SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 1-10682
PAGE AMERICA GROUP, INC.
(Exact name of registrant as specified in its charter)
New York 13-2865787
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 State Street, Suite 100, Hackensack, New Jersey 07601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 342-6676
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of March 1, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the closing price, was approximately
$2,000,000.
As of March 1, 1996, the registrant had 8,052,305 shares of Common Stock
outstanding.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
<PAGE>
Item 1. BUSINESS
General
Page America Group, Inc. (the "Company" or "Page America") provides
paging, messaging and information products and services through networks which
it owns and operates as a radio common carrier ("RCC") under licenses from the
Federal Communications Commission ("FCC"). As of December 31, 1995, the Company
provided paging services through 11 offices in 14 states to approximately
221,000 pagers in geographic areas encompassing a total population of 34
million people.
The Company's strategy is to concentrate its operations in major
metropolitan markets in which it can achieve both critical mass and a
substantial market share position. The Company targets specific user segments
and, through its broad distribution capabilities, markets and delivers its
comprehensive package of paging and value-added messaging services to each
particular segment. The Company has secured licenses for multiple channels in
each of its markets and has developed, and continues to develop, networks which
can support significant future growth in paging units as well as value-added
messaging and information services. The Company emphasizes customer ownership
of pagers, as compared to leasing of pagers, which significantly reduces the
Company's capital costs. At March 1, 1996, approximately 74 percent of the
Company's units in service were customer owned.
The accompanying financial statements have been prepared on a going concern
basis. The Company, since its inception, has experienced a deficiency in working
capital and recurring losses. In 1995, as a result of non-compliance by the
Company with certain covenants of its credit facility, the terms were modified
to accelerate the final maturity to December 29, 1995, and the subordinated
notes were modified to provide for a final maturity of six months thereafter.
The credit facility was not repaid at maturity causing the credit facility and
the subordinated notes to be in default (see Note E of Notes to Consolidated
Financial Statements). Such debt is classified as a current liability and the
Company's current liabilities exceeded its current assets by $52.4 million at
December 31, 1995. The Company intends to pay the balance due under the credit
facility and the subordinated notes in 1996 from cash generated by the sale of
its assets. Alternatively, the Company intends to complete a refinancing which
repays the balance due under the credit facility and amends and extends the
subordinated notes. The successful completion of one of these efforts is
essential as the Company has no other immediate plans that will provide
sufficient cash flows to satisfy its obligations. There can be no assurance that
the Company will have sufficient funds to finance its operations, which continue
to show losses, through the year ending December 31, 1996.
All of these matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts or classifications of liabilities
that may result from the outcome of this uncertainty.
Since October 1995, Daniels & Associates L.P. has been retained by the
Company as its non-exclusive financial advisor to render financial advisory
services to the Company in connection with the possible sale of one or more of
the Company's paging operations.
Page America was incorporated in 1976 under the laws of the State of New
York. The Company's principal executive offices are located at 125 State
Street, Hackensack, New Jersey 07601, and its telephone number is (201)
342-6676. Unless the context indicates otherwise, the terms "Company" and "Page
America" as used herein refer to Page America Group, Inc. and its subsidiaries.
Sale of California and Florida Operations
On July 28, 1995, the Company sold to Paging Network of Florida, Inc. its
California and Florida paging assets for a cash purchase price of $19.4
million. Approximately $1.0 million of the purchse price is held in escrow.
Management expects that the escrow will be released to the Company in
accordance with the time frame set forth in the agreement. The assets sold had
a net book value of approximately $19.1 million and consisted of the assets
which the Company acquired from Crico Communications Corporation ("Crico") on
December 30, 1993 and the 900 Mhz channel which is licensed to provide
state-wide coverage in California which the Company acquired in 1994 for a
purchase price of $500,000. The purchase price paid by the Company for the
Crico assets consisted of $12,650,000 in cash paid to Crico's lenders, the
issuance of an aggregate of 1,435,903 shares of Common Stock to Crico's lenders
and the issuance of 240,000 shares of Common Stock and warrants to purchase
130,000 shares of Common Stock at an exercise price of $5.00 per share to a
company related to certain shareholders of Crico. After expenses, the sale
resulted in a loss of approximately $718,000.
Restructuring of Debt
On July 28, 1995, concurrent with the sale of the Company's Florida
and California paging assets, the Company's senior secured credit facility with
certain banks ("Credit Facility") was amended. Among other things, the
amendment provided for an acceleration of the final maturity to December 29,
1995 and modified the financial covenants so that the Company would not be in
default as of the amendment date. The Company used a portion of the net
proceeds from the sale of its Florida and California operations to reduce the
debt by $11.8 million and prepay interest at the LIBOR rate from August 1, 1995
through December 29, 1995. In its third fiscal quarter the Company recorded a
charge of approximately $1.8 million related to the amended agreement
which included the write-down of deferred financing costs of approximately $1.1
million. The Credit Facility was not repaid and the lenders have declared the
Company in default. The Credit Facility is secured by substantially all the
assets of the Company.
On July 28, 1995, the Company's 12 percent subordinated notes due 2003
were modified to provide for a final maturity of six months subsequent to the
final maturity of the Credit Facility and to defer the cash payment of interest
until maturity. As a result of the default under the Credit Facility, the
Company is in default of the subordinated notes. Commencing January 1, 1995,
interest is increased from 12 to 15 percent per annum, compounded
semi-annually, and is satisfied by the issuance of additional promissory notes
with terms substantially identical to the subordinated notes, as amended. In
1995 the Company recorded a charge of approximately $500,000 related to
the modified agreement, which includes the write-down of deferred financing
costs of approximately $479,000. If a change in control of the Company occurs,
the note holders will have the right to require the Company to repurchase the
notes at par plus accrued interest.
Background of the Paging Industry
Radio paging began more than four decades ago as an adjunct to
telephone answering services, delivering tone-only messages to subscribers.
Beginning in the 1970's, cost-effective technological innovations and
regulatory reforms helped to accelerate the use of paging services. Advances in
microprocessor technology facilitated dramatic reductions in the size and
weight of pagers. In 1982, the FCC increased the number of available channels
for paging, further stimulating growth of the industry.
During the 1980's, the paging industry expanded significantly. Factors
contributing to the growth in the paging industry include: (i) a continuing
shift towards a service-based economy and a resultant need to keep in contact;
(ii) increasing mobility among workers; (iii) increasing awareness of the
benefits of mobile communications; (iv) a reduction in the price of pagers; (v)
product distribution at the retail level; and (vi) increasing availability of
information service-based offerings.
In addition, the benefits of mobile and wireless communications have
gained widespread acceptance as a result of the growth in cellular
communications. The Company believes that paging will continue to grow with the
wireless communications industry generally, because it believes paging is the
most cost-effective form of mobile communication. Since paging is a form of
one-way communication, it is less expensive than communicating by cellular
telephones. Pagers and air time required to transmit an average message cost
less than equipment and air time for cellular telephones. In fact, some users
of cellular telephones use a pager in conjunction with their telephones to
screen incoming calls and to minimize usage-based charges.
The availability of value-added paging products and services is
creating demand within certain market segments which previously had not been
attracted by the benefits of basic paging services alone. Demand for paging
services is anticipated to increase further as a result of technological
advances which permit messaging to be integrated into business tools (such as
lap top and palm top computers) and into consumer products (such as
wristwatches).
Business Strategy
The Company's objective is to maximize revenues by focusing on a
business strategy which emphasizes the following elements: (i) major
metropolitan market focus; (ii) broad product distribution capabilities; (iii)
network infrastructure and channel capacity; (iv) comprehensive service
options; (v) targeted market segments; (vi) value-added services; and (vii)
customer ownership of pagers.
Major Metropolitan Market Focus. The Company presently operates in the New
York and Chicago metropolitan area markets serving an aggregate population of
34 million. Based upon its knowledge and experience in these markets, the
Company believes that in each of its markets, the four largest competitors
serve approximately 80 percent of pager users. Significant barriers to entry
exist in the New York and Chicago metropolitan area markets, since there are no
more FCC paging channels currently available for license and substantial
capital would be required to construct and operate efficient and competitive
paging systems.
Broad Product Distribution Capabilities. The Company has developed and is
continuing to expand multiple distribution channels which reach targeted market
segments. Products are distributed through a number of different outlets,
including 11 sales offices, four company-owned retail stores, a direct sales
force and resellers.
Network Infrastructure and Channel Capacity. The Company believes that
controlling licenses to a large number of FCC-allocated paging channels is
important to adequately service both current and future demand for paging and
messaging services. The New York network utilizes 220 transmitters over 14
available paging channels to provide service to 140,000 pagers throughout most
of Connecticut, New York State south of Albany (including Long Island), New
Jersey and Eastern Pennsylvania. The Chicago network consists of 80
transmitters over 11 available paging channels. This network provides service
to 81,000 pagers from the Wisconsin border, throughout Illinois, Northern
Indiana and into Western Michigan. The Company has substantial capacity to
expand in its New York and Chicago metropolitan area markets utilizing its
existing network without the need for more licenses or significant additional
capital expenditures for transmission and telephony infrastructure.
Comprehensive Service Options. Since the Company has multiple channels, it
is able to offer customers the widest possible choice in services (tone,
tone/voice, numeric, alphanumeric), geographic coverage and pricing options.
Customers select from a wide variety of pagers, which come with both silent and
audible alerts. Convenience, as evidenced by the location of the sales offices,
and flexible policies regarding service plan options are significant components
of why customers select Page America.
Targeted Market Segments. The Company has designed its product and service
offerings to attract defined user groups. The Company's marketing efforts are
focused on four principal market segments: mobile workers; medical and other
on-call professionals; business professionals seeking a competitive advantage
and the home market.
Value-Added Services. The Company provides subscribers with value-added
services, such as voice mail messaging and operator-assisted alphanumeric
messaging, as well as equipment related services, including loss and damage
protection and paging maintenance programs. Such offerings include: PageTalkSM,
a voice mail system; PageGramSM, which involves delivery of messages from a
personal computer; Group Calling, which allows notification of several pager
users simultaneously with a common telephone number; and Nationwide Paging
which enables a subscriber to be paged in over 200 cities across the United
States. Provision of value-added services enables the Company to maximize
revenues.
Customer Ownership of Pagers. The Company emphasizes customer ownership of
pagers, as compared to leasing, since customer ownership significantly reduces
the Company's capital costs and reduces potential exposure to changes in
technology. Approximately 74 percent of the Company's units in service are
customer owned (including resellers).
Paging Services
Paging operations consist of a process of signaling, through the use of a
radio transmission network, a portable pocket size, battery-operated radio
receiver carried by a subscriber, commonly called a "pager" or a "beeper". Each
paging subscriber is assigned a distinct telephone number. When a telephone
call for a subscriber is received at one of the Company's computerized paging
terminals, the Company transmits a radio signal to the subscriber's pager,
which causes the pager to emit a beep, vibrate or generate another signal and,
in certain cases, provides the subscriber with additional information from the
caller.
The Company currently provides the following four types of pagers:
Type of Pager Functions
Tone Only Alerts the user with a signal, so the
user will know to call a pre-determined
telephone number (such as the office).
Tone and Voice Alerts the user with a signal,
followed by a brief voice message.
Numeric (Digital) Display Visually displays numbers
(such as a telephone number or a coded
message) on a screen to communicate with
the user.
Alphanumeric Display Visually displays up to one-third
of a page of text and/or numbers on a
screen so the user receives actual
messages, instead of just a telephone
number or coded message.
The table below sets forth the number of various types of pagers in
service with subscribers of the Company at the dates indicated:
Types of Pagers in Service with Subscribers of the Company
<TABLE>
<CAPTION>
============================================================================================
December 31,
======================================================================================================
1993 1994 1995
----------------- ----------------- ------------
Units % Units % Units %
<S> <C> <C> <C> <C> <C> <C>
digital display 287,000 94.1% 283,000 91.0% 207,000 93.7%
Tone only 8,000 2.6% 8,000 2.7% 4,000 1.8%
Tone and
voice 1,000 0.3% 1,000 0.3% * -
Alphanumeric
display 9,000 3.0% 19,000 6.0% 10,000 4.5%
------- ------- ------- ------- ------ -------
Total 305,000 100% 311,000 100% 221,000 100%
------- --- ------- --- ------- ---
* Less than 500 units in service.
</TABLE>
The Company sells and leases a variety of paging models, including
credit card-sized pagers, pen-like pagers, wristwatch pagers and conventional
pagers, with a range of available options, such as silent vibrating alert and
extended message memory. The Company provides its subscribers with local,
wide-area and national coverage. While the Company continues to purchase most
of its pagers from NEC America, Inc., it intends to purchase pagers from a
number of sources.
The Company's value-added services include PageTalkSM, which combines
the features of an answering machine and paging, enabling a caller to leave a
voice message in the private mailbox of an end user on the Company's voice mail
system, which in turn pages the end user to call the mailbox and retrieve the
message; PageGramSM, which permits people originating messages to the end user
to use either an operator or a personal computer to send a message to an end
user who carries an alphanumeric pager; Group Calling, which allows the
notification of several pager users simultaneously with a common telephone
number; and Nationwide Paging, which allows a pager user to be paged in over
200 cities across the United States on a common frequency.
The Company provides paging services to pagers that are either (i)
owned by the Company and leased to its subscribers, (ii) owned by its
subscribers or (iii) owned by third party resellers which buy pagers from the
Company, lease or sell such pagers to their own subscribers and resell the
Company's paging services as resellers under agreements with the Company.
Subscribers who own their own pagers pay a monthly paging service fee to the
Company. Subscribers who lease pagers pay a monthly rental fee which is
combined with a monthly paging service fee. Service fees, leasing rates and
purchase prices for pagers vary widely by region served, service type and
number of pagers purchased or leased by the subscriber.
The following table sets forth the respective numbers and percentages
of pagers that are (i) serviced directly by the Company and owned by the
Company, (ii) serviced directly by the Company and owned by subscribers and
(iii) serviced by the Company through third party resellers, which may be owned
by the third party resellers or by their subscribers.
Ownership of Pagers in Service with Subscribers of the Company
<TABLE>
<CAPTION>
====================================================================================================================================
December 31,
====================================================================================================================================
1993 1994 1995
----------------- ----------------- ------------
Units % Units % Units %
<S> <C> <C> <C> <C> <C> <C>
Company owned 105,000 34.4 96,000 30.9 58,000 26.2
Subscriber
owned 102,000 33.5 109,000 35.0 87,000 39.4
Third party
reseller 98,000 32.1 106,000 34.1 76,000 34.4
------- ------- ------- ------- ------- -----
Total 305,000 100% 311,000 100% 221,000 100%
------- --- ------- --- ------- ---
</TABLE>
Technical Facilities
The Company owns and operates RCC network facilities in each of its
two markets. Page America presently provides service over six primary channels
in New York and three primary channels in Chicago enabling the Company to
provide a wide range of coverage, pricing and product offerings. One channel in
New York, for example, is devoted exclusively to alphanumeric service. The
Company's operations are highly automated and centralized, with all sales
offices linked to a centralized billing, inventory and customer service
computer system, and allowing direct interfacing from its resellers.
The Company completed construction of its own RCC system in New York
in 1985. On July 13, 1990, the Company acquired the New York metropolitan area
paging assets and business of NYNEX Mobile Communications Company and its
affiliates ("NYNEX"). This acquisition increased the Company's number of units
in service by approximately 74,000 pagers. The New York technical facilities
currently consist of seven paging terminals. The New York network utilizes 220
transmitters over 14 available channels to provide service to 140,000 pagers
throughout most of Connecticut, New York State south of Albany (including Long
Island), New Jersey and Eastern Pennsylvania.
The Chicago RCC facilities, which were acquired by the Company in
1984, serve approximately 81,000 pagers in the Illinois and Northwestern
Indiana areas. The Chicago technical facilities consist of three paging
terminals, and the Chicago network consists of 80 transmitters over 11
available channels. This network provides service from the Wisconsin border,
throughout Illinois, Northwestern Indiana and into Western Michigan.
Marketing
The Company's customers include individuals, corporations and other
organizations whose business or personal needs involve field operations or
require substantial mobility, accessibility and the need to receive timely
information. Potential users of pagers include people in every industry. The
Company services four principal market segments: mobile workers; medical and
other on-call professionals; business professionals seeking a competitive
advantage and the home market.
In order to reach these markets, the Company has developed four
channels of distribution: a direct sales force, resellers, independent retail
dealers and retail stores. Each of the Company's distribution channels focuses
on those market segments which it addresses most cost effectively. At December
31, 1995, the Company employed 86 persons in direct sales and marketing support
positions.
The following table sets forth the respective revenues and percentages
of revenues that are attributed to (i) the Company's direct sales force,
including retail dealers, (ii) third party resellers and (iii) retail stores.
Channels of Distribution
<TABLE>
<CAPTION>
===================================================================================================================================
December 31,
===================================================================================================================================
1993 1994 1995
-------------- -------------- ------------
Revenues % Revenues % Revenues %
<S> <C> <C> <C> <C> <C> <C>
Direct
Sales
Force $24,301,000 80.3 $30,626,000 82.2 $24,117,000 82.9
Resellers 5,956,000 19.7 6,505,000 17.5 4,611,000 15.8
Retail
Stores -- -- 127,000 0.3 379,000 1.3
----------- ------ ----------- ----- ----------- ----
Total $30,257,000 100% $37,258,000 100% $29,107,000 100%
----------- --- ----------- --- ----------- ---
</TABLE>
The Company's own direct sales force operates out of 11 sales offices.
The direct sales effort is supported through a multimedia marketing campaign
with advertising, promotion and subscriber enhancement campaigns. The Company
also advertises in print media, including periodicals and yellow pages.
The Company also has a sales force which sells products and services
in bulk to resellers and retail dealers. Resellers purchase service at
wholesale rates from the Company, and in turn, provide service to their own
customers. Resellers contribute to the Company's profits without the Company
having to incur any significant selling or administrative overhead. Independent
retail dealers, consisting of electronics and video stores, also market the
Company's products.
The Company, in order to market its products directly to the consumers
and reduce its cost of sales has opened three Company-owned stores in New York
and one in Illinois. These stores sell cellular as well as paging products and
maintain a high end, high tech appearance attracting consumers at all levels.
The Company's marketing strategies have been focused on small to
medium-sized customer accounts, with the result that the Company is not
dependent on any single customer or reseller. No single customer or reseller
accounted for more than one percent of the Company's total revenues in the
fiscal year ended December 31, 1995.
Regulation
The construction and operation of RCCs are subject to both federal and
state regulation, principally by the FCC under the Communications Act of 1934,
as amended (the "Communications Act"). The Company believes it is in compliance
with all applicable federal and state regulations.
