<PAGE>
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
___________
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-16029
PRONET INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1832168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 Data Drive, Suite 100
Plano, Texas 75075
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214-964-9500)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 31, 1995; 6,128,131.
==============================================================================
<PAGE>
PRONET INC.
Index
PART I. FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 1995 and
December 31, 1994............................................ 1
Consolidated Statements of Operations for the Three Months
Ended March 31, 1995 and 1994................................ 2
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1995 and 1994................................ 3
Notes to Consolidated Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 14
SIGNATURES................................................................ 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PRONET INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................... $ 5,369 $ 666
Trade accounts receivable, net of allowance for
doubtful accounts................................. 4,654 5,055
Inventories - Note A................................ 3,848 4,614
Other current assets - Note A....................... 2,696 2,528
-------- --------
16,567 12,863
EQUIPMENT
Pagers.............................................. 25,257 23,669
Communications equipment............................ 14,931 14,561
Security systems equipment.......................... 10,843 10,517
Office and other equipment.......................... 3,743 3,210
-------- --------
54,774 51,957
Less allowance for depreciation..................... (26,880) (25,441)
27,894 26,516
GOODWILL AND OTHER ASSETS, net of amortization -
Note A.............................................. 42,511 33,894
-------- --------
$ 86,972 $ 73,273
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables...................................... $ 1,421 $ 4,759
Other accrued expenses and liabilities - Note A..... 7,761 7,829
-------- --------
9,182 12,588
LONG-TERM DEBT, less current maturities - Note B...... 27,232 10,450
DEFERRED TAX LIABILITIES.............................. 146 --
STOCKHOLDERS' EQUITY - Note A
Common stock........................................ 65 65
Additional capital.................................. 49,685 49,574
Retained earnings................................... 2,092 2,026
Less treasury stock at cost......................... (1,430) (1,430)
-------- --------
50,412 50,235
-------- --------
$ 86,972 $ 73,273
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1994
--------- ------------
<S> <C> <C>
REVENUES - Note A
Recurring revenues.................................. $10,488 $5,962
Product sales....................................... 2,196 601
------- ------
Total revenues...................................... 12,684 6,563
Cost of products sold............................... (2,066) (470)
------- ------
Net revenues........................................ 10,618 6,093
COST OF SERVICES
Pager lease and access services..................... 2,220 1,249
Security systems equipment services................. 246 334
------- ------
2,466 1,583
------- ------
GROSS MARGIN........................................ 8,152 4,510
EXPENSES
Sales and marketing................................. 1,642 1,270
General and administrative.......................... 2,996 1,145
Depreciation and amortization....................... 2,745 1,497
------- ------
7,383 3,912
------- ------
OPERATING INCOME.................................... 769 598
OTHER INCOME (EXPENSE)
Interest and other income........................... 41 5
Interest expense.................................... (386) (171)
------- ------
(345) (166)
------- ------
INCOME BEFORE INCOME TAXES.......................... 424 432
Provision for income taxes - Note D................... 358 235
------- ------
NET INCOME.......................................... $ 66 $ 197
======= ======
NET INCOME PER SHARE.................................. $ 0.01 $ 0.05
======= ======
WEIGHTED AVERAGE SHARES............................... 6,627 4,163
======= ======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1994
--------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................... $ 66 $ 197
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 2,745 1,497
Deferred tax provision............................ 106 82
Provision for losses on accounts receivable....... 208 55
Changes in operating assets and liabilities:
Decrease in trade accounts receivable............. 781 635
(Increase) decrease in inventories................ 1,277 (196)
(Increase) decrease in other current assets....... (220) 173
Decrease in trade payables and other accrued
expenses and liabilities......................... (4,176) (68)
------- --------
Net cash provided by operating activities........... 787 2,375
INVESTING ACTIVITIES:
Purchase of equipment............................... (1,478) (796)
Acquisitions, net of cash acquired.................. (5,434) (19,447)
Reduction in equipment.............................. 56 108
Computer system software, product enhancements,
and other intangible assets........................ (332) (92)
Other............................................... 53 3
------- --------
Net cash used in investing activities............... (7,135) (20,224)
FINANCING ACTIVITIES:
Proceeds from bank debt............................. 12,400 18,500
Decrease in other long-term obligations............. 42 (63)
Debt financing costs................................ (1,391) --
------- --------
Net cash provided by financing activities........... 11,051 18,437
------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS............. 4,703 588
CASH AND CASH EQUIVALENTS:
Beginning of period................................. 666 530
------- --------
End of period....................................... $ 5,369 $ 1,118
======= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1995
NOTE A - ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Form 10-K for
ProNet Inc. (the "Company") filed with the Securities and Exchange Commission
on March 13, 1995.