The FCC's review and revision of rules affecting paging companies is
ongoing and the regulatory requirements to which the Company is subject may be
modified significantly. The FCC recently has proposed adopting a market area
licensing scheme for all paging channels under which carriers would be licensed
to operate on a particular channel throughout a broad geographic area, rather
than being licensed on a site-by-site basis. Under the proposal, existing
paging facilities would be entitled to protection as grandfathered systems. The
ability of paging carriers to make major modifications to their current systems
may be affected during the transition to the market area licensing process. On
February 8, 1996, the FCC announced a temporary cessation in the acceptance of
applications for new paging stations, and placed certain restrictions on the
extent to which current licensees can expand into new territories on existing
channels. The FCC has initiated an expedited comment period in which it will
consider whether these interim processing procedures should be relaxed. The FCC
also has proceedings underway that may have a significant impact on the manner
in which telephone numbers are assigned and utilized by common carriers,
including paging companies. Some of the alternatives under consideration by the
FCC, if adopted, could adversely affect the Company.
RCC operations may be conducted only on channels assigned by the FCC.
The FCC grants a license for the use of such channels only upon compliance with
FCC regulations. Upon receiving a grant, a licensee is authorized to construct
and operate an RCC facility in the assigned area using the designated channel.
In the Company's markets all available channels have been allocated.
The FCC licenses granted to the Company are for terms of 10 years, at the
end of which time renewal applications must be approved by the FCC. The
Company's current licenses all expire in 1999. In the past, FCC renewal
applications routinely have been granted upon a demonstration of compliance
with FCC regulations and adequate service to the public. The FCC has granted
each renewal license the Company has filed. Although the Company is unaware of
any circumstances which would prevent the grant of any renewal applications, no
assurance can be given that any of the Company's licenses will be renewed by
the FCC. In addition, the FCC has the authority to revoke or modify licenses.
No licenses owned by the Company have ever been revoked.
The Communications Act requires licensees such as the Company to
obtain prior approval from the FCC for the transfer of control of any
construction permit or station license, or any rights thereunder. The
Communications Act also requires prior approval by the FCC of acquisitions by
the Company of other paging companies and transfers by the Company of a
controlling interest in any of its licenses or construction permits. The FCC
has approved each acquisition and transfer of control for which the Company has
sought approval.
The Communications Act also limits foreign ownership of entities that
hold licenses from the FCC. All the Company's FCC licenses are owned by
wholly-owned subsidiaries of the Company. As a result, no more than 25 percent
of the Company's stock may be owned or voted by aliens or their
representatives, a foreign government or its representatives, or a foreign
entity.
In addition to regulation by the FCC, certain states impose various
regulations on certain paging operations of the Company. Such regulations may
require the Company to obtain certificates of public convenience and necessity
before constructing paging facilities or offering paging services and before
modifying, expanding or abandoning such services. The Company may also be
subject to regulations requiring the submission, for prior approval, of the
rates, terms and conditions under which it plans to provide service, or any
changes to those rates. Contracts for service and financial information
regarding the Company may also be required to be filed. Those states which
regulate paging services may also require the Company to obtain prior approval
for the sale or acquisition of controlling interests in any other paging
company certificates, licenses, construction permits or assets. The Company
believes that to date all such required certificates and state approvals have
been granted. Although no assurances can be given with respect to future
approvals, the Company knows of no reason to believe such approvals will not be
granted to the Company in connection with anticipated future requests.
From time to time, legislation which could potentially affect the
Company, either beneficially or adversely, is proposed by federal and state
legislators. In 1993, federal legislation was enacted which permits auction of
new radio spectrum allocated by the FCC to new or existing services which may
have the effect of increasing competition for scarce spectrum and affecting
costs of operation in markets in which the Company operates.
Competition
The Company experiences competition, from independent companies as
well as Regional Bell Operating Companies, in its efforts to attract and retain
customers for its services in the markets in which it operates. Competition for
subscribers to the Company's paging services is based primarily on the quality,
price and breadth of services offered (including geographic coverage in each
market served). Since the transmitting and receiving equipment is virtually
identical, companies differentiate themselves by marketing, channels of
distribution, price competition, the variety of service options and breadth of
service coverage (more transmitters covering a larger territory). The Company
believes that based on the quality, price and breadth of services offered, it
generally competes effectively with its competitors.
Many RCCs in the United States are small companies serving limited
market areas; however, some of the Company's competitors, including Regional
Bell Operating Companies, are larger, have greater financial resources and are
more established than the Company.
In addition, future technological advances in the telecommunications
industry could create new services or products competitive with the paging
services currently provided by the Company. There can be no assurance that the
Company would not be adversely affected in the event of such technological
change.
Employees
At February 29, 1996, Page America employed 162 persons, none of whom
was represented by a labor union. Page America believes that its relations with
its employees are good.
Item 2. Properties
The Company leases approximately 15,200 square feet of office space at
125 State Street, Hackensack, New Jersey, under a lease expiring in 2000, at an
annual base rent of $281,000, approximately 10,715 square feet of office space
at 1919 South Highland Avenue, Lombard, Illinois, under a lease expiring in
2005, at an annual base rent of $151,000 and approximately 500 square feet of
retail space at 41 East 42nd Street, New York, New York, under a lease expiring
in 2004, at an annual base rent of $84,000. The Company has several other
leases for office and retail space which are not material individually and
which aggregate $472,000 per year expiring at various dates between 1996 and
2005. The Company does not own any material real property. The Company also
leases sites for its transmitters on commercial broadcast towers, buildings and
other fixed sites at various rentals for various terms. The Company believes
its facilities are suitable and adequate for its purposes.
Item 3. Legal Proceedings
The Company is involved in various lawsuits and proceedings arising in the
normal course of business. In the opinion of management of the Company, the
ultimate outcome of these lawsuits and proceedings will not have a material
effect on the results of operations, financial position or cash flows of
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Price Range of Common Stock
The Common Stock of the Company is listed on the American Stock
Exchange ("AMEX") under the symbol PGG. The Company does not meet certain
financial and other guidelines of the AMEX for continued listing of its Common
Stock on the AMEX. As a result, the staff of the AMEX has determined to remove
the Company's Common Stock from trading on the AMEX; however, the Company has
appealed this determination. The appeal is presently pending and the Company
believes that its Common Stock will continue to be traded on the AMEX pending
the determination of its appeal. The following table sets forth for the
calendar periods indicated the closing sales prices on the AMEX.
High Low
1994
First Quarter $5.13 $4.13
Second Quarter 4.25 3.50
Third Quarter 5.13 3.00
Fourth Quarter 4.38 2.88
1995
First Quarter $3.75 $2.50
Second Quarter 3.38 0.50
Third Quarter 1.00 0.56
Fourth Quarter 0.75 0.13
There were approximately 2,043 shareholders of record of Common Stock as
of February 29, 1996. This number does not include beneficial owners holding
shares through nominee or "street" names.
Dividend Policy
The Company has never declared or paid cash dividends on its Common
Stock and does not anticipate paying cash dividends to the holders of its
Common Stock in the foreseeable future. The payment of dividends on Common
Stock and Preferred Stock is also restricted pursuant to the provisions of the
Company's Credit Agreement (the "Credit Agreement"). The Company's outstanding
series of Series One Convertible Preferred Stock provides that the Company may
not declare or pay dividends on its Common Stock unless all accrued dividends
on the Series One Convertible Preferred Stock have been paid in full. Payment
of dividends on the Series One Convertible Preferred Stock may be made in cash
or in Common Stock of the Company registered under the Securities Act of 1933.
At December 31, 1995, accrued and unpaid dividends on the Company's outstanding
Series One Convertible Preferred Stock aggregated $1,432,000. It is anticipated
that such dividends will be paid by the issuance of approximately 7,900,000
shares of the Company's Common Stock.
Item 6. Selected Financial Data
The following selected consolidated financial data for the nine-month
period ended December 31, 1991 and each of the four years in the period ended
December 31, 1995 are derived from the Consolidated Financial Statements of the
Company. The selected consolidated financial data should be read in conjunction
with the Consolidated Financial Statements and the related Notes thereto
contained elsewhere in this report.
<TABLE>
<CAPTION>
Nine-Month
Period Ended
December 31, Years Ended December 31,
------------- ----------------------------------------
1991 1992 1993 1994(4) 1995(2)
---- ---- ---- ---- ----
Consolidated Statement of Operations Data:(1) (In thousands,except per share and pager data)
<S> <C> <C> <C> <C> <C>
Total revenues $ 25,209 $ 32,805 $ 30,257 $37,258 $29,107
Operating expenses:
Cost of service and sales 3,018 3,296 4,253 5,709 4,363
Selling 5,501 6,544 4,879 6,842 6,066
General and administrative 6,219 8,940 8,688 10,653 8,923
Technical 2,507 3,455 3,343 4,685 4,262
Depreciation, amortization and write-off of intangibles 6,066 9,519 9,793 10,817 8,585
------ ------ ------ ------- -----
Operating profit (loss) 1,898 1,051 (699) (1,448) (3,092)
Interest expense 4,952 4,783 4,032 5,102 6,263
Other expenses 1,053 1,957 1,814 478 3,738
Extraordinary gain(5) -- 7,156 -- -- --
Cumulative effect of changes in accounting principles (7) -- (3,960) -- -- --
-------- ------- --------- -------- --------
Net loss (4,107) (2,493) (6,545) (7,028) (13,093)
Preferred stock dividend requirements (1,449) (2,791) (3,268) (3,023)(3) (2,863)(3)
--------- -------- -------- --------- -------
Net loss applicable to common shares $(5,556) $(5,284) $(9,813) $(10,051) $(15,956)
======== ======== ======== ========= =========
Net loss per common share(6) $(1.54) $(1.40) $(2.55) $(1.55) $(2.01)
======= ======= ======= ======= =======
Weighted average shares outstanding 3,609 3,774 3,847 6,464 7,936
Other Data:
Pagers in service at end of period 223,000 228,000 305,000 311,000 221,000
Capital expenditures, net of book value of pagers
sold (excluding acquisitions) $ 5,707 $4,296 $2,630 $5,365 $3,300
December 31
1991 1992(5) 1993(4) 1994(3) 1995(2)(3)
---- ---- ---- ---- ----
Consolidated Balance Sheet Data:
Working capital (deficiency) $( 9,996) $(10,242) $( 2,053) $( 9,541) $(52,444)
Total assets 67,623 58,755 75,193 70,229 44,003
Long-term debt, less current maturities 58,499 48,269 57,850 56,953 69
Series A, A-2 and B Preferred Stock 10,799 17,063 -- -- --
Accumulated deficit (54,281) (59,365) (68,980) (78,989) (94,945)
Shareholders' equity (deficit) (16,688) (21,402) 9,096 439 (11,222)
</TABLE>
(1) EBITDA for the nine-month period ended December 31, 1991 and for
the years ended December 31, 1992, 1993, 1994 and 1995 was $8.0 million,
$10.6 million, $9.1 million, $9.4 million, and $5.5 million respectively.
EBITDA is a standard measure of financial performance in the paging
industry but should not be construed as an alternative to operating income
or cash flows from operating activities as determined in accordance with
generally accepted accounting principles. EBITDA is also the operating
measure by which the Company's financial covenants are calculated under its
Credit Agreement.
(2) In July 1995, the Company sold its California and Florida paging
assets. Concurrently with the sale, the Company amended its Credit Facility
providing, among other things, for an accelerated maturity date of December
29, 1995 and its subordinated notes were modified to provide for a final
maturity of six months thereafter. Such debt, which was classified as long
term at December 31, 1994, is in default and is classified as a current
liability at December 31, 1995.
(3) In August, 1994 and March, 1995, the Company issued shares of its Common
Stock as full payment of fiscal year 1994 dividends on Series One
Convertible Preferred Stock. On June 30, 1995, in exchange for the waiver
of the dividend payment on Series One Convertible Preferred Stock, the
accrued dividends were added to the liquidation value. See Note G of Notes
to Consolidated Financial Statements.
(4) On December 30, 1993, the Company acquired Crico and refinanced its senior
and subordinated debt and redeemable Preferred Stocks. See Notes C and E
of Notes to Consolidated Financial Statements.
(5) In June of 1992, the Company repurchased its subordinated note payable.
(6) The Company has never paid any cash dividends on its Common Stock.
(7) Effective January 1, 1992, the Company changed its method of depreciation
for pager equipment from the straight line method to the double declining
balance method.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table presents certain items in the Consolidated
Statement of Operations and as a percentage of total revenues for the periods
indicated.
<TABLE>
<CAPTION>
Years Ended
December 31,
----------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total revenues $29,107 100.0% $37,258 100.0% $30,257 100.0%
Operating expenses:
Cost of service and sales 4,363 15.0 5,709 15.3 4,253 14.1
Selling expenses 6,066 20.8 6,842 18.4 4,879 16.1
General and administrative
expenses 8,923 30.7 10,653 28.6 8,688 28.7
Technical expenses 4,262 14.6 4,685 12.6 3,343 11.1
Depreciation, amortization
and write-off of intangibles 8,585 29.5 10,817 29.0 9,793 32.3
------- ------ -------- ------ ------ -----
Operating profit (loss) (3,092) (10.6) (1,448) (3.9) ( 699) ( 2.3)
Interest expense 6,263 21.5 5,102 13.7 4,032 13.3
Net loss $(13,093) (45.0)% $(7,028) (18.9)% $( 6,545) (21.6)%
</TABLE>
Year Ended December 31, 1995 Compared with
Year Ended December 31, 1994
Total revenues for fiscal 1995 were approximately $8.2 million (21.9
percent) lower than that of 1994. The sale of the operations in Florida and
California accounted for a decrease of approximately $4.5 million while the
Company's other operations experienced a $3.7 million decrease in total
revenues as compared to 1994. Average revenue per subscriber declined as the
result of the emphasis on the sale of pagers (for which the Company does not
receive recurring equipment rental revenue) and rates obtained from new
subscribers were lower than the rates associated with lost subscribers due to
competitive pressure. Subscriber growth in 1994 and 1995 was limited as pager
purchases were constrained by limited available capital. The Company's units in
service at December 31, 1995 showed a decrease of 90,000 units from the 311,000
units in service at December 31, 1994. A substantial portion of this decrease
(78,000 units) is attributable to the sale of the Florida and California
operations.
Cost of service decreased $303,000 (10.3 percent) in 1995. This
decrease was principally due to cost of service associated with the sold
operations. Cost of sales decreased by approximately $1 million (37.7 percent)
in 1995. As a percent of sales revenues, cost of sales increased from 61% of
sales revenues in 1994 to 64% in 1995, primarily as a result of lower selling
prices due to competitive pressure.
Selling expense decreased by approximately $776,000 (11.3 percent) in 1995
as compared to 1994. $661,000 of the decrease was due to selling expenses
associated with the sold operations.
General and administrative expenses decreased by $1.7 million (16.2
percent). A decrease of $1 million was due to expenses associated with the sold
operations. The Company's remaining operations experienced a decrease of
$700,000 primarily due to a reduction in bad debt expense and, to a lesser
extent, reductions in personnel.
Technical expenses decreased by $423,000 (9.0 percent), principally as
a result of the sale of the Florida and California operations, partially offset
by an increase in personnel costs.
Depreciation expense decreased by $1.1 million (17.8 percent),
$462,000 of which was due to the sale of depreciable assets in Florida and
California. The decrease experienced by the Company's existing operations
resulted from the lower average price of pagers purchased in 1995 and the
decrease in pagers on lease to customers, partially offset by a $465,000
valuation adjustment of pager assets in the fourth quarter of 1995.
Amortization expense decreased by approximately $1.1 million (24.7
percent) in 1995 over 1994, principally due to the elimination of intangible
assets related to the Florida and California operations and certain customer
lists becoming fully amortized in the second quarter of 1994 and first quarter
of 1995, partially offset by a write off of certain intangibles related to the
Nynex acquisition.
Interest expense increased by approximately $1.2 million (22.8
percent) in 1995 primarily due to higher interest rates, in the current period,
on borrowings outstanding under the Company's senior credit facility and
subordinated debt agreement.
Other expenses increased approximately $3.3 million (682 percent) in
1995. The increase was primarily due to a write-down of deferred financing
costs related to the senior debt and subordinated debt amounting to $1.6
million, loss realized on the sale of the Florida and California operations of
approximately $718,000 and costs associated with the debt restructuring in the
amount of $726,000.
Net loss was $13.1 million (45.0 percent of total revenues) in the
year ended December 31, 1995, as compared to $7.0 million (18.9 percent of
total revenues) in the year ended December 31, 1994.
EBITDA (earnings before interest, taxes, depreciation and
amortization) in 1995 was $5.5 million as compared to $9.4 million in 1994.
Year Ended December 31, 1994 Compared with
Year Ended December 31, 1993
Total revenues for fiscal 1994 were approximately $7 million (23.1
percent) higher than that of 1993. The operations acquired in the Crico
transaction accounted for increases of approximately $8.8 million while the
Company's other operations experienced a $1.8 million decrease in total
revenues as compared to 1993. Subscriber growth, primarily in the Company's New
York operation, was not sufficient to offset the overall lower average revenue
per subscriber. Average revenue per subscriber declined as the result of the
emphasis on the sale of pagers (for which the Company does not receive
recurring equipment rental revenue) and rates obtained from new subscribers
were lower than the rates associated with lost subscribers due to lower monthly
rates caused by competitive pressure. Subscriber growth in 1993 and 1994 was
limited as pager purchases were limited, by management, to an amount necessary
to maintain the subscriber base in order to conserve capital. The Company had
311,000 units in service at December 31, 1994, an increase of 6,000 units over
the 305,000 units in service at December 31, 1993.
Cost of service increased $1.1 million (60 percent) in 1994. This
increase was principally due to cost of service associated with the operations
acquired from Crico. Cost of sales increased by approximately $353,800 (15
percent) in 1994. As a percent of sales revenues, cost of sales decreased from
66% of sales revenues in 1993 to 61% in 1994. This decrease in cost of sales as
a percent of sales revenues is principally a result of lower current costs of
pagers.
Selling expense increased by approximately $1.9 million (40 percent)
in 1994 as compared to 1993. The increase was due to selling expenses
associated with the acquired operations.
General and administrative expenses increased by $1.9 million (23.0
percent). This increase was due to expenses associated with the acquired
operations, partially offset as the Company's existing operations experienced a
decrease of $449,600 primarily due to a reduction in salaries and related
benefits.
Technical expenses increased by $1.3 million (40.1 percent) as a
result of the operations acquired from Crico.
Depreciation expense decreased by approximately $497,800 (7.3
percent). This resulted from the decrease in the renting of pagers to
customers, in favor of the sale of pagers, the ensuing decrease in pager
assets, and from the Company's $934,000 valuation adjustment of pager assets in
the fourth quarter of 1993 which left a lower depreciable pager asset base.
These offset the depreciation associated with the fixed assets acquired from
Crico.
Amortization expense increased by approximately $1.5 million (52.0
percent) in 1994 over 1993, due to intangibles acquired in the Crico
transaction.
Interest expense increased by approximately $1.1 million (26.6
percent) in 1994 as a result of higher interest bearing debt resulting from the
December 30, 1993 acquisition financing and refinancing and higher interest
rates in 1994.
Other expenses decreased approximately $1.3 million (73.6 percent) in
1994. In 1993 approximately $677,400 was written off in deferred financing cost
resulting from the debt refinancing. Fiscal year 1994 includes a second quarter
gain of approximately $178,400 recognized on the sale of shares of stock in a
cellular interest, owned by a subsidiary of the Company, and a gain of $175,000
recognized in the third quarter on the sale of a paging license in the State of
Wisconsin.
Net loss was $7.0 million (18.9 percent of total revenues) in the year
ended December 31, 1994, as compared to $6.5 million (21.6 percent of total
revenues) in the year ended December 31, 1993.
EBITDA in 1994 was $9.4 million as compared to $9.1 million in 1993.
Liquidity and Capital Resources
The Company had a working capital deficiency of approximately $52.4
million at December 31, 1995 as compared to a deficiency of $9.5 million at
December 31, 1994. The increase in working capital deficiency was primarily due
to an increase in current debt maturities of $47.6 million, which include $33.2
million and $14.7 million related to the senior credit facility and
subordinated debt, respectively.
To reduce indebtedness and improve liquidity, the Company sold its
California and Florida paging assets for a cash sale price of $19.4 million.
One million dollars of the sale price is being held in escrow and is scheduled
to be released to the Company over a two year period, as provided for in the
agreement. In connection with this sale, the Company incurred expenses
amounting to approximately $1.0 million. The Company used a portion of the net
proceeds from this sale to reduce the balance due on its Credit Facility by
$11.8 million and prepay interest at the LIBOR rate from August 1, 1995 through
December 29, 1995.
The accompanying financial statements have been prepared on a going concern
basis. The Company, since its inception, has experienced a deficiency in working
capital and recurring losses. In 1995, as a result of non-compliance by the
Company with certain covenants of its credit facility, the terms were modified
to accelerate the final maturity to December 29, 1995, and the subordinated
notes were modified to provide for a final maturity of six months thereafter.
The credit facility was not repaid at maturity causing the credit facility and
the subordinated notes to be in default (see Note E of Notes to Consolidated
Financial Statements). Such debt is classified as a current liability and the
Company's current liabilities exceeded its current assets by $52.4 million at
December 31, 1995. The Company intends to pay the balance due under the credit
facility and the subordinated notes in 1996 from cash generated by the sale of
its assets. Alternatively, the Company intends to complete a refinancing which
repays the balance due under the credit facility and amends and extends the
subordinated notes. The successful completion of one of these efforts is
essential as the Company has no other immediate plans that will provide
sufficient cash flows to satisfy its obligations. There can be no assurance that
the Company will have sufficient funds to finance its operations, which continue
to show losses, through the year ending December 31, 1996.
All of these matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts or classifications of liabilities
that may result from the outcome of this uncertainty.
Sustaining market share requires substantial capital expenditures,
primarily for paging equipment. Management estimates that capital expenditures
in 1996 will be approximately $4.8 million ($4.1 million for pagers and
$700,000 for RCC equipment). The Company does not have any material capital
expenditure commitments.
At December 31, 1995 the Company had net operating losses of
approximately $71.5 million for federal income tax purposes which will expire
at varying dates between 1998 and 2010. Certain stockholder transactions have
resulted in an ownership change, as defined, which, under the Internal Revenue
Code, limits the utilization of the net operating loss carryforwards.
The Company maintains a policy for delinquent customers of billing and
attempting to collect the balance of the unexpired term of their contracts and
the value of unreturned leased pagers. In 1995, the Company wrote off
approximately $900,000 of accounts receivable against the allowance for
doubtful accounts.
Inflation and Changing Prices
Inflation has not materially affected the sale of paging services by
the Company. Paging systems equipment, leasing costs and transmission costs
have not risen significantly, nor has the Company substantially increased its
charges to customers. Pager costs have actually declined in recent years. This
reduction in cost has generally been reflected in lower prices charged to
subscribers. Overhead expenses are, however, subject to inflationary pressure.
Item 8. Financial Statements and Supplementary Data.
The Financial Statements and supplementary data required by Part II,
Item 8, are included in Part IV, as indexed at Item 14(a)(1).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Director or
Name Age Position with Company Officer Since
<S> <C> <C> <C>
Kathleen C. Parramore 44 President and Chief Operating Officer 1990
Richard A. Contrera 50 Vice President--RCC Engineering 1985
Martin Katz 43 Vice President--Administration
and Chief Financial Officer 1995
Martin H. Neidell 49 Secretary 1983
David A. Barry(1)(2) 49 Chairman of the Board, Director 1988
and Chief Executive Officer
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
The Directors are presently elected for one year terms which expire at
the next annual meeting of shareholders. Executive officers are elected
annually by the Board of Directors to hold office until the first meeting of
the Board following the next annual meeting of shareholders and until their
successors are chosen and qualified.
Ms. Parramore has been President and Chief Operating Officer of the
Company since March 1995 and was Vice President from December 1990 until 1995.
She has been employed by the Company since April 1990. From 1989 to 1990, she
was general manager of Nationwide Cellular; from 1987 to 1989, she was Chief
Financial Officer of American Mobile Communications; and from 1984 to 1987, she
was Chief Financial Officer of AT&T Intelliserve.
Mr. Contrera has been Vice President--RCC Engineering of the Company
since July 1985 and has been employed by the Company since November 1983. In
1983, Mr. Contrera was a Project Manager for 3M Corporation and from 1973
through 1982 held various positions with U.A. Columbia Cablevision, Inc.,
including Director of Operations.
Mr. Katz has been Vice President-Administration and Chief Financial Officer
since April 1995. From 1987 through 1994, Mr. Katz was Chief Financial Officer
and Vice President of Finance and Business Affairs at CEL Communications, Inc.
Mr. Neidell has been Secretary of the Company since 1983. For more than
the past five years, Mr. Neidell has been a partner of Stroock & Stroock &
Lavan, counsel to the Company.
Mr. Barry has been President of Bariston Associates, Inc. since April 1986.
He has been acting as Chairman of the Board and Chief Executive Officer of the
Company since August 1, 1995. Mr. Barry was Managing Director and Principal of
Winthrop Financial Associates from September 1982 to April 1986. Prior thereto
Mr. Barry was a Managing Director of Paine Webber Incorporated.
The Company's non-employee Directors are entitled to annual fees of
$1,500 and $250 for each meeting attended, plus reimbursement for expenses in
attending meetings.
Item 11. Executive Compensation
The following table sets forth information concerning compensation
paid to the Company's Chief Executive Officer and to each of the other most
highly compensated executive officers of the Company whose salary and bonus for
1995 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
===================================================================================================================================
ANNUAL COMPENSATION Long Term
Compensation
Name and Year
Principal All Other
Position Compensation(1)
($)
--------------------------------------------------------------------------
Salary Bonus Other Options
($) ($) Annual (#)
Comp. ($)
<S> <C> <C> <C> <C> <C> <C>
Steven L. Sinn 1995 $148,078 - $2,644
Chairman of the
Board and Chief
Executive Officer
1994 $250,000 -
1993 $200,000 $200,000
Kathleen C. Parramore 1995 $160,673 - 150,000 $4,957
President and Chief
Operating Officer
1994 $140,000 $39,000
1993 $130,741 $30,500
Martin Katz 1995 $102,692 - 75,000 $1,038
Vice President
Richard A. Contrera 1995 $110,039 - $5,173
Vice President
1994 $104,745 $7,867
1993 $97,125 $8,753
</TABLE>
(1) Consists of Company matching contributions under the Company's Stock
Purchase Plan and $650 in premiums on an insurance policy on the life
of Ms. Parramore under which she designates the beneficiaries.
Agreements
Ms. Parramore is employed under an employment agreement with the
Company which expires on February 28, 1997, and provides for an annual salary
at the rate of $165,000 per year, plus a discretionary bonus. This agreement is
automatically extended for successive one year periods unless terminated by the
Company or Ms. Parramore at least three months prior to any expiration date.
The Company may terminate the agreement at any time, with or without cause;
provided, however, that if such termination is without cause, Ms. Parramore
will be entitled to continue to receive her salary for one year.
Effective August 1, 1995, Mr. Sinn resigned as Chairman of the Board and
Chief Executive Officer of the Company. Mr. Sinn entered into a consulting and
non-competition agreement with the Company pursuant to which Mr. Sinn agreed to
serve as a consultant to the Company for one year at compensation of $250,000.
Mr. Sinn also agreed pursuant to the agreement not to compete with the Company
during his one year consulting term. During 1995, Mr. Sinn was paid $100,962
pursuant to the consulting agreement.
Stock Option Grants and Exercises
The table below shows information regarding the grant of stock options
made to the Company's Chief Executive Officer and the other most highly
compensated executive officers during the fiscal year ended December 31, 1995.
The amounts shown for each officer as potential realizable values are based on
arbitrarily assumed annualized rates of stock price appreciation over the term
of the options. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Company's Common Stock. There is no assurance
that such potential realizable values will be achieved.
<TABLE>
<CAPTION>
OPTION GRANTS IN THE LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Terms(3)
Exercise Price
Number %Grants to All per Expiration 5% Stock 10% Stock
Name Granted(1) Employees Share($)(2) Date Price ($) Price($)
<S> <C> <C> <C> <C> <C> <C>
Kathleen C.
Parramore 150,000 66.7 $.75 10/2/02 46,500 106,500
Martin Katz 75,000 33.3 $.75 10/2/02 23,250 53.250
Richard A. Contrera 0
(1) These options may not be exercised prior to one year from the date of grant
and may be exercised 20% per year thereafter, subject to acceleration upon the
occurrence of certain events.
(2) The exercise price was established at the market price on the date of
grant, October 2, 1995.
(3) The assumed annual rate of appreciation of five and ten percent would
result in the price of the Company's stock increasing to $1.06 and $1.46 per share,
respectively.
</TABLE>
The following table sets forth information with respect to the named
executives concerning exercise of options during the fiscal year ended December
31, 1995 and unexercised options held at December 31, 1995. The value of
unexercised, in-the-money options at December 31, 1995 is the difference
between the exercise price of options and the fair market value of Page
America's Common Stock on December 31, 1995, which was $.125 per share.
<TABLE>
<CAPTION>
STOCK OPTION EXERCISES TABLE
FOR THE YEAR ENDED DECEMBER 31, 1995
YEAR END STOCK VALUE
===================================================================================================================================
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Value Fiscal Year-End Fiscal Year End ($)
Name Acquired on Realized
Exercise (#) ($)
------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
(#) (#)
<S> <C> <C> <C> <C> <C> <C>
Kathleen C. Parramore 0 0 10,500 152,000 0 0
Martin Katz 0 0 0 75,000 0 0
Richard A. Contrera 0 0 8,750 1,250 0 0
</TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to
beneficial ownership of Common Stock at February 1, 1996 by (i) each person
known by the Company to beneficially own more than five percent of outstanding
Common Stock, (ii) each Director of the Company, (iii) each of the most highly
compensated executive officers of the Company and (iv) all Directors and
executive officers of the Company as a group. Except as noted below, each
person or entity has sole voting and investment power with respect to all
shares listed as owned by such person or entity.
<TABLE>
<CAPTION>
Name and Address Number(1) Percent of Class
<S> <C> <C>
David A. Barry(2) 3,722,211 31.7%
One International Place
Boston, MA 02110
Jack Kadis(2) 3,696,811 31.5%
One International Place
Boston, MA 02110
Bariston Paging Partners, L.P.(2) 3,471,714 30.1%
c/o Bariston Associates, Inc.
One International Pl.
Boston, MA 02110
T. Rowe Price High Yield Fund, Inc.(3) 1,712,411 18.6%
100 East Pratt Street
Baltimore, MD 21202
T. Rowe Price Strategic Partners Associates, Inc.(4) 462,402 5.7%
100 East Pratt Street
Baltimore, MD 21202
Sandler Mezzanine General Partnership(5) 945,741 10.6%
767 Fifth Avenue
New York, NY 10153
Froley, Revy Investment Co., Inc.(6) 471,000 5.8%
1900 Wilshire Blvd.
Los Angeles, CA 90024
Richard Contrera(7) 25,757 *
Kathleen Parramore(8) 168,624 2.1%
Martin Katz(9) 75,000 *
Directors and executive officers as a group(10) 294,981 3.0%
(5 persons)
* Less than one percent.
</TABLE>
(1) Assumes exercise of options or warrants to purchase shares of Common
Stock and conversion of shares of Series One Convertible Preferred Stock
into shares of Common Stock.
(2) David A. Barry is a director of the Company elected by the holders of
the Company's Series One Convertible Preferred Stock. Mr. Barry and Jack Kadis
are the general partners of BHI Associates VI, L.P., which is the sole general
partner of Bariston Paging Partners, L.P. ("Bariston Paging"). Messrs. Barry and
Kadis are the controlling shareholders of Bariston Holdings, Inc., which is the
sole shareholder of Bariston Associates, Inc. ("Bariston") and Bariston
Securities, Inc. The total number of shares listed above include 156,242 shares
of Series One Convertible Preferred Stock owned by Bariston Paging; 2,254 shares
of Series One Convertible Preferred Stock owned by Bariston Associates; 378
shares of Series One Convertible Preferred Stock owned by Mr. Barry, which are
convertible into an aggregate of 3,530,180 shares of Common Stock; 125,778
shares of Common Stock issuable upon exercise of warrants owned by BHI
Associates VI, L.P.; 41,672 shares of Common Stock issuable upon exercise of
warrants owned by Bariston; 17 shares of Common Stock owned by Bariston Paging;
7,563 shares of Common Stock owned by Bariston; and 17,001 shares of Common
Stock owned by Mr. Barry. Messrs. Barry and Kadis disclaim beneficial ownership
of the portion of the foregoing shares in which they have no actual pecuniary
interest.
(3) Consists of 20,000 shares of Series One Convertible Preferred Stock
convertible into an aggregate of 444,400 shares of Common Stock; warrants to
purchase 711,111 shares of Common Stock at an exercise price of $3.50 per
share; and 556,900 shares of Common Stock.
(4) T. Rowe Price Strategic Partners Associates, Inc. is the general
partner of T. Rowe Price Strategic Partners Fund, L.P. (the "Fund") and T. Rowe
Price Strategic Partners Fund II, L.P. ("Fund II"). Consists of 5,642 shares of
Series One Convertible Preferred Stock convertible into an aggregate of 125,365
shares of Common Stock and warrants to purchase 15,200 shares of Common Stock at
an exercise price of $3.50 per share owned by the Fund and 12,918 shares of
Series One Convertible Preferred Stock convertible into an aggregate of 287,037
shares of Common Stock and warrants to purchase an aggregate of 34,800 shares of
Common Stock at an exercise price of $3.50 per share owned by Fund II.
(5) Sandler Mezzanine General Partnership is the investment General Partner
of each of Sandler Mezzanine T-E Partners, L.P. ("TE"), Sandler Mezzanine
Partners, L.P. ("SM") and Sandler Mezzanine Foreign Partners, L.P. ("FP").
Consists of 5,390, 12,020, and 2,590 shares of Series One Convertible Preferred
Stock owned by TE, SM, and FP, respectively, which are convertible into an
aggregate of 444,400 shares of Common Stock; 15,333, 34,196 and 7,367 shares of
Common Stock owned by TE, SM and FP, respectively; and warrants to purchase
119,823, 267,200 and 57,422 shares of Common Stock owned by TE, SM, and FP,
respectively, at an exercise price of $3.50 per share.
(6) Includes 20,000 shares of Series One Convertible Preferred Stock
convertible into an aggregate of 444,400 shares of Common Stock.
(7) Includes 10,000 shares of Common Stock issuable upon exercise of
options and 15,757 shares of Common Stock vested under the Company's Stock
Purchase Plan.
(8) Includes 162,500 shares of Common Stock issuable upon exercise of
options and 5,724 shares of Common Stock vested under the Company's Stock
Purchase Plan.
(9) Consists of 75,000 shares of Common Stock issuable upon exercise of
options.
(10) Includes 247,500 shares of Common Stock issuable upon exercise of
options owned by all executive officers and Directors; 21,481 shares of Common
Stock vested under the Company's Stock Purchase Plan; and 378 shares of Series
One Convertible Preferred Stock which are convertible into 8,399 shares of
Common Stock.
Item 13. Certain Relationships and Related Transactions
Bariston Associates, Inc. ("Bariston") has been engaged by the Company
to provide investment banking functions for which it receives an annual fee of
$105,000, subject to cost of living adjustments. This agreement will terminate
upon the earlier to occur of Bariston and its affiliates ceasing to control a
majority of the Series One Convertible Preferred Stock or Common Stock issued
upon conversion thereof or Bariston and its affiliates owning less than 20
percent of the Company's full diluted shares of Common Stock.
Holders of a majority of Series One Convertible Preferred Stock, as a
class, have the right to elect two directors of the Company. In addition, if
any dividend payments are not made to the holders of shares of Series One
Convertible Preferred Stock, the dividend rate will increase to 15% per annum
and the holders of a majority of Series One Convertible Preferred Stock will be
entitled to elect an additional director of the Company. If a change in control
of the Company occurs, the holders of Series One Convertible Preferred Stock
have the right to cause the Company to repurchase such stock at its liquidation
value, plus accrued dividends. Bariston Paging Partners, L.P. holds a majority
of the Series One Convertible Preferred Stock. Mr. Barry is the director
elected by the holders of Series One Convertible Preferred Stock. The holders
of a majority of the Series One Convertible Preferred Stock have agreed that as
long as they continue to own a majority of such stock they will vote for a
nominee designated by the holders of a majority of such stock.
David A. Barry, a director of the Company, is affiliated with Bariston
Securities, Inc. and Bariston.
All of the terms and provisions of the foregoing transactions were
determined on an arms length basis. The Company believes that the terms of
these transactions were no less favorable to the Company than those which could
have been obtained from unaffiliated third parties.
Part IV
Item 14. Exhibits and Financial Statement Schedules and Reports on Form 8-K.
(a)(1). Financial Statements. The following consolidated financial
statements of Page America Group, Inc. and Subsidiaries, required by Part II,
Item 8, are included in Part IV of this report:
Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1995 and December 31,
1994.
Consolidated Statements of Operations for the years ended December 31,
1995, December 31, 1994, and December 31, 1993.
Consolidated Statements of Cash Flows for the years ended December 31,
1995, December 31, 1994, and December 31, 1993.
Consolidated Statement of Stockholders' Equity (Deficit) for the years
ended December 31, 1995, December 31, 1994 and December 31, 1993.
Notes to Consolidated Financial Statements.
(a)(2). Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts
All other financial statement schedules are omitted because they are
not applicable, or not required, or because the required information
is included in the consolidated financial statements or notes thereto.
Exhibits
(a)(3) Exhibits:
Exhibit No.
3.1 Restated Certificate of Incorporation of the Registrant, as
amended. Incorporated by reference to Exhibit 3.1 to Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 ("1993
10-K").
3.2 By-Laws of the Registrant. Incorporated by reference to Exhibit 3.2
to Registration Statement on Form S-1 (File No. 33-46333).
10.1 Employment Agreement, dated as of March 1, 1995, between the
Registrant and Kathleen Parramore. Incorporated by reference to
Exhibit 10.1 Annual Report on Form 10-K for the fiscal year ended
December 31, 1994 ("1994 10-K").
10.2 Asset Acquisition Agreement dated as of September 27, 1993, as
amended, by and among Page America Group, Inc., Crico
Communications Corporation and the stockholders thereof.
Incorporated by reference to Exhibit 2(a) to Current Report on Form
8-K dated January 14, 1994.
10.3 Credit Agreement dated as of December 30, 1993 by and among Page
America Group, Inc., its subsidiaries and NationsBank of Texas,
N.A., Canadian Imperial Bank of Commerce, Fleet National Bank and
State Street Bank and Trust Company. Incorporated by reference to
Exhibit 10.3 to 1993 10-K.
10.4 Subordinated Promissory Note, Preferred Stock, Common Stock and
Warrant Purchase Agreement dated as of December 30, 1993, by and
among Page America Group, Inc., its subsidiaries and various
purchasers parties thereto. Incorporated by reference to Exhibit
10.4 to 1993 10-K.
10.5 Second Amended and Restated Registration Rights Agreement dated as
of December 30, 1993. Incorporated by reference to Exhibit 10.5 to
1993 10-K.
10.6 Subordinated Promissory Note Registration Rights Agreement dated as
of December 30, 1993. Incorporated by reference to Exhibit 10.6 to
1993 10-K.
10.7 Series One Convertible Preferred Stock Voting Agreement dated as of
December 30, 1993. Incorporated by reference to Exhibit 10.7 to
1993 10-K.
10.8 Investment Banking Agreement dated December 30, 1993 between
Bariston Associates, Inc. and Page America Group, Inc.
Incorporated by reference to Exhibit 10.8 to 1993 10-K.
10.9 Purchase and Sale Agreement dated August 10, 1993 between Page
America Group, Inc. and Forsyth Company. Incorporated by reference
to Exhibit 10.9 to 1994 10-K.
10.10 Asset Purchase Agreement dated as of February 24, 1995 by and among
Paging Network of Florida, Inc., Page America Group, Inc. and
various subsidiaries of Page America Group, Inc. Incorporated by
reference to Exhibit 10.10 to 1994 10-K.
10.11 Consulting and Non-Competition Agreement dated August 1, 1995
between Registrant and Steven L. Sinn.
10.12 Third Amendment dated as of July 28, 1995 to Credit Agreement dated
as of December 30, 1993 by and among Page America Group, Inc., its
subsidiaries, and bank lenders.
10.13 Indenture dated as of June 30, 1994 among Page America Group, Inc.,
its subsidiaries, and American Stock Transfer and Trust Company, as
Trustee. Incorporated by reference to Exhibit 4 to Registration
Statement on Form S-4 (File No. 33-77832).
10.14 Amendment dated as of July 28, 1995 to Indenture dated as of June
30, 1994 by and among Page America Group, Inc., its subsidiaries,
and American Stock Transfer and Trust Company, as Trustee.
21. Subsidiaries of the Registrant. Incorporated by reference to
Exhibit 21 to 1994 10-K.
23. Consent of Ernst & Young LLP.
(b) Reports on Form 8-K
None
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors F-2
Consolidated Balance Sheets at December 31, 1995 and
December 31, 1994 F-3
Consolidated Statements of Operations for the years
ended December 31, 1995, December 31, 1994,
and December 31, 1993 F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, December 31, 1994, and
December 31, 1993 F-6
Consolidated Statement of Shareholders' Equity (Deficit) for the years ended
December 31, 1995, December 31, 1994, and December 31, 1993 F-8
Notes to Consolidated Financial Statements F-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Page America Group, Inc.
We have audited the accompanying consolidated balance sheets of Page
America Group, Inc. and subsidiaries as of December 31, 1995 and December 31,
1994, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. Our audit also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Page America Group, Inc. and subsidiaries at December 31, 1995 and December 31,
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
The accompanying consolidated financial statements have been prepared assuming
that Page America Group, Inc. will continue as a going concern. As shown in
the financial statements, the Company has incurred a loss of $13 million for
the year ended December 31, 1995. Losses from operations in recent years have
significantly weakened the Company's financial position and its ability to
purchase paging equipment and meet current operating expenses. Further, as
discussed in Note A, the Company is in default of its debt agreements under
which it has outstanding borrowings of $48 million, including $33 million of
borrowings under a credit facility with certain banks which is secured by
substantially all of the assets of the Company. Such debt is classified as a
current liability and the Company's current liabilities exceeded its assets by
$52 million at December 31, 1995. Management's plans in regard to these
matters are also described in Note A.
The matters referred to in the preceding paragraph raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the
amounts or classifications of liabilities that may result from the outcome of
this uncertainty.
Ernst & Young LLP
Hackensack, New Jersey
March 15, 1996
<PAGE>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
($ In Thousands)
<TABLE>
<CAPTION>
December 31,
1995 1994
------------- --------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 751 $ 1,128
Accounts receivable, net of allowance for doubtful
accounts of $277 and $439 1,017 1,665
Prepaid expenses and other current assets 944 503
--------- --------
Total current assets 2,712 3,296
EQUIPMENT, less accumulated depreciation and amortization 6,662 10,924
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $3,216 and $3,044 20,968 31,788
Customer lists, net of accumulated amortization
of $7,992 and $8,486 3,776 8,625
Other intangibles, net of accumulated amortization
of $3,676 and $2,940 8,945 12,595
Deferred financing costs, net 32 1,924
Deposits and other non-current assets 908 1,077
---------- --------
34,629 56,009
--------- --------
$ 44,003 $70,229
========= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (continued)
($ In Thousands, except share data)
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ --------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 48,666 $ 1,068
Accounts payable 1,982 4,819
Accrued expenses and other liabilities 1,535 3,433
Preferred dividends payable 1,432 1,444
Customer deposits 299 544
Deferred revenue 1,242 1,529
--------- --------
Total current liabilities 55,156 12,837
LONG-TERM DEBT, less current maturities 69 56,953
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Series One Convertible Preferred Stock, 10% cumulative, $.01 par value,
authorized 310,000 shares; issued and outstanding-- 286,361 and 288,881 shares;
liquidation value--$105 and $100 per share 30,068 28,888 Common stock--$.10 par
value, authorized--100,000,000 shares; issued and outstanding 8,052,305 and
7,101,868 shares 805 710 Paid-in capital 52,850 49,830 Accumulated deficit
(94,945) (78,989) --------- --------
(11,222) 439
--------- -------
$ 44,003 $70,229
========= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
---------------- ---------------- -----------
<S> <C> <C> <C>
Service revenues $26,415 $32,693 $26,609
Sales revenues 2,692 4,565 3,648
-------- -------- -------
Total revenues 29,107 37,258 30,257
Operating expenses:
Cost of service 2,640 2,943 1,841
Cost of sales 1,723 2,766 2,412
Selling 6,066 6,842 4,879
General and administrative 8,923 10,653 8,688
Technical 4,262 4,685 3,343
Depreciation 5,235 6,370 6,868
Amortization and write-off of
intangibles 3,350 4,447 2,925
-------- ------- ------
32,199 38,706 30,956
-------- ------- ------
Operating loss (3,092) (1,448) (699)
Interest expense (6,263) (5,102) (4,032)
Other income (expenses)
Gain (loss) on disposal of assets (657) 371 (53)
Amortization and write-off
of deferred costs (2,688) (437) (1,078)
Other (393) (412) (683)
-------- ------- ------
(3,738) (478) (1,814)
-------- ------- -------
Net loss (13,093) (7,028) (6,545)
Preferred stock dividend requirements (2,863) (3,023) (3,268)
--------- --------- --------
Net loss applicable to common stock $(15,956) $(10,051) $(9,813)
========= ========= ========
Loss per common share $(2.01) $(1.55) $(2.55)
======= ======= =======
Weighted average number of shares
outstanding 7,936,410 6,463,889 3,847,185
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ In Thousands)
Increase (Decrease) in Cash and Cash Equivalents
Years Ended December 31,
1995 1994 1993
-------------- ---------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $28,949 $36,958 $29,610
Cash paid to suppliers and employees (22,269) (23,913) (17,569)
Interest paid (4,556) (4,389) (3,972)
Other (60) (54) (41)
--------- --------- ----------
Net cash provided by operating
activities 2,064 8,602 8,028
Cash flows from investing activities:
Capital expenditures (5,938) (8,016) (6,886)
Licensing costs (206) (1,016) (364)
Acquisitions and related liabilities -- (265) (13,108)
Net proceeds from disposal of assets 17,473 416 46
-------- -------- ---------
Net cash provided by (used in) investing
activities 11,329 (8,881) (20,312)
Cash flows from financing activities:
Proceeds from issuance of debt 116 -- 59,757
Net proceeds from issuance of Series One
Preferred Stock -- -- 7,752
Common Stock issued to employee stock
purchase plan -- -- 26
Net proceeds from issuance of common stock -- -- 3,601
Principal payments on debt (13,077) (919) (51,984)
Costs related to financing of debt (741) (177) (3,802)
Costs related to issuance of common stock (68) (39) --
Costs related to issuance of Series One
Preferred Stock -- (370) --
Costs related to 1992 terminated
registration statement -- -- (45)
Costs related to 1992 note repurchase -- -- (275)
---------- ---------- ----------
Net cash (used in) provided by
financing activities (13,770) (1,505) 15,030
Net (decrease) increase in cash and
cash equivalents (377) (1,784) 2,746
Cash and cash equivalents at beginning of period 1,128 2,912 166
-------- --------- ---------
Cash and cash equivalents at end of period $ 751 $ 1,128 $ 2,912
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ In Thousands)
Reconciliation of net loss to net cash provided by operating activities:
Years Ended December 31,
1995 1994 1993
--------- -------- ------
<S> <C> <C> <C>
Net loss $(13,093) $(7,028) $(6,545)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 9,690 11,254 10,193
Net book value of pagers sold 1,596 2,731 2,352
Write-off of deferred financing costs 1,584 -- 677
Provision for losses on accounts
receivable 710 1,703 1,130
Provision for lost pagers 249 342 688
Loss (gain) on disposal of assets 657 (371) 54
Issuance of promissory notes
to satisfy interest on
subordinated debt 1,950 - -
Other 578 204 54
Change in assets and liabilities:
Increase in accounts receivable (158) (300) (647)
Decrease (increase) in prepaid expenses
and other 279 (245) 174
(Decrease) increase in accounts payable (1,759) 83 (392)
(Decrease) increase in accrued expenses (219) 229 290
--------- --------- --------
Total adjustments 15,157 15,630 14,573
-------- -------- -------
Net cash provided by operating activities $ 2,064 $ 8,602 $ 8,028
======== ======== =======
Supplemental schedule of noncash investing and financing activities:
Dividends accrued on preferred stock $ 1,432 $ 1,444 $ 3,071
Dividends added to the liquidation
value of Preferred Stock 1,432 -- --
Notes issued in connection with acquisitions -- -- 250
Common stock issued:
In connection with acquisitions 1,470 -- 5,425
To employee stock purchase plan 16 130 32
Dividend payment on preferred stock 1,445 1,527 --
Common Stock adjustment relating to
Crico asset acquisition -- 1,471 --
Capital expenditures in accounts payable
and accrued expenses 94 1,367 160
Capital expenditures financed 1,287 -- 1,512
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
($ In Thousands)
Series One Series C Paid-in
Preferred Stock Preferred Stock Common Stock Capital Accumulated
Shares Amount Shares Amount Shares Amount Amount Deficit Total
---------- ---------- ------- ------- ------- ------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 131,742 $1,834 3,828,434 $383 $35,746 $(59,365) $(21,402)
Conversion of Preferred Stock (263) (3) 263 0 3 0
Issuance of Common Stock
In connection with acquisition 1,240,000 124 5,301 5,425
In connection with Subordinated Notes 915,625 92 3,571 3,663
To employee stock purchase plan and trust 15,000 1 57 58
Issuance of warrants in connection
with subordinated debt 867 867
Preferred Stock exchange 229,978 $22,998 320 23,318
Repayment of Related Party receivable
and cancellation of certificates (4,210) (421) (421)
Sale of Preferred Stock Series One 80,000 8,000 8,000
Expenses related to Preferred and
Common Stock issuance (796) (796)
Dividends declared on Preferred Stock (3,070) (3,070)
Net loss (6,545) (6,545)
------- --------- -------- -------- -------- ----- ------- ------- ------
Balance at December 31, 1993 305,768 30,577 131,479 1,831 5,999,322 600 45,069 (68,980) 9,097
Issuance of Common Stock:
To employee stock purchase plan and trust 33,548 3 127 130
For dividends on Preferred Stock-Series One 406,220 40 1,487 1,527
Purchase price adjustment related
to an acquisition (38,000) (4) (163) (167)
Conversion of Preferred Stock (16,887) (1,689) (18,970) (264) 394,197 40 1,913 0
Preferred Stock-Series C Exchange (112,509)(1,567) 306,581 31 1,536 0
Expenses related to issuance of Common Stock
and referred Stock-Series One (139) (139)
Dividends declared on Preferred Stock (2,981) (2,981)
Net loss (7,028) (7,028)
---------- -------- ------- ------- --------- ----- ------- --------- --------
Balance at December 31, 1994 288,881 28,888 7,101,868 710 49,830 (78,989) 439
Issuance of Common Stock:
To employee stock purchase plan and trust 20,912 2 14 16
For dividends on Preferred Stock-Series One 437,629 44 1,401 1,445
Purchase price adjustment related
to an acquisition 435,903 43 1,427 1,470
Conversion of Preferred Stock (2,520) (252) 55,993 6 246 0
Dividends added to the liquidation
value of Preferred Stock 1,432 1,432
Expenses related to issuance of Common Stock (68) (68)
Dividends declared on Preferred Stock (2,863) (2,863)
Net loss (13,093) (13,093)
-------- -------- -------- ------- --------- ---- -------- ---------- --------
Balance at December 31, 1995 286,361 $30,068 0 $0 8,052,305 $805 $52,850 $(94,945) ($11,222)
======== ======== ========= ======= ========== ==== ======= ========== =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Page America Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business--The Company is a radio paging company which
markets and provides over-the-air messaging information, products and services
in the New York and Chicago metropolitan area markets through facilities which
it owns and operates as a radio common carrier ("RCC") under licenses from the
Federal Communications Commission. The Company's diversified customer base
provides for a lack of concentration of credit risk.
Basis of Presentation--Certain amounts in the prior year financial
statements have been reclassified to conform with the current year
presentation.
Principles of Consolidation--The consolidated financial statements
include the accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Cash and Cash Equivalents--The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less, at date of
acquisition, to be cash equivalents.
Equipment--Equipment is stated at cost less accumulated depreciation
and amortization and includes pagers held for sale or lease. Depreciation is
computed by the declining balance method for pager equipment and the
straight-line method for all other equipment in amounts sufficient to allocate
the cost of depreciable assets to operations over their estimated useful lives.
Leasehold improvements are amortized over the shorter of the life of the
respective lease or service life of the improvement. Cost of sales and service
does not include depreciation expense, which is presented separately in the
accompanying statements of operations.
Certificates of Authority--The costs of certificates of authority
related to the conduct of RCC operations are amortized on a straight-line basis
principally over periods of 40 years.
Customer Lists--Customer lists generally consist of a portion of the
cost of business acquisitions assigned to the value of customer accounts and
are amortized on a straight-line basis over the estimated lives of those
customers which range up to fourteen years.
Other Intangibles--Other intangibles include the excess of the
purchase price over the fair market value of the net assets acquired and are
amortized on a straight-line basis principally over 40 year periods. The
Company routinely evaluates the carrying value of all of its intangibles for
impairment.
Interest Rate Protection--On December 30, 1993, the Company entered
into a new senior credit facility with certain banks. On February 15, 1994, the
Company entered into an interest rate cap agreement which protects the Company
against increases in interest rates on $25 million of this debt. The
unamortized cost of this agreement is included in prepaid expenses in the
consolidated balance sheet and is being amortized over the three year life of
the agreement. The fair value of the instrument, as further described in Note
E, was based upon a quote from an independent financial institution.
Loss Per Share--Loss per share is computed based upon the weighted
average number of common shares outstanding during the periods presented and is
computed after giving effect to preferred stock dividend requirements. Stock
options, warrants and the assumed conversion of the convertible preferred stock
have not been included in the calculation, since their inclusion would not be
dilutive for each of the periods presented.
Net Losses and Management's Plans--The accompanying financial statements
have been prepared on a going concern basis. The Company, since its inception,
has experienced a deficiency in working capital and recurring losses. In 1995,
as a result of non-compliance by the Company with certain covenants of its
credit facility, the terms were modified to accelerate the final maturity to
December 29, 1995, and the subordinated notes were modified to provide for a
final maturity of six months thereafter. The credit facility was not repaid at
maturity causing the credit facility and the subordinated notes to be in default
(see Note E). Such debt is classified as a current liability and the Company's
current liabilities exceeded its current assets by $52.4 million at December 31,
1995. The Company intends to pay the balance due under the credit facility and
the subordinated notes in 1996 from cash generated by the sale of its assets.
Alternatively, the Company intends to complete a refinancing which repays the
balance due under the credit facility and amends and extends the subordinated
notes. The successful completion of one of these efforts is essential as the
Company has no other immediate plans that will provide sufficient cash flows to
satisfy its obligations. There can be no assurance that the Company will have
sufficient funds to finance its operations, which continue to show losses,
through the year ending December 31, 1996.
All of these matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts or classifications of liabilities
that may result from the outcome of this uncertainty.
NOTE B--SALE OF FLORIDA AND CALIFORNIA OPERATIONS
On July 28, 1995, the Company sold its California and Florida paging
assets for a cash sale price of $19.4 million. One million dollars of the sale
price is being held in escrow and is scheduled to be released to the Company
over a two year period, as provided for in the agreement. Part of the proceeds
was used to reduce the Company's senior debt by $11.8 million and to prepay
interest of $1.2 million through December 29, 1995. In connection with this
sale, the Company incurred expenses amounting to approximately $1.0 million.
This sale included approximately 78,000 pagers, two statewide and several
regional frequencies. The assets sold had a net book value of approximately
$19.1 million and consisted of the assets which the Company acquired from Crico
Communications Corporation ("Crico") on December 30, 1993 and the 900 Mhz
channel which is licensed to provide state-wide coverage in California which
the Company acquired in 1994 for a purchase price of $500,000. The purchase
price paid by the Company for the Crico assets consisted of $12,650,000 in cash
paid to Crico's lenders, the issuance of an aggregate of 1,435,903 shares of
Common Stock to Crico's lenders and the issuance of 240,000 shares of Common
Stock and warrants to purchase 130,000 shares of Common Stock at an exercise
price of $5.00 per share to a company related to certain shareholders of Crico.
As a result of the sale, the Company incurred a loss of approximately $718,000.
NOTE C--1993 REFINANCING AND ACQUISITION FINANCING
On December 30, 1993, contemporaneous with the Crico acquisition, the
following occurred:
Credit Facility
The Company entered into a new senior secured credit facility,
replacing the Company's then existing credit facility. The new agreement
provided for an $11.27 million reducing revolving credit and a $45 million term
loan facility, each with a final maturity of March 31, 2000. In connection with
this transaction, the Company wrote off $677,400 of deferred financing costs
related to the retired credit facility. The terms of this credit facility were
subsequently modified. See Note E.
Subordinated Note Financing
The Company sold $13 million aggregate principal amount of 12 percent
Subordinated Notes originally due 2003. Payments on the Subordinated Notes
initially were to be interest only with mandatory principal payments of $1.3
million due semi-annually beginning on June 30, 1999. The terms of these notes
were subsequently modified. See Note E.
In connection with the issuance of the notes, the Company also issued
warrants to purchase an aggregate of 1,155,556 shares of Common Stock, at a
purchase price of $3.50 per share. The warrants expire ten years from issuance.
The Company may accelerate the expiration of the warrants at any time after
December 31, 1996 if the average closing price of the Common Stock for both the
60 day and the five day periods preceding the notice date was equal to or
greater than 150 percent of the warrant exercise price. The holders will be
entitled to anti-dilution protection under certain circumstances. If a change
of control of the Company occurs at less than a 25 percent premium over the
exercise price, the warrant holders will have the right to cause the Company to
pay to them the difference between the exercise price and 125 percent of the
exercise price; provided, however, the warrants must be exercised.
Preferred and Common Stock Issuance
The Company sold $8 million of a new series of Series One Convertible
Preferred Stock (See Note G). As part of this transaction, the Company also
sold 500,000 shares of Common Stock at a price of $4.00 per share. The Series
One Convertible Preferred Stock has a 10 percent dividend, payable
semi-annually in arrears and is convertible into Common Stock at $4.50 per
share, subject to certain anti-dilution provisions. Payment of dividends may be
made in cash or in Common Stock of the Company registered under the Securities
Act of 1933. Any dividend payments not made when permitted under the Credit
Facility and the Subordinated Note Financing will result in, among other
things, an increase in the dividend rate to 15 percent per annum and entitle
holders of the majority of the Series One Convertible Preferred Stock to elect
an additional representative to the Board of Directors of the Company. Holders
of the Series One Convertible Preferred Stock were originally entitled to a
preference in liquidation of $100 per share plus any accrued but unpaid
dividends. In 1995 the holders of the Series One Convertible Preferred Stock
waived their rights to receive the dividend payment of $1,432,000 due on June
30, 1995. In exchange, this amount was added to the liquidation value of the
shares thereby increasing the liquidation value to $105 per share. The Company
may redeem the Series One Convertible Preferred Stock if the average closing
price of the Common Stock for both the preceding 60 day and five day periods
has equalled or exceeded 150 percent of the conversion price. After December
31, 2000, the Series One Convertible Preferred Stock may be redeemed at par,
plus accrued dividends. If the Company calls the Series One Convertible
Preferred Stock for redemption, the holders may convert to shares of Common
Stock. Upon any redemption, accrued dividends must be paid by the Company in
cash. Upon conversion of the Series One Convertible Preferred Stock, the
Company will have the option to pay accrued dividends by issuing additional
shares of its Common Stock. Holders of the Series One Convertible Preferred
Stock will be entitled to vote as if their shares of Series One Convertible
Preferred Stock were converted into shares of Common Stock. Holders of a
majority of the Series One Convertible Preferred Stock, as a class, will be
entitled to elect two representatives to the Board of Directors. If a change in
control in the Company occurs, the holders of Series One Convertible Preferred
Stock will have the right to cause the Company to repurchase such stock at the
liquidation value, plus accrued dividends. The Company has registered for
resale under the Securities Act of 1933 the Series One Convertible Preferred
Stock, Common Stock issued in payment of dividends and the Common Stock
issuable upon conversion of the Series One Convertible Preferred Stock. The
Company also registered the warrants issued on December 30, 1993 and shares of
Common Stock issuable upon exercise thereof.
Preferred Stock Exchange
The Company also issued $23 million of Series One Preferred Stock in
exchange for (i) all outstanding shares of Series A Preferred Stock, Series A-2
Preferred Stock and Series B Preferred Stock (which were reflected outside of
shareholders' equity due to redemption provisions); (ii) warrants to purchase
1,276,289 shares of Common Stock having an exercise price of $6.761 per share
and (iii) $8,065,960 of dividends accrued through December 31, 1993 on the
exchanged preferred stock. As the result of the exchange, all the outstanding
Series A, Series A-2 and Series B Preferred Stock were canceled and provisions
relating to change in control and rights to terminate were terminated. The
terms of the exchange were negotiated between independent members of the Board
of Directors of the Company and the holders of the preferred stock.
NOTE D--BALANCE SHEET CLASSIFICATIONS ($ In Thousands)
Prepaid expenses and other current assets comprise the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Escrow amount for the
sale of Florida and California assets $502 $0
Receivable from a reseller 0 152
Other current assets 442 351
---- ----
$944 $503
==== ====
Equipment consists of the following:
December 31,
1995 1994
------ ------
Pagers $8,164 $12,542
Radio common carrier equipment 12,914 14,683
Office equipment 3,946 4,002
Leasehold improvements 614 544
Building and land 64 100
-------- --------
25,702 31,871
Less accumulated depreciation and
amortization (19,040) (20,947)
-------- --------
$6,662 $10,924
======== =======
Accrued expenses and other liabilities comprise the following:
December 31,
1995 1994
---- ----
Interest $101 $837
Taxes 818 651
Salaries and bonuses 366 267
Professional services 95 14
Crico acquisition contingent payment 1,471
Other 155 193
------- -------
$1,535 $3,433
====== ======
</TABLE>
NOTE E--LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
----------------- -----------
$ In Thousands $ In Thousands
<S> <C> <C>
Bank credit facility $33,200 $45,000
Subordinated notes (including
deferred interest) 14,667 12,245
Other 868 776
------- -------
48,735 58,021
Less current maturities 48,666 1,068
------- --------
$ 69 $56,953
========= =======
</TABLE>
On December 30, 1993, the Company entered into a senior secured credit
facility with certain banks. The bank credit facility ("Credit Facility"),
replacing the Company's then existing credit facility, provided for an $11.27
million reducing revolving credit line and a $45 million term loan facility,
each with an original final maturity of March 31, 2000. The interest rate is
based either on prime or LIBOR, at the option of the Company, with further
adjustment depending on the Company's ratio of total debt to operating cash
flow, as defined. Due to the existence of a default at December 31, 1995, the
interest rate was based on prime plus the aforementioned adjustment. At
December 31, 1995, the interest rate was prime of 8.5 percent plus 1.75
percent. At closing, the Company paid a fee to the Banks in the amount of
$951,550. The Company was also required to pay the Banks a commitment fee of
0.5 percent on the unused balance of the revolving credit facility and annual
fees of $55,000. The Company canceled its revolving credit facility effective
November 29, 1994. Payments on the Credit Facility initially were to be
interest only with mandatory principal payments due quarterly beginning on
September 30, 1995.
On July 28,1995, concurrent with the sale of the Company's Florida
and California paging assets, the Credit Facility was amended. Among other
things, the amendment provided for an acceleration of the final maturity to
December 29, 1995 and modified the financial covenants so that the Company
would no longer be in default as of the amendment date. The Company used the
net proceeds from the sale of its Florida and California operations to reduce
the debt by $11.8 million and prepay interest at the LIBOR rate from August 1,
1995 through December 29, 1995. In its third fiscal quarter, the Company
recorded a charge of approximately $1.8 million related to the amended
agreement which includes the write-down of deferred financing costs of
approximately $1.1 million. The Credit Facility has not been repaid and the
lenders have declared the Company in default. The Credit Facility is secured by
substantially all the assets of the Company.
On December 30, 1993 the Company sold $13 million aggregate principal
amount of 12 percent Subordinated Notes originally due 2003, with warrants,
pursuant to a Note Purchase Agreement. Payments on the Subordinated Notes
initially were to be interest only with mandatory principal payments of $1.3
million due semi-annually beginning on June 30, 1999. All payments on the notes
are subordinated to the prior payment in full of all amounts outstanding under
the Credit Facility. The notes are governed by certain financial covenants. In
July, 1994, the Company exchanged the notes for identical notes which were
registered under the Securities Act of 1933.
On July 28, 1995, the subordinated notes were modified to provide for
a final maturity of six months subsequent to the final maturity of the Credit
Facility and to defer the cash payment of interest until maturity. As a result
of the default under the Credit Facility, the Company is in default of the
subordinated notes. Commencing January 1, 1995, interest is increased from 12
to 15 percent per annum, compounded semi-annually and is satisfied by the
issuance of additional promissory notes with terms substantially identical to
the subordinated notes, as amended. In 1995 the Company recorded a
charge of approximately $500,000 related to the modified agreement, which
includes the write-down of deferred financing costs of approximately $479,000.
If a change in control of the Company occurs, the note holders will have the
right to require the Company to repurchase the notes at par plus accrued
interest.
On February 15, 1994, in accordance with the terms of the Credit
Facility, the Company entered into an interest rate cap agreement for which the
Company paid $65,000. This agreement protects the amount of $25 million against
LIBOR rates in excess of 7.5 percent and expires in February of 1997. There was
no impact on the weighted average borrowing rate or the reported interest
expense during 1994 and 1995 as the LIBOR rate did not exceed 7.5 percent. The
estimated fair value of this instrument at December 31, 1995 and March 31, 1995
was $0 and $137,000, respectively. The net carrying value of the instrument at
December 31, 1995 was $24,000.
NOTE F--CUMULATIVE SERIES C PREFERRED STOCK EXCHANGE
On March 7, 1994, the Company offered the holders of its Cumulative
Series C Preferred Stock to exchange each share of such stock, and undeclared
dividends thereon, for 2.725 shares of common stock. The holders of 112,509
shares of Series C elected to accept this offer. Accordingly, 306,581 shares of
Common Stock of the Company were issued in exchange for those shares of Series
C and the holders' right to $970,400 of associated undeclared dividends. In
accordance with the original terms, on September 12, 1994, the remaining shares
outstanding were mandatorily converted to shares of Common Stock of the Company
and accrued dividends of $17,500 were paid.
NOTE G--SHAREHOLDERS' EQUITY
Series One Convertible Preferred Stock--Series One Convertible
Preferred Stock has a 10 percent dividend, payable semi-annually in arrears and
is convertible into Common Stock at an initial price of $4.50 per share,
subject to certain anti-dilution provisions. Payment of dividends may be made
in cash or in Common Stock of the Company. On August 11, 1994 and March 8,
1995, the Company issued 406,220 shares and 437,629 shares of its Common Stock,
respectively, to the holders of Series One Convertible Preferred Stock, as full
payment of dividends for the year ended December 31, 1994. On June 30, 1995,
the Preferred shareholders waived their rights to receive the dividend payment
of $1,432,000 due on the same date. In exchange, this amount was added to the
liquidation value of the shares. As of December 31, 1995, accrued dividends
aggregated $1,432,000. It is anticipated that such dividends will be paid by
the issuance of approximately 7,900,000 shares of the Company's Common Stock.
See Note C.
Common Stock Reserved For Issuance--As of December 31, 1995, unissued
Common Stock of the Company was reserved for issuance in accordance with the
terms of outstanding warrants (1,511,238), stock options (251,700),
convertible preferred stock (6,363,578) and preferred stock dividends
(7,900,000).
Stock Options--The Company's 1983 Stock Option Plan, as amended,
provides for the granting of options to purchase an aggregate of 235,000 shares
of the Company's Common Stock to key employees. The option prices cannot be
less than the fair market value of Common Stock at dates of grant. Options may
not be exercised until specified time restrictions have lapsed and option
periods cannot exceed five years. In August, 1995, 100,000 options held by the
former President of the Company were canceled. No more options may be granted
under this plan.
The Company's 1990 Stock Option Plan provides for the grant by the
Company of options to purchase not more than 555,000 shares of Common Stock to
key employees and directors. The exercise price per share is the fair market
value of a share of Common Stock for options granted after December 29, 1992,
and the greater of (i) the fair market value of a share of Common Stock or (ii)
$7.00, for options granted on or before December 29, 1992. Options to be
granted under the 1990 Stock Option Plan may not be exercised prior to one year
from the date of grant and options may be exercised 20 percent per year
thereafter. Exercise of such options will be accelerated if the Company is
sold, a change in control occurs or as the Compensation Committee of the Board
of Directors deems appropriate. In August, 1995, 252,508 options held by the
former President of the Company were canceled. In October, 1995, 150,000 and
75,000 options were granted to the President and the Chief Financial Officer of
the Company, respectively. These options have an exercise price of $.75 per
share and will expire in October, 2002.
The following summarizes the changes in stock options:
<TABLE>
<CAPTION>
Number of Option price
shares per share
<S> <C> <C>
Outstanding at December 31, 1992
(183,597 exercisable) 576,967 4.40-7.38
Granted 252,508 4.63
Canceled (413,774) 4.40-7.38
Expired (9,243) 4.40
--------
Outstanding at December 31, 1993
(198,575 exercisable) 406,458 4.63-7.38
Canceled (11,750) 7.00-7.38
Outstanding at December 31, 1994
(278,566 exercisable) 394,708 4.63-7.38
Granted 225,000 .75
Canceled (368,008) 4.63-7.38
---------
Outstanding at December 31, 1995
(22,450 exercisable) 251,700 .75-7.38
==========
</TABLE>
The stock options outstanding at December 31, 1995 expire at various
dates through October, 2002. As of December 31, 1995 and December 31, 1994,
308,300 and 266,292 options were available for grant, respectively.
NOTE H--INCOME TAXES
The Tax Reform Act of 1986 enacted a complex set of rules limiting the
utilization of net operating loss and tax credit carryforwards to offset future
taxable income following a corporate "ownership change". In general, an
ownership change occurs if the percentage of stock of a loss corporation owned
(actually, constructively and, in some cases, deemed ownership) by one or more
"5 percent shareholders" has increased by more than 50 percentage points over
the lowest percentage of such stock owned by those persons during a three year
testing period. If an ownership change occurs it would limit the utilization of
the net operating loss carryforwards for federal income tax purposes. The
Company has determined that there has been an ownership change as of December
31, 1993. As of December 31, 1995, the Company had net operating losses of
approximately $71.5 million for federal income tax purposes which will expire
at various dates between 1998 and 2010. $52.6 million of the total net
operating losses of $71.5 million are subject to the aforementioned
limitations. In addition, the Company has investment tax credit carryforwards
of approximately $670,000 which expire principally in 1997 through 2000, which
are also subject to limitation.
The effects of temporary differences that gave rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Current Long-Term CurrentLong-Term
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Deferred tax assets:
FCC License amortization $110 -
Depreciation - $590
Allowance for bad debts $13 $68
Commission expense 1,425 1,502
Investment tax credit carryforwards 670 670
Net operating loss carryforwards 27,362 22,278
Other 256 392
------ --------- ------ --------
Total deferred tax assets 13 29,823 68 25,432
Less: Valuation allowance (13) (29,699) (68) (25,329)
----- -------- ----- --------
Net deferred tax assets 124 103
Deferred tax liabilities:
Depreciation 124 -
FCC license amortization - 88
Other - 15
------ ----------- ------ --------
Total deferred tax liabilities 124 103
------ --------- ------ -------
Net deferred tax asset/liability $0 $0 $0 $0
===== ========== ===== ========
</TABLE>
The Company's valuation allowance increased by approximately $4,315 to
$29,712 as of December 31, 1995 due principally to the increase in the net
operating losses.
The reconciliation of income taxes computed at the U.S. federal
statutory tax rate to income tax expense is:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Tax (benefit) at U.S. statutory rates ($4,429) ($2,390) ($2,225)
State income taxes, net of federal
benefit (487) (195) (134)
Valuation allowance 4,315 3,014 2,121
Other 601 (429) 238
--------- --------- --------
$0 $0 $0
========= ========= ========
</TABLE>
NOTE I--CONTINGENCIES
The Company is involved in various lawsuits and proceedings arising
in the normal course of business. In the opinion of management of the Company,
the ultimate outcome of these lawsuits and proceedings will not have a material
effect on the results of operations, financial position or cash flows of the
Company.
NOTE J--RELATED PARTY TRANSACTIONS
A company (the "Related Company") whose president is a Director of
the Company acted as a placement agent in connection with the sale by the
Company of shares of Series One Convertible Preferred Stock and subordinated
notes and the entering into of the bank credit facility. As a result, the
Related Company received a fee of $532,500 plus reimbursement of its
out-of-pocket expenses which was paid in December, 1993.
The Related Company has been engaged to provide investment banking
functions for which it receives an annual fee of $105,000, subject to cost of
living adjustments. This agreement will terminate if the Related Company ceases
to control a majority of the Series One Convertible Preferred Stock (or Common
Stock issued upon conversion thereof) or owns less than 20% of the Company's
fully diluted shares of Common Stock. At December 31, 1995, investment banking
fees accrued but unpaid were $151,000.
In 1993 the Related Company repaid $421,000 of indebtedness owed to
the Company by surrendering for cancellation 4,210 shares of Series One
Convertible Preferred Stock which had a value of $100 per share.
NOTE K--RENTALS
Rental expense for the fiscal years 1995, 1994 and 1993 was
approximately $3,062,000, $3,236,000, and $2,353,000 respectively.
Future minimum annual payments under non-cancelable operating leases
for office space and transmitter sites, as of December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
Amount
(In Thousands)
<S> <C>
1996 $1,145
1997 823
1998 664
1999 546
2000 432
Thereafter 1,576
---------
$5,186
</TABLE>
Certain leases are subject to increases in taxes, operating and other
expenses.
NOTE L--EMPLOYEE BENEFIT PLAN
The Company has a 401(K) plan covering substantially all of its
employees. All employees who have completed ninety days of service are eligible
to participate. Employees may contribute 1% to 4% of compensation to the plan
on an after-tax basis and also defer additional amounts of compensation in 1%
increments on a pre-tax basis, subject to limits established by the Internal
Revenue Code. The Company matches 100% of after-tax and 25% of pre-tax
contributions with shares of its common stock. The total cost of the plan
amounted to $69,400, $124,800, and $140,700 in 1995, 1994 and 1993,
respectively.
<PAGE>
<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
($ In Thousands)
Column A Column B Column C Column D Column E
-------------- ----------- ------------ -------------- ---------
Additions
Balance at-- charged to Balance at
beginning costs and Deductions-- end of
Description of period expenses describe period
<S> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for
doubtful accounts $750 $1,130 $985(a) $895
==== ====== ==== ====
Year ended December 31, 1994
Allowance for
doubtful accounts $895 $1,703 $2,159(a) $439
==== ====== ====== ====
Year ended December 31, 1995
Allowance for
doubtful accounts $439 $710 $ 872(a) $277
==== ==== ====== ====
</TABLE>
(a) Accounts written off as uncollectible.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAGE AMERICA GROUP, INC.
March 28, 1996
By:/s/ Kathleen C. Parramore
------------------------
Kathleen C. Parramore
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Title Date
/s/ David A. Barry Chairman of the Board
David A. Barry and Chief Executive Officer March 28, 1996
/s/ Martin Katz Chief Financial Officer March 28, 1996
Martin Katz
Exhibit 10.12
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT is dated as of the
28th day of July, 1995, and entered into among PAGE AMERICA GROUP, INC., a New
York corporation, PAGE AMERICA OF ILLINOIS, INC., an Illinois corporation, PAGE
AMERICA COMMUNICATIONS OF INDIANA, INC., an Indiana corporation, PAGE AMERICA
OF NEW YORK, INC., a New York corporation, PAGE AMERICA COMMUNICATIONS OF
CALIFORNIA, INC., a California corporation, PAGE AMERICA COMMUNICATIONS OF
FLORIDA, INC., a Florida corporation, PAGE AMERICA OF PENNSYLVANIA, INC., a
Pennsylvania corporation, and ADIRONDACK RADIO TELEPHONE CO., INC., a New York
corporation (each a "Company", and collectively the "Companies"), the Lenders
signatory hereto, and NATIONSBANK OF TEXAS, N.A., a national banking
association, individually and as Administrative Lender (in such latter
capacity, the "Administrative Lender").
WITNESSETH:
WHEREAS, the Companies, the Lenders and the Administrative
Lender entered into a Credit Agreement, dated December 30, 1993, as amended
pursuant to that certain First Amendment to Credit Agreement dated as of August
12, 1994, and as further amended by that certain Second Amendment to Credit
Agreement dated as of December 28, 1994 (as amended, the "Credit Agreement");
WHEREAS, certain Events of Default (as defined in the Credit
Agreement) have occurred and are continuing as a result of the Companies'
failure to perform, observe and comply with certain covenants contained in the
Credit Agreement;
WHEREAS, the Companies have requested that the Lenders and
the Administrative Lender waive the Specified Defaults (as hereinafter defined)
and amend certain of the terms and provisions of the Credit Agreement; and
WHEREAS, the Lenders and the Administrative Lender have
agreed to waive the Specified Defaults and to modify the Credit Agreement upon
the terms and conditions set forth below.
NOW, THEREFORE, for valuable consideration hereby
acknowledged, the Companies, the Lenders and the Administrative Lender agree as
follows:
SECTION 1. DEFINITIONS. Unless specifically defined or
redefined below, capitalized terms used herein shall have the
meanings ascribed thereto in the Credit Agreement.
SECTION 2. AMENDMENTS TO SECTION 1.01 OF THE CREDIT AGREEMENT.
(a) AMENDMENT TO DEFINITION OF MATURITY DATE.
Section 1.01 of the Credit Agreement is hereby amended by
deleting the definition of "MATURITY DATE" of the Credit Agreement in its
entirety and substituting the following in its stead:
"MATURITY DATE" means December 29, 1995, or such earlier date
that the Revolving Credit Loans, the Term Loan or the Obligation
become due and payable in full or in part pursuant to this Agreement
(whether by acceleration, prepayment in full or otherwise); PROVIDED,
HOWEVER, that Maturity Date shall mean:
(A) February 29, 1996 (subject to earlier termination if the
Revolving Credit Loan, the Term Loan or the Obligation become due and
payable in full or in part pursuant to this Agreement, whether by
acceleration, prepayment in full or otherwise), if each of the
following conditions shall have been satisfied:
(a) On or before December 29, 1995, PAG shall have
entered into and delivered to the Administrative Lender a
letter of intent for the sale of Property of the Companies,
which letter of intent shall (x) be in form and substance
satisfactory to the Lenders and the Administrative Lender in
their sole and absolute discretion, (y) provide for the sale
of such Property on terms which provide payment in cash on
the closing in an amount sufficient to satisfy the entire
amount of the Obligation on or before June 28, 1996, and (z)
provide for such sale to be completed on or before June 28,
1996;
(b) On or before 5:00 p.m. on December 28, 1995, the
Administrative Lender shall have received from the
Notification Agent a written notice, signed by a Responsible
Officer, indicating that the Companies intend to exercise
their option to amend the Maturity Date, and certifying that
the conditions precedent to the extension of the Maturity
Date have been satisfied, or will be satisfied on or prior to
December 29, 1995; and
(c) No Default shall have occurred and be
continuing; or
(B) June 28,1996 (subject to earlier termination if the
Revolving Credit Loan, the Term Loan or the Obligation become due and
payable in full or in part pursuant to this Agreement, by
acceleration, prepayment in full or otherwise), if each of the
following conditions shall have been satisfied:
(a) On or before December 29, 1995, or if the
Maturity Date has been extended to February 29, 1996,
pursuant to paragraph (A) above, then on or before February
29, 1996, PAG shall have:
(i) entered into and delivered to the
Administrative Lender an agreement for the sale of
Property of the Companies, which agreement shall (x)
be in form and substance satisfactory to the Lenders
and the Administrative Lender in their sole and
absolute discretion, (y) provide for the sale of
such Property on terms which provide payment in cash
on the closing in an amount sufficient to satisfy
the entire amount of the Obligation on or before
June 28,1996, and (z) provide for such sale to be
completed on or before June 28, 1996; or
(ii) delivered to the Administrative
Lender, a signed commitment for the refinancing in
full of the Obligation, which commitment shall (x)
be in form and substance and from a source with
resources satisfactory to the Lenders and the
Administrative Lender in their sole and absolute
discretion, and (y) provide for such refinancing to
be completed on or before June 28, 1996; and
(b) On or before 5:00 p.m. on December 28, 1995, or
if the Maturity Date has been extended to February 29, 1996,
pursuant to paragraph (A) above, then on or before 5:00 p.m.
on February 28, 1996, the Administrative Lender shall have
received from the Notification Agent a written notice, signed
by a Responsible Officer, indicating that the Companies
intend to exercise their option to amend the Maturity Date,
and certifying that the conditions present to the extension
of the Maturity Date have been satisfied, or will be
satisfied on or prior to December 29, 1995, or February 29,
1996, as the case may be; and
(c) No Default shall have occurred and be
continuing.
(b) AMENDMENT TO DEFINITION OF OBLIGATION. Section 1.01 of the Credit
Agreement is hereby amended by deleting the definition of "OBLIGATION" of the
Credit Agreement in its entirety and substituting the following in its stead:
"OBLIGATION" means (a) all present and future obligations,
indebtedness and liabilities of the Companies and the Subsidiaries, or
any of them, to the Lenders, or any of them, arising from, by virtue
of' or pursuant to this Agreement, any other Loan Papers and any and
all renewals and extensions thereof or any part thereof' including,
without limitation, all costs, expenses and fees incurred by any
Lender, all interest accruing on all or any part of such obligations,
indebtedness and liabilities, and attorneys' fees payable by the
Companies in accordance with the terms of Section 9.07 hereof whether
such obligations, indebtedness and liabilities are direct, indirect,
fixed, contingent, joint, several, or joint and several, and (b) all
present and future obligations, indebtedness and liabilities
(including without limitation all obligations, indebtedness and
liabilities for overdrafts) of the Companies, or any of them, to
NationsBank of Texas, N.A. in connection with any deposit account of
Companies or any of them, including without limitation all costs,
expenses and fees incurred by NationsBank of Texas, N.A., all interest
accruing on all or any part of such obligations, indebtedness and
liabilities, and attorneys' fees payable and other expenses incurred
by NationsBank of Texas, N.A. in the enforcement or collection
thereof.
(c) AMENDMENT TO DEFINITION OF OPERATING CASH FLOW.
Section 1.01 of the Credit Agreement is hereby amended by
deleting the definition of "OPERATING CASH FLOW" of the Credit
Agreement in its entirety and substituting the following in its
stead:
"OPERATING CASH FLOW" means, for the most recently completed
twelve months of the Companies (after excluding the effect of the
contribution of Property sold pursuant to the PageNet Sale), the sum
of the Companies' and the Subsidiaries' (a) pretax income or loss, as
the case may be (excluding extraordinary gains and losses), plus (b)
total interest expense, bank fees and other financing costs, plus (c)
depreciation and amortization expense, plus (d) gain or loss on any
disposition of any asset or Property other than sales of pagers in the
ordinary course of business, plus (e) all other non-recurring or
non-cash charges, as customarily determined, all calculated on a
consolidated basis in accordance with GAAP.
(d) AMENDMENT TO DEFINITION OF SPECIAL COUNSEL. Section
1.01 of the Credit Agreement is hereby amended by deleting the
definition of "SPECIAL COUNSEL" of the Credit Agreement in its
entirety and substituting the following in its stead:
"SPECIAL COUNSEL" means the law firm of Winstead
Sechrest & Minick P.C., or any other counsel selected from
time to time by the Administrative Lender.
(e) ADDITION OF DEFINITION OF MOTOROLA DEBT. Section 1.01
of the Credit Agreement is hereby amended by adding thereto the
following definition of "MOTOROLA DEBT":
"MOTOROLA DEBT" means all obligations,
indebtedness and liabilities of the Companies, or
any of them, to Motorola, Inc., including without
limitation all obligations, indebtedness and
liabilities arising pursuant to the purchase of
certain paging equipment.
(f) ADDITION OF DEFINITION OF NET CAPITAL EXPENDITURES.
Section 1.01 of the Credit Agreement is hereby amended by adding
thereto the following definition of "NET CAPITAL EXPENDITURES":
"NET CAPITAL EXPENDITURES" means, for any period,
Capital Expenditures of the Companies for such period, minus
(i) cost of goods sold of the Companies for such period and
(ii) the net book value of pagers lost or stolen during such
period, both as determined in accordance with GAAP, all on a
consolidated basis.
(g) ADDITION OF DEFINITION OF PAGENET AGREEMENT. Section
1.01 of the Credit Agreement is hereby amended by adding thereto
the following definition of "PageNet Agreement":
"PAGENET AGREEMENT" means that certain Asset
Purchase Agreement dated as of February 24, 1995, by and
among Paging Network of Florida, Inc., a Delaware
corporation, Page America Group, Inc., a New York
corporation, Page America Communications of California, Inc.,
a California corporation, Page America Communications of
Florida, Inc., a Florida corporation and Page America of New
York, Inc., a New York corporation, as amended to the extent
permitted in Section 6.04(d).
(h) ADDITION OF DEFINITION OF PAGENET SALE. Section 1.01
of the Credit Agreement is hereby amended by adding thereto the
following definition of "PAGENET SALE":
"PAGENET SALE" means the sale by certain of the
Companies of substantially all of the paging and
related assets of Page America Communications of
California, Inc. and Page America Communications of
Florida, Inc. to Paging Network of Florida, Inc.,
pursuant to the PageNet Agreement.
SECTION 3. AMENDMENT TO SECTION 2.05(C) OF THE CREDIT AGREEMENT.
Section 2.05(c) of the Credit Agreement is hereby deleted in its
entirety and the following substituted in its stead:
(c) TERM LOAN PAYMENTS. The Companies
shall, jointly and severally, repay the Term Loan
on the Maturity Date and as follows:
(i) immediately upon receipt, all proceeds
paid to any of the Companies from the escrow
provided for in the PageNet Agreement; and
(ii) to the extent funds remain after
December 29, 1995, all amounts in the account
described in paragraph (d)(v) of Section IS of the
Third Amendment to Credit Agreement dated as of July
28, 1995.
SECTION 4. AMENDMENT TO SECTION 4.04 OF THE CREDIT AGREEMENT.
The date in the penultimate sentence of Section 4.04 of the Credit Agreement is
hereby amended to read "June 30, 1995".
SECTION 5. AMENDMENTS TO SECTION 5.07 OF THE CREDIT
AGREEMENT. Section 5.07 of the Credit Agreement is hereby amended to (x) delete
subsection (f) in its entirety and substitute the following subsection (f) in
its stead and (y) add the following subsections (r) and (s):
(f) Together with each set of financial statements delivered
pursuant to subsections (a) and (c) above, a Compliance Certificate, a
churn analysis report, and an accounts receivable aging report with
reconciliation of bad debt expense for such period and including a
comparison of budgeted and actual Capital Expenditures and budgeted
and actual pagers in service, all in detail, and in any event in form
satisfactory to Administrative Lender and Lenders;
(r) Within ten (10) days following the end of each month, a
written report describing the Companies' efforts during such month to
sell any Property of the Companies, together with any and all offering
materials delivered by the Companies, or any of them, during such
month to potential purchasers in connection with such sales efforts,
all in detail, and in any event in form satisfactory to Administrative
Lender and Lenders;
(s) As soon as possible, and in any event within three (3)
Business Days after Friday of each week, a report of beginning and
ending cash for such week, and receipts and disbursements for such
week of the Companies on a consolidated basis, in reasonable detail,
and in any event in form satisfactory to Administrative Lender and to
Lenders.
SECTION 6. AMENDMENT TO SECTION 6.01 OF THE CREDIT AGREEMENT. Section
6.01 of the Credit Agreement shall be deleted in its entirety and the following
substituted in its stead:
SECTION 6.01. FINANCIAL COVENANTS. The Companies and
the Subsidiaries shall comply with the following covenants,
calculated on a consolidated basis:
(a) LEVERAGE RATIO. The Leverage Ratio shall not, on the
last day of any month set forth below, exceed the ratio set
forth below opposite such month:
MONTH RATIO
8.57
September, 1995 9.06
October, 1995 9.66
November, 1995 10.23
December, 1995 10.92
January, 1996 11.34
February, 1996 11.88
March, 1996 12.63
April, 1996 13.02
May, 1996 13.34
June, 1996 4.45
(b) SENIOR LEVERAGE RATIO. The Senior Leverage Ratio shall
not, on the last day of any month set forth below, exceed the
ratio set forth below opposite such month:
MONTH RATIO
August, 1995 6.15
September, 1995 6.47
October, 1995 6.89
November, 1995 7.30
December, 1995 7.62
January, 1996 7.91
February, 1996 8.29
March, 1996 8.81
April, 1996 9.09
May, 1996 9.31
June, 1996 0.40
(c) OPERATING CASH FLOW TO TOTAL INTEREST CHARGES. The ratio of (i)
Operating Cash Flow to (ii) cash interest expense on Funded Debt, paid by the
Companies and the Subsidiaries during the most recently completed twelve month
period shall not, as of the end of any month set forth below, be less than the
ratio set forth below opposite such month:
MONTH RATIO
August, 1995 1.39
September, 1995 1.41
October, 1995 1.43
November, 1995 1.47
December, 1995 2.13
January, 1996 2.16
February, 1996 2.12
March, 1996 2.11
April, 1996 2.12
May, 1996 2.22
June, 1996 2.33
(d) PRO-FORMA DEBT SERVICE COVERAGE RATIO. The Pro-Forma Debt Service
Coverage Ratio shall not, as of the end of any month, be less than the ratio set
forth below opposite such month: MONTH RATIO
August, 1995 0.162
September, 1995 0.151
October, 1995 0.141
November, 1995 0.133
December, 1995 0.127
January, 1996 0.123
February, 1996 0.118
March, 1996 0.112
April, 1996 0.109
May, 1996 0.108
June, 1996 3.375
(e) CAPITAL EXPENDITURES LIMITATION. The Companies will not permit the
aggregate amount of Net Capital Expenditures of the Companies during any
calendar month, beginning August, 1995, to exceed the amount set forth below
opposite such month (such amount being hereinafter referred to as the "Monthly
CapEx Allowance").
August, 1995 $300,000
September, 1995 300,000
October, 1995 300,000
November, 1995 300,000
December, 1995 300,000
January, 1996 189,000
February, 1996 149,000
March, 1996 147,000
April, 1996 146,000
May, 1996 145,000
June, 1996 144,000
To the extent the Companies have Net Capital Expenditures during any given
month in an aggregate amount which is less than the Monthly CapEx Allowance,
the Companies may carry over the unused portion of the Monthly CapEx Allowance
to the succeeding months.
SECTION 7. AMENDMENT TO SECTION 6.02(D) OF THE CREDIT AGREEMENT.
Section 6.02(d) of the Credit Agreement is hereby deleted in its entirety and
the following substituted in its stead:
(d) so long as (i) no Default or Event of Default is in
existence immediately before the incurrence of such Debt or is caused
thereby, and (ii) the Companies have delivered to each Lender a
Compliance Certificate demonstrating pro forma compliance with the
terms of this Agreement after giving effect to the incurrence of such
Debt, Debt of Companies (including Contingent Liabilities,
reimbursement obligations for letters of credit, purchase money Debt,
and Capitalized Lease Obligations of Companies) which together with
the Debt described in Section 6.02(b) hereof shall not exceed at any
one time outstanding in the aggregate for all Companies an amount
equal to $2,000,000.00, and
SECTION 8. AMENDMENT TO SECTION 6.04(D) OF THE CREDIT AGREEMENT.
Section 6.04(d) of the Credit Agreement is hereby deleted in its entirety and
the following substituted in its stead:
(d) so long as (i) no Default or Event of Default shall exist
or be caused thereby, and (ii) the Companies have delivered to each
Lender a Compliance Certificate demonstrating pro forma compliance
with the terms and provisions of this Agreement after giving effect to
such asset sales, the Companies may sell or dispose of assets for
cash, provided that the Net Proceeds of such sales must promptly be
used by the Companies to prepay outstanding Advances in accordance
with the provisions of Section 2.05(e) hereof. The PageNet Sale, so
long as it is consummated pursuant to the terms of the PageNet
Agreement without substantial amendment or waiver, and the proceeds
are paid in accordance with the conditions precedent to the Third
Amendment to Credit Agreement dated as of July 28, 1995, is hereby
deemed to comply with the requirements of this Section 6.04(d) and
Section 2.05(e), and shall be permitted.
SECTION 9. AMENDMENTS TO SECTION 6.05 OF THE CREDIT AGREEMENT. Sections
6.05(b) and 6.05(c) of the Credit Agreements, are each hereby deleted in their
entirety.
SECTION 10. AMENDMENT TO SECTION 6.07 OF THE CREDIT AGREEMENT. The
first sentence of Section 6.07 of the Credit Agreement is hereby deleted in its
entirety and the following substituted in its stead:
The Companies will not, and will not cause or permit any of the
Subsidiaries to, engage in any transaction with an Affiliate of the
Companies or any of the Subsidiaries (other than the Companies or a
wholly owned Subsidiary of any Company) on terms less favorable to
such Company or such Subsidiary (as the case may be) than would have
been obtainable in an arm's length dealing with a Person other than an
Affiliate, provided that PAG may engage Bariston Associates, Inc. to
provide investment banking services to PAG, provided, however, that
the payment for such services, which shall not exceed an aggregate
amount for any fiscal year of $ 105,000 plus a cost of living
adjustment for each year after 1993 equal to the change in the
consumer price index at the start of each such year, over such index
at the start of the prior year, shall be deferred from March 1, 1995,
until after the Maturity Date (or until the Obligation is paid and
performed in full).
SECTION 11. AMENDMENT TO SECTION 7.01(C) OF THE CREDIT AGREEMENT.
Section 7.01(c) of the Credit Agreement is hereby deleted in its entirety and
the following is substituted in its stead:
(c) Any Company or any Subsidiary shall fail to perform or
observe any term or covenant contained in Article VI hereof or Section
5.07(i) hereof; or any letter of intent, agreement, or commitment for
refinancing submitted to the Lenders which has the effect of extending
the Maturity Date (subject to earlier termination provided herein)
shall be terminated, revoked, or in any material respect changed or
amended; or the FCC shall decline or fail to consent to any matter
requiring its consent in order to close any transaction which is the
subject of any of the above described letters of intent, agreements or
commitments.
SECTION 12. AMENDMENT TO SECTION 7.01(O) OF THE CREDIT AGREEMENT.
Effective January 1, 1995, Section 7.01(o) of the Credit Agreement is hereby
deleted in its entirety and the following is substituted in its stead:
(o) Any Change in Control shall occur, or the Company shall
fail to continue to engage a consultant to the Companies, satisfactory
to the Lenders and the Administrative Lender in their sole and
absolute discretion, with expertise in financial management and
turnaround situations, subject to a Consulting Agreement reasonably
satisfactory in form and substance to the Lenders and the
Administrative Lender.
SECTION 13. AMENDMENT TO SECTION 9.02(B) OF THE CREDIT AGREEMENT.
Section 9.02(b) of the Credit Agreement is hereby deleted in its entirety and
the following is substituted in its stead:
(b) IF TO THE ADMINISTRATIVE LENDER:
NationsBank of Texas, N.A.
901 Main Street, 66th Floor
Dallas, Texas 75202
Attention: Mr. William E. Livingstone, IV
Senior Vice President
(214) 508-2023 - phone
(214) 508-0604 - facsimile
WITH A COPY TO:
Winstead Sechrest & Minick, P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270-2199
Attention: Mr. Ira D. Einsohn
(214)745-5223 - phone
(214)745-5390 - facsimile
SECTION 14. AMENDMENT TO EXHIBIT B TO THE CREDIT AGREEMENT. Exhibit B to
the Credit Agreement is hereby deleted in its entirety and Exhibit B to this
Third Amendment is substituted in its stead.
SECTION 15. CONDITIONS PRECEDENT. This Third Amendment shall not be
effective until all proceedings of the Companies taken in connection with this
Third Amendment and the transactions contemplated hereby shall be satisfactory
in form and substance to the Administrative Lender and Lenders, and each of the
following conditions precedent shall have been satisfied:
(a) The Companies shall have delivered to the Administrative
Lender all monthly and annual information required to be delivered
pursuant to Section 5.07 of the Credit Agreement and not previously
delivered;
(b) The Administrative Lender shall have received an original
executed copy of an amendment to the Subordinated Purchase Agreement,
certified by a Responsible Officer to be true and correct and in full
force and effect, which shall be reasonably satisfactory in form and
substance to the Lenders and the Administrative Lender in their sole
and absolute discretion and shall provide for all cash payments of
principal, interest and any other amounts due under the Subordinated
Debt after the date hereof, to be deferred until the earlier of (i)
July 1, 1996, or (ii) the first day immediately following the day on
which the Obligation has been paid and performed in full, PROVIDED
that such amendment may require the Companies to issue promissory
notes in lieu of such deferred cash interest payments;
(c) The Companies shall have established a lease credit
facility with NEC America, Inc., on terms satisfactory to the Lenders
and the Administrative Lender in their sole and absolute discretion,
in a minimum amount of $ 1,000,000.00;
(d) The PageNet Sale shall have closed substantially in
accordance with the terms of the PageNet Agreement on or before July
31, 1995, and the following payments shall have been made and actions
taken:
(i) the principal of the Term Loans shall have
been reduced by an amount not less than $11,780,260;
(ii) NationsBank of Florida, H.A. shall have
been reimbursed in full for any overdrafts outstanding
from the Companies;
(iii) Lenders and Administrative Lender shall have
been reimbursed in full for all expenses, including
attorneys' fees and expenses, described in Section 19 of this
Third Amendment;
(iv) the Companies shall have moved their
operating accounts to NationsBank of Texas, H.A.;
(v) the Companies shall have established one or more
restricted accounts at NationsBank of Texas, H.A., into which
$2.3 million of the Net Proceeds of the PageNet Sale shall
have been deposited, to be used for the payment of the
Motorola Debt and other accounts payable outstanding as of
July 31, 1995, which account shall provide that it may be
drawn upon by the Company against certification by the
Company that payments are being used for said accounts
payable, together with the submission of invoices supporting
the same;
(vi) PAG shall have paid to Administrative Lender
for the account of the Lenders (x) interest at the LIBOR rate
from August 1, 1995, through and including December 29, 1995,
on the amount of all principal outstanding after payments of
principal on July 28, 1995, and (y) all interest due and
payable on July 31, 1995;
(vii) the Administrative Lender shall have received
the original or a certified copy of a letter from PAG to the
Escrow Agent and Paging Network of Florida, Inc. directing
that all funds payable to PAG or any Company shall be paid
instead directly to the Administrative Lender for the account
of the Lenders until further notice from the Administrative
Lender, which direction shall have been accepted by Paging
Network of Florida, Inc. and the escrow agent;
(viii) PAG shall have paid to the Administrative
Lender for the account of the Lenders an extension fee in the
amount of 1% of the outstanding principal amount of the Term
Loans after giving effect to the payments in (i) above and
(ix) below; and
(ix) PAG shall have paid to the Administrative
Lender for the account of the Lenders all net cash available
to the Company from the Net Proceeds of the PageNet Sale in
excess of $948,000 minus the amount paid to cover the
overdraft described in (ii) above, after application of the
amounts in (i), (iii), (v), (vi) and (viii) above.
(e) The Administrative Lender and each Lender shall have
received each of the following, in form and substance satisfactory to
the Administrative Lender, the Lenders and Special Counsel in their
sole and absolute discretion:
(i) a loan certificate of the Companies certifying
(i) as to the accuracy of the representations and warranties
set forth in Article IV of the Credit Agreement, the other
Loan Papers and in this Third Amendment, (ii) that there
exists no Default or Event of Default, other than the
Specified Defaults (as hereinafter defined) either before or
after giving effect to this Third Amendment, and the
execution, delivery and performance of this Third Amendment
will not cause a Default or Event of Default, (iii) that
except for the Specified Defaults, they have complied with
all agreements and conditions to be complied with by them
under the Credit Agreement, the other Loan Papers and this
Third Amendment by the date hereof, (iv) that, except as
delivered pursuant to paragraph (b) above, no notice of the
execution of this Third Amendment is required under the terms
of the Subordinated Notes and Agreements and no consent of
the holders of the Subordinated Debt is required under the
terms of the Subordinated Notes and Agreements in connection
with this Third Amendment, and (v) that there exists no
default or breach by any party of any term or provision of
the Subordinated Notes and Agreements, or any other document
or instrument related to the Subordinated Debt, and that
copies of all material notices, letters or other
communications received by any Company from any Subordinated
Lender are attached to such certificate;
(ii) an opinion of counsel of the Companies
acceptable to the Lenders with respect to this Third
Amendment, including, without limitation, an opinion with
respect to (i) the validity and enforceability of the Loan
Papers after giving effect to this Third Amendment, and (ii)
the Subordinated Notes and Agreements (particularly with
respect to the subordination provisions), the execution of
the Third Amendment, and compliance with all notice and other
provisions relating to the execution of this Third Amendment
and the circumstances and events necessitating its
execution); and
(iii) such other documents, instruments, and
certificates, in form and substance reasonably satisfactory
to the Lenders, as the Lenders shall deem necessary or
appropriate in connection with this Third Amendment and the
transactions contemplated hereby.
SECTION 16. WAIVERS. (a) Subject to the terms and conditions hereof,
the Lenders hereby waive the Specified Defaults (hereinafter defined);
PROVIDED, HOWEVER, that the Lenders' waiver of the Specified Defaults and their
rights and remedies as a result of the occurrence thereof shall not constitute
and shall not be deemed to constitute a waiver of any other Event of Default,
whether arising as a result of further violations of any provision of the
Credit Agreement previously violated by the Companies and constituting a
Specified Default or otherwise, or a waiver of any rights and remedies arising
as a result of such other Events of Default; and PROVIDED FURTHER, HOWEVER, the
waiver of the Specified Default in paragraph 3 on Annex I shall only be
effective until one day after the Closings (as defined in the PageNet
Agreement). As used herein, "SPECIFIED DEFAULTS" shall mean the failure of the
Companies to observe the covenants set forth in the Credit Agreement, which are
described on Annex I attached hereto. (b) In consideration of the Lenders'
waiver of the Specified Defaults and certain other good and valuable
consideration, the Companies each hereby expressly acknowledge and agree that
none of them has any setoffs, counterclaims, adjustments, recoupments,
defenses, claims or actions of any character, whether contingent,
non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured, known or unknown, against
any Lender or the Administrative Lender or any grounds or cause for reduction,
modification or subordination of the Obligation or any liens or security
interests of any Lender or the Administrative Lender. To the extent any Company
may possess any such setoffs, counterclaims, adjustments, recoupments, claims,
actions, grounds or causes, each Company hereby waives, and hereby releases
each Lender and the Administrative Lender from, any and all of such setoffs,
counterclaims, adjustments, recoupments, claims, actions, grounds and causes,
such waiver and release being with full knowledge and understanding of the
circumstances and effects of such waiver and release and after having consulted
counsel with respect thereto.
SECTION 17. TERMINATION OF REVOLVING CREDIT COMMITMENT. The Companies,
the Lenders and the Administrative Lender hereby acknowledge and agree that (a)
the Revolving Credit Commitment is terminated and no further Advances shall be
available thereunder, and (b) effective December 29, 1995, no further LIBOR
Advances will be available.
SECTION 18. REPRESENTATIONS AND WARRANTIES. The Companies represent
and warrant to the Lenders and the Administrative Lender that (a) this Third
Amendment constitutes their legal, valid, and binding obligations, enforceable
in accordance with the terms hereof (subject as to enforcement of remedies to
any applicable bankruptcy, reorganization, moratorium, or other laws or
principles of equity affecting the enforcement of creditors' rights generally),
(b) other than the Specified Defaults, there exists no Event of Default or
Default under the Credit Agreement either before or after giving effect to this
Third Amendment, (c) their representations and warranties set forth in the
Credit Agreement and other Loan Papers are true and correct on the date hereof
both before and after giving effect to this Third Amendment, (d) other than the
Specified Defaults, they have complied with all agreements and conditions to be
complied with by them under the Credit Agreement and the other Loan Papers by
the date hereof, (e) the Credit Agreement, as amended hereby, and the other
Loan Papers remain in full force and effect, (f) there exists no breach or
default by any party of any term or provision of the Subordinated Notes and
Agreements or any other document, agreement or instrument related to the
Subordinated Debt, and (g) no notice to, or consent of, the holders of the
Subordinated Debt is required under the terms of the Subordinated Notes and
Agreements in connection with the execution of this Third Amendment.
SECTION 19. EXPENSES OF LENDERS. The Companies hereby jointly and
severally agree to pay on demand all costs and expenses incurred by any Lender
or the Administrative Lender, and including costs and fees of counsel to any
Lender or the Administrative Lender, in connection with the preparation,
negotiation, review and execution of this Third Amendment and the other Loan
Papers executed pursuant hereto and any and all amendments, modifications and
supplements thereto, including without limitation, the costs and fees of the
Special Counsel and all costs and expenses incurred by any Lender or the
Administrative Lender, including costs and fees of counsel to any Lender or the
Administrative Lender, in connection with the enforcement or preservation of
any rights under the Credit Agreement, as amended hereby, or any other Loan
Paper, including without limitation, the costs and fees of Special Counsel.
SECTION 20. FURTHER ASSURANCES. The Companies shall execute and
deliver such further agreements, documents, instruments, and certificates in
form and substance satisfactory to the Administrative Lender, as the
Administrative Lender or any Lender may deem necessary or appropriate in
connection with this Third Amendment.
SECTION 21. COUNTERPARTS. This Third Amendment and the other Loan
Papers may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument. In making proof of any
such agreement, it shall not be necessary to produce or account for any
counterpart other than one signed by the party against which enforcement is
sought.
SECTION 22. ENTIRE AGREEMENT. THIS AGREEMENT AND THE
OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 23. GOVERNING LAW. (a) THIS AGREEMENT AND ALL LOAN PAPERS
SHALL BE DEEMED CONTRACTS MADE UNDER THE LAWS OF TEXAS AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF TEXAS, EXCEPT TO
THE EXTENT (A) FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF ALL OR ANY PART OF THIS AGREEMENT AND ALL LOAN PAPERS OR (B)
STATE LAW GOVERNS UCC COLLATERAL INTERESTS FOR PROPERTIES OF THE COMPANIES AND
THE SUBSIDIARIES OUTSIDE THE STATE OF TEXAS. WITHOUT EXCLUDING ANY OTHER
JURISDICTION, EACH COMPANY AND EACH SUBSIDIARY AGREES THAT THE COURTS OF TEXAS
WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
(b) EACH COMPANY AND EACH SUBSIDIARY HEREBY WAIVES PERSONAL SERVICE OF
ANY LEGAL PROCESS UPON IT. IN ADDITION, EACH COMPANY AND EACH SUBSIDIARY AGREES
THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO SUCH COMPANY AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER
THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT
BY SUCH COMPANY. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE LENDER OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
SECTION 24. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, THE COMPANIES, EACH SUBSIDIARY AND EACH LENDER HEREBY WAIVES ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT,
CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT,
THE OTHER LOAN PAPERS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, this Third Amendment to Credit Agreement is
executed as of the date first set forth above.
THE COMPANIES: PAGE AMERICA GROUP, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
PAGE AMERICAN OF ILLINOIS, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
PAGE AMERICA COMMUNICATIONS OF
INDIANA, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
PAGE AMERICA OF NEW YORK, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
PAGE AMERICA COMMUNICATIONS OF
CALIFORNIA, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
PAGE AMERICA COMMUNICATIONS OF
FLORIDA, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
PAGE AMERICA PENNSYLVANIA, INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
ADIRONDACK RADIO TELEPHONE CO.,
INC.
-------------------------------
By: Kathleen C. Parramore
Its: President
ADMINISTRATIVE LENDER: NATIONSBANK OF TEXAS, N.V.
as the Administrative Lender
-------------------------------
By: William E. Livingstone, IV
Its: Senior Vice President
LENDERS: NATIONSBANK OF TEXAS, N.V.,
Individually
Address: _______________________________
901 Main Street, 66th Fl. By: William E. Livingstone, IV
Dallas, Texas 75202 Its: Senior Vice President
Attn: Mr. William E.
Livingstone, IV
Senior Vice President
CANADIAN IMPERIAL BANK OF COMMERCE
Address: ________________________________
125 Lexington Ave., 8th Fl. By: Douglas J. Smith
New York, NY 10017 Its: Senior Manager
Attn: Mr. Douglas J. Smith
Senior Manager
FLEET NATIONAL BANK
Address: ________________________________
Mail Stop FIMOM14F By: Edward W. O'Brien
111 Westminister Street Its: Vice President
Providence, RI 02903
Attn: Edward W. O'Brien
Vice President
STATE STREET BANK AND TRUST
COMPANY
Address: _______________________________
225 Franklin St. M-8 By: James R. Shulman
Boston, MA 02110 Its: Vice President
Attn: Mr. James R. Shulman
Vice President
<PAGE>
Exhibit 10.13
AMENDMENT TO INDENTURE
AMENDMENT TO INDENTURE, dated as of July 28, 1995 (the
"Amendment"), by and among PAGE AMERICA GROUP, INC. (the "Company"), a New York
corporation, PAGE AMERICA OF ILLINOIS, INC., an Illinois corporation, PAGE
AMERICA COMMUNICATIONS OF INDIANA, INC., an Indiana corporation, PAGE AMERICA
OF NEW YORK, INC. ("PA-New York"), a New York corporation, PAGE AMERICA
COMMUNICATIONS OF CALIFORNIA, INC. ("PA-California"), a California corporation,
PAGE AMERICA COMMUNICATIONS OF FLORIDA, INC. ("PA-Florida"), a Florida
corporation (collectively with the Company, the "Obligors"), T. ROWE PRICE HIGH
YIELD FUND, INC., SANDLER MEZZANINE PARTNERS, L.P., SANDLER MEZZANINE T-E
PARTNERS, L.P., and SANDLER MEZZANINE FOREIGN PARTNERS, L.P. (collectively, the
"Holders"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as Indenture Trustee
for the Holders (the "Indenture Trustee").
RECITALS
A. Pursuant to that certain Subordinated Promissory Note, Preferred
Stock, Common Stock and Warrant Purchase Agreement, dated as of December 30,
1993 (the "Subordinated Agreement"), by and among the Obligors, as the Issuers,
and the Holders, Froley, Revy Investment Co., Inc., MHF Fund I Limited
Partnership, Clarion Capital Corporation, and Delaware State Employee
Retirement Fund, as the Purchasers, the Company issued its 12% Series A
Subordinated Notes (the "Notes").
B. Pursuant to that certain Indenture, dated as of June 15, 1994 (the
"Indenture"), between the Obligors and the Indenture Trustee, the Obligors
exchanged the Notes for the Company's 12% Series B Subordinated Notes (the
"Securities").
C. The Company and certain of the Obligors have entered into that
certain Asset Purchase Agreement, dated as of February 24, 1995, as the same
may be amended from time to time (the "PageNet Agreement"), providing for the
sale by the Company and certain of the Obligors of their California, Florida,
and Nevada operations to Paging Network of Florida, Inc. or to its assignee.
D. The Obligors and certain of their affiliates have agreed, subject
to amendment and modification of the Indenture, to amend that certain Credit
Agreement, dated as of December 30, 1993, as amended (the "Credit Agreement"),
by and among the Obligors and NationsBank of Texas, N.A., as Administrative
Lender, and the other lenders party thereto, to take into account, among other
things, the consummation of the PageNet Agreement and the use of the proceeds
therefrom.
E. The Holders are the record or beneficial holders of one
hundred percent (100%) of the outstanding amount of the
Securities.
F. Pursuant to the provisions of Section 10.02 of the
Indenture, the Holders and the Indenture Trustee agree to modify
the Indenture upon the terms and conditions set forth herein.
G. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed thereto in the
Indenture.
NOW, THEREFORE, for valuable consideration hereby
acknowledged, the Obligors, the Holders and the Indenture Trustee agree as
follows:
1. DEFINITIONS. Section 1.01 of the Indenture is
hereby amended as follows:
(a) AMENDMENT OF DEFINITION OF "FUNDED DEBT".
The definition of "Funded Debt" is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"Funded Debt" means all Debt of the Company and the
Subsidiaries, as the context requires, constituting (a) Debt
for borrowed money or the deferred purchase price of property
or services, and any other Debt evidenced by a promissory
note or similar instrument, including without limitation the
Obligation and the Securities, but excluding the principal of
and interest on the Interest Securities, (b) Capitalized
Lease Obligations, and (c) Debt secured by any Lien on any
Property of the Company or any Subsidiary, whether with or
without recourse; provided, however, that such term shall not
include accounts payable and accrued liabilities incurred in
the ordinary course of business."
(b) AMENDMENT OF DEFINITION OF "OPERATING CASH
FLOW". The definition of "Operating Cash Flow" is hereby
deleted in its entirety and the following is inserted in lieu
thereof:
"Operating Cash Flow" means, for the most recently
completed twelve months of the Companies (after excluding the
effect of the contribution of Property sold pursuant to the
PageNet Agreement), the sum of the Companies' and the
Subsidiaries' (a) pre-tax income or loss, as the case may be
(excluding extraordinary gains and losses), plus (b) total
interest expense, bank fees and other financing costs, but
excluding interest on the Interest Securities, plus (c)
depreciation and amortization expense, plus (d) gain or loss
on any disposition of any asset or Property other than sales
of pagers in the ordinary course of business, plus (e) all
other non-recurring or non-cash charges, as customarily
determined, all calculated on a consolidated basis in
accordance with GAAP."
(c) AMENDMENT OF DEFINITION OF "PERMITTED
LIENS". Clause (i) of the definition of "Permitted Liens" is
deleted in its entirety and substituting the following in its
stead:
"(i) Liens to secure indebtedness under the Credit Agreement,
including, without limitation, a security interest to be
granted to the Administrative Lender, pursuant to the Third
Amendment to the Credit Agreement, on a pro rata basis with
the other Lenders to secure, and only to the extent of, the
Company's overdrafts."
(d) NO CHANGE IN CONTROL. The definition of
"Change in Control" is hereby amended by deleting the period at
the end thereof and inserting the following:
"; PROVIDED, HOWEVER, that the sale of the California,
Florida and Nevada operations by Page America Group, Inc.,
Page America Communications of California, Inc., Page America
Communications of Florida, Inc., and Page America of New
York, Inc. in accordance with the PageNet Agreement shall not
constitute a Change in Control."
(e) INTEREST SECURITIES. Section 1.01 of the
Indenture is hereby amended by inserting the following definition:
"Interest Securities" means the promissory notes
to be issued in lieu of cash payments of interest with
respect to the Securities."
(f) AMENDMENT OF DEFINITION OF "SECURITIES".
The definition of "Securities" is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"Securities" means the (a) 12% Series B Subordinated
Notes due December 31, 1996 or any of them (each a
"Security"), as amended or supplemented from time to time,
that are issued under this Indenture and (b) to the extent
issued and delivered, Interest Securities."
2. AUTHORIZATION TO ISSUE INTEREST SECURITIES.
(a) Section 5.09 of the Indenture is hereby
amended, as follows:
(i) The word "and" at the end of clause (d)
thereof is deleted.
(ii) The period at the end of clause (e) is
deleted and replaced by ", and"; and
(iii) A new clause (f) is inserted and shall
read in its entirety as follows:
"(f) the Debt evidenced by the Interest
Securities."
(b) Clause (ii) of Section 5.20 of the Indenture
is hereby deleted in its entirety and the following is inserted
in lieu thereof:
"(ii) any liability with respect to any Debt that is
subordinate or junior in right of payment to Senior
Indebtedness and junior to or PARI PASSU in any respect in
right of payment to the Securities which has an earlier
maturity or shorter amortization than the Securities;
PROVIDED, HOWEVER, that nothing contained herein shall
preclude, nor shall it be construed to preclude, the Obligors
from issuing the Interest Securities."
3. FINANCIAL COVENANTS. Section 5.08 of the Indenture is
hereby deleted in its entirety; provided, however, that if the Company
refinances any amounts under the Credit Agreement, the covenants contained in
Section 5.08 shall be reinstated in their entirety and shall be in full force
and effect except that the provisos contained in subsections (a), (b) and (c)
of Section 5.08 shall not be reinstated.
4. DEFERRAL OF INTEREST, ISSUANCE OF INTEREST
SECURITIES, NEW MATURITY. The terms of the Securities are
hereby amended as follows:
(a) INTEREST PAYMENTS. Interest payments due
with respect to the Securities on each of June 30, 1995, December 31, 1995 and
June 30, 1996, will be satisfied by the issuance of Interest Securities in the
face amount equal to the amount of interest due on each of the foregoing
installment dates. As the result of the issuance of Interest Securities the
fourth paragraph of Section 2.02 of the Indenture is hereby amended to add the
words ", plus the principal amount of the Interest Securities," after both
places in which the amount $13,000,000 appears.
(b) INTEREST RATE ON SECURITIES AND INTEREST
SECURITIES. Commencing on January 1, 1995, the Securities and, when and to the
extent issued, the Interest Securities shall bear interest at the rate of
fifteen percent (15%) per annum.
(c) PAYMENT OF INTEREST ON INTEREST SECURITIES.
All interest which shall accrue with respect to the Interest Securities shall
be paid in cash on the maturity thereof or such earlier date on which cash
interest payments shall be paid or be payable with respect to the Securities.
(d) MATURITY. The Securities and the Interest
Securities shall mature on the first (1st) Business Day six (6) months
following the maturity of the Senior Indebtedness due under the Credit
Agreement, but in no event later than December 31, 1996.
(e) TERMS OF INTEREST SECURITIES. Except as
otherwise provided herein, the Interest Securities shall contain the same terms
and conditions as the Securities.
5. LIMITATION ON DEBT. Section 5.09(e) of the
Indenture is hereby deleted in its entirety and the following is
inserted in lieu thereof:
"(e) so long as (i) no Default or Event of Default
is in existence immediately before the incurrence of such
Debt or is caused thereby, and (ii) the Company has delivered
to the Trustee a Compliance Certificate demonstrating
compliance with the terms of this Indenture after giving
effect to the incurrence of such Debt, and (iii) no further
Debt is created, incurred or assumed under Section 5.09(a),
Senior Indebtedness of the Company not to exceed in principal
amount outstanding at any time (x) such amount as may be
necessary to refinance the Company's outstanding obligations
under the Credit Agreement up to Thirty-Three Million Dollars
($33,000,000) (which gives effect to the repayment of Debt as
the result of the closing of the PageNet Agreement), reduced
by any repayments, paydowns or amortization of the Credit
Agreement or other Senior Indebtedness, plus (y)
$1,000,000 of other Senior Indebtedness, plus (z)
$3,000,000."
6. AMENDMENT TO CREDIT AGREEMENT. Section 5.19 of
the Indenture shall not apply to the Credit Agreement, as
amended or modified.
7. SALE OF OPERATIONS.
(a) RIGHT TO SELL. Notwithstanding anything
contained in the Indenture to the contrary, the Company, PA-California,
PA-Florida, and PA-New York shall have the right to consummate the transactions
contemplated by the PageNet Agreement and the proceeds thereof may be applied
as permitted pursuant to the provisions of the Credit Agreement.
8. MOTOROLA INDEBTEDNESS.
(a) NO NOTICE REQUIRED. Notwithstanding the
provisions of Section 5.04 of the Indenture to the contrary, the Company shall
not be required to provide the Holders additional written notice of any default
with respect to any indebtedness of the Company or other Obligors to Motorola,
Inc.
(b) NO EVENT OF DEFAULT. Notwithstanding the
provisions of Sections 7.01(6) and 7.01(8) of the Indenture to the contrary,
any indebtedness owed by any of them to Motorola, Inc., the entry of a judgment
or the failure to pay any judgment against the Company or the other Obligors
with respect to such indebtedness shall not be considered or deemed to be a
Default or an Event of Default under the Indenture, the Securities or the
Interest Securities until the earlier to occur of (i) one (1) Business Day
after the Closings, as defined in the PageNet Agreement, (ii) October 10, 1995,
or such earlier date as the PageNet Agreement shall be terminated, revoked, or
in any material respect changed or amended, and (iii) any attempt by Motorola,
Inc. to levy or execute on any property of any Obligor or use other legal
process to enforce or collect any such judgment.
9. SUBORDINATION UNAFFECTED. Notwithstanding
anything contained herein to the contrary, the Securities and
the Interest Securities shall remain subordinate in the same
manner and to the same extent as provided in the Indenture.
10. EXPENSES. The Obligors hereby jointly and
severally agree to pay on demand all costs and expenses incurred
by the Indenture Trustee or any Holder in connection with the
preparation, negotiation, review and execution of this
Amendment.
11. COUNTERPARTS. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument. In making proof of any such amendment, it shall not be
necessary to produce or account for any counterpart other than the one signed
by the party against whom enforcement is sought.
12. ENTIRE AGREEMENT. This Amendment represents the
final agreement between the parties and may not be contradicted
by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral
agreements between the parties.
13. GOVERNING LAW. This Amendment shall be governed
by and construed in accordance with the laws of the State of New
York.
IN WITNESS WHEREOF, this Amendment is executed as of the date
first set forth above.
PAGE AMERICA GROUP, INC.
Attest:
- ------------------ --------------------------
Secretary By:
Its:
PAGE AMERICA OF ILLINOIS, INC.
Attest:
- ------------------ --------------------------
Secretary By:
Its:
PAGE AMERICA COMMUNICATIONS OF
INDIANA, INC.
Attest:
- ------------------ --------------------------
Secretary By:
Its:
PAGE AMERICA OF NEW YORK, INC.
Attest:
- ------------------ --------------------------
Secretary By:
Its:
PAGE AMERICA COMMUNICATIONS OF
CALIFORNIA, INC.
Attest:
- ------------------ --------------------------
Secretary By:
Its:
PAGE AMERICA COMMUNICATIONS OF
FLORIDA, INC.
Attest:
- ------------------ --------------------------
Secretary By:
Its:
INDENTURE TRUSTEE: AMERICAN STOCK TRANSFER &
TRUST COMPANY
Attest:
- ------------------ --------------------------
By:
Its:
Address:
40 Wall Street
New York, New York 10005
Attn: Herbert Lemmer
SUBORDINATED HOLDERS:
Address: BOWMAN & CO.
100 E. Pratt Street By: T. Rowe Price High Yield
Seventh Floor Fund, Inc.
Baltimore, Maryland 21202
Attn: Darlene McMullen _____________________________
By:
Its:
Address: SANDLER MEZZANINE PARTNERS,
L.P.
767 Fifth Avenue, 45th Floor
New York, New York 10153 By: Sandler Mezzanine
General Partnership
General Partner
By: MJM Media Corp.
General Partner
---------------------------
By: Michael J. Marocco
Its: President
Address: SANDLER MEZZANINE T-E
PARTNERS, L.P.
767 Fifth Avenue, 45th Floor
New York, New York 10153 By: Sandler Mezzanine
General Partnership
General Partner
By: MJM Media Corp.
General Partner
---------------------------
By: Michael J. Marocco
Its: President
Address: SANDLER MEZZANINE FOREIGN
PARTNERS, L.P.
767 Fifth Avenue, 45th Floor
New York, New York 10153 By: Sandler Mezzanine
General Partnership
Investment General
Partner
By: MJM Media Corp.
General Partner
---------------------------
By: Michael J. Marocco
Its: President
<PAGE>
Exhibit 10.14
CONSULTING AND NON-COMPETITION AGREEMENT
AGREEMENT dated August 1, 1995 between Page America Group, Inc., a New
York corporation (the "Corporation"), and Steven L.
Sinn (the "Consultant").
W I T N E S S E T H :
WHEREAS, the Consultant is currently employed as Chairman
of the Board and Chief Executive Officer of the Corporation; and
WHEREAS, the parties hereto desire to terminate the employment
arrangement of the Consultant and to enter into an agreement providing for the
engagement of Consultant as a consultant to the Corporation upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and conditions herein contained, the parties agree as follows:
1. The Consultant hereby resigns effective as of the date hereof as an
officer and director of the Corporation and each of its subsidiaries. The
Corporation hereby engages Consultant and Consultant agrees to serve the
Corporation as a consultant for a period of one year from the date hereof upon
the terms and conditions of this Agreement hereinafter set forth.
2. During the term of this Agreement, Consultant shall render such
services to the Corporation, and/or any subsidiary of the Corporation, at such
reasonable times and places and for a reasonable duration as from time to time
shall be mutually agreed upon by the Consultant and by the Board of Directors
or the President of the Corporation. In performing the services hereunder,
Consultant will use his best efforts to promote the interests of the
Corporation. The parties hereto understand that, subject to the provisions of
paragraph 4 of this Agreement, Consultant's duties hereunder will not be his
sole occupation and Consultant, for other compensation, may perform other
duties for entities other than the Corporation.
3. The Corporation shall compensate Consultant for the services to be
rendered by Consultant hereunder at the rate of $250,000 per annum, payable at
the same frequency as payments made by the Corporation to its employees. In
addition, the Corporation agrees to reimburse Consultant for any reasonable
out-of-pocket business expenses incurred at the request of the Corporation.
During the term of this Agreement, the Consultant shall be entitled to receive
medical benefits at the expense of the Corporation, consistent with those
available to the officers of the Corporation.
4. During the term of this Agreement, the Consultant will not,
directly or indirectly, (a) participate in the ownership or operation of any
business engaged in the marketing of pager communications programs of the types
and in the geographical areas served by the Corporation at the date of this
Agreement, but nothing contained herein shall be deemed to prohibit the
Consultant from investing in any company engaged in such business, the stock of
which is available in a public securities market if the Consultant shall not
own in excess of 1% of the total issued and outstanding stock of such company
or (b) hire or offer to hire or persuade or attempt to persuade any of the
Corporation's officers, employees or agents to discontinue their relationship
with the Corporation nor divert or attempt to divert from the Corporation any
business by attempting to influence any customer or supplier of the
Corporation.
In the event of an actual or threatened breach by the
Consultant of the provisions of this paragraph, the Corporation shall be
entitled to pursue injunctive relief restraining the Consultant from doing any
act prohibited hereunder. Nothing contained herein shall be construed as
prohibiting the Corporation from pursuing any other remedies available to it
for such breach or threatened breach, including the recovery of any monetary
damages to which it would be entitled under the law. In the event that any
provision of this paragraph 4 is held to be unenforceable as a result of it
being too broad, either in terms of time or geographical extent, the Consultant
agrees that the court can adapt and limit this paragraph 4 so as to make the
provisions hereof enforceable.
5. The Consultant recognizes and acknowledges that the lists of the
Corporation's actual and prospective customers, as they exist from time to
time, are a valuable and unique asset of the Corporation and therefore agrees
that he will not, during or after the term of this Agreement, disclose the
identity of any of the Corporation's customers to any person, firm,
corporation, association or other entity, for any reason whatsoever, unless
previously authorized to do so by the Corporation's Board of Directors. For the
purpose of enforcing this provision, the Corporation may resort to any remedy
available to it under the law.
6. The Corporation and Consultant acknowledge that they are entering
into this Agreement as independent contractors and that this Agreement shall
not create and shall not be construed to create a relationship of employer and
employee, principal and agent, co-partners or any other similar relationship
between the Corporation and the Consultant.
7. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns and
upon Consultant, his heirs, representatives and beneficiaries.
8. This Agreement contains the entire agreement between the parties
with respect to its subject matter and may only be changed by a writing signed
by the party to be charged. The Employment Agreement made as of January 1,
1994, between the Corporation and the Consultant is hereby terminated and is of
no further force or effect.
9. All notices, requests, demands, documents and other communications
given or due hereunder shall hereafter be made in writing and shall be deemed
to have been duly given when hand delivered, when received if sent by
telecopier or by same day or overnight recognized commercial carrier service or
three days after being mailed by certified or registered mail, postage prepaid:
if to the Consultant to:
Steven L. Sinn
and if to the Corporation to:
Page America Group, Inc.
125 State Street
Hackensack, NJ 07601
Attn: President
with a copy to:
Martin H. Neidell, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
10. This Agreement and its validity, construction and performance
shall be governed in all respects by the internal laws of the State of New York
without giving effect to any principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
PAGE AMERICA GROUP, INC.
By:______________________________
---------------------------------
Steven L. Sinn
Exhibit 21
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-41887) pertaining to the 1983 Stock Option Plan, 1990 Stock
Option Plan and Stock Purchase Plan and Trust of Page America Group, Inc. and in
the related Prospectus of our report dated March 15, 1996 with respect to the
consolidated financial statements and schedule of Page America Group, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Hackensack, New Jersey
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 751
<SECURITIES> 0
<RECEIVABLES> 1,294
<ALLOWANCES> 277
<INVENTORY> 46
<CURRENT-ASSETS> 2,712
<PP&E> 25,702
<DEPRECIATION> 19,040
<TOTAL-ASSETS> 44,003
<CURRENT-LIABILITIES> 55,156
<BONDS> 0
0
30,068
<COMMON> 805
<OTHER-SE> (42,095)
<TOTAL-LIABILITY-AND-EQUITY> 44,003
<SALES> 2,692
<TOTAL-REVENUES> 29,107
<CGS> 1,723
<TOTAL-COSTS> 32,199
<OTHER-EXPENSES> 3,738
<LOSS-PROVISION> 710
<INTEREST-EXPENSE> 6,263
<INCOME-PRETAX> (13,033)
<INCOME-TAX> 60
<INCOME-CONTINUING> (13,093)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,093)
<EPS-PRIMARY> (2.01)
<EPS-DILUTED> 0
</TABLE>