INVENTORIES: The Company values inventory at the lower of first-in,
first-out (FIFO) cost or market. Inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
<S> <C> <C>
Raw materials.................... $ 231 $ 263
Work in process.................. 125 89
Finished goods................... 3,492 4,262
------ ------
$3,848 $4,614
====== ======
</TABLE>
OTHER CURRENT ASSETS: Other current assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
<S> <C> <C>
Security transmitter TracPacs.... $1,475 $1,428
Other current assets............. 1,221 1,100
------ ------
$2,696 $2,528
====== ======
</TABLE>
GOODWILL AND OTHER ASSETS: Goodwill and other assets consist of the
following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
<S> <C> <C>
Goodwill........................ $35,808 $27,946
Noncompetition agreements....... 3,250 3,050
Other........................... 8,205 6,726
------- -------
47,263 37,722
Less accumulated amortization... 4,752 3,828
------- -------
$42,511 $33,894
======= =======
</TABLE>
OTHER ACCRUED EXPENSES AND LIABILITIES: Other accrued expenses and
liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
<S> <C> <C>
Accrued revenue.................. $3,766 $3,530
Customer deposits................ 2,220 2,247
Other accrued liabilities........ 1,775 2,052
------ ------
$7,761 $7,829
====== ======
</TABLE>
<PAGE>
Goodwill is amortized on the straight-line method over a fifteen year term.
Noncompetition agreements are amortized on the straight-line method over a 5
year term.
NET REVENUES: Net revenues consist of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------ ------
<S> <C> <C>
Recurring revenues:
Pager lease and access fees........... $9,187 $4,727
Security systems equipment fees....... 1,301 1,235
------- ------
10,488 5,962
Product sales:
Pager and paging equipment............ 2,085 548
Other security systems income......... 111 53
------- ------
2,196 601
Cost of products sold:
Cost of pager and paging equipment
sales................................ (2,007) (458)
Cost of other security systems income. (59) (12)
------- -------
(2,066) (470)
------- -------
Net revenues......................... $10,618 $6,093
======= =======
</TABLE>
NET INCOME PER SHARE: Net income per share is based on the weighted
average number of common and common equivalent shares outstanding during each
period. Stock options are considered common stock equivalents for purposes of
computing weighted average shares outstanding.
RECLASSIFICATION OF FINANCIAL STATEMENTS: The 1994 financial statements
have been reclassified to conform to the 1995 financial statement
presentation.
NOTE B - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1995 DECEMBER 31, 1994
-------------- -----------------
<S> <C> <C>
Revolving line of credit........ $21,900 $9,500
Deferred payments............... 5,332 950
------- -------
27,232 10,450
Less current maturities......... -- --
------- -------
$27,232 $10,450
======= =======
</TABLE>
During the three months ended March 31, 1995, the Company paid $368,000 in
interest as compared to $91,000 for the comparable period in 1994.
In June 1994, the Company entered into an agreement with The First National
Bank of Chicago, as Agent (the "Lender") making available a $52 million
revolving line of credit (the "Former Credit Facility") for working capital
purposes and for acquisitions approved by the Lender. Borrowings were secured
by all assets of the Company and its subsidiaries. Under terms of the Former
Credit Facility, the borrowings bore interest, at the Company's designation,
at either (i) the greater of the Lender's corporate base rate or the Federal
Funds Rate, plus a margin of up to one percent, or (ii) the London Interbank
Offer Rate ("LIBOR"), plus a margin of up to 2.25%. In addition, the Former
Credit Facility required maintenance of certain specified financial and
operating covenants, prohibited the payment of dividends or other
distributions on the Common Stock and required the proceeds from the December
1994 common stock offering to repay indebtedness under the Former Credit
Facility if such proceeds were not used to make approved acquisitions.
<PAGE>
The Former Credit Facility was amended and restated in February 1995 (the
"New Credit Facility") increasing the amount of available credit from $52
million under the Former Credit Facility to $125 million under the New Credit
Facility. In February 1997, the revolving line of credit under the New Credit
Facility will convert to a five and one half year term loan maturing in July
2002. The term loan may be repaid at any time and will be payable in
quarterly installments, based on the principal amount outstanding on the
conversion date, in amounts ranging from 3.25% initially to 5.75%. The
borrowings bear interest, at the Company's designation, at either (i) the
greater of the Lender's corporate base rate or the Federal Funds Rate, plus a
margin of up to .75%, or (ii) LIBOR, plus a margin of up to 2%. In addition,
an arrangement fee of 1.125% of the aggregate commitment was paid in February
1995 and a commitment fee is required on the revolving line of credit at .5%
per annum computed on the daily unused portion of the available loan
commitment. Borrowings are secured by all assets of the Company and its
subsidiaries. The New Credit Facility requires maintenance of certain
specified financial and operating covenants and prohibits the payment of
dividends or other distributions on the Common Stock. The New Credit Facility
also states that in the event of an issuance of subordinated indebtedness of
the Borrower or an equity issuance (other than the common stock offering
which occurred in December 1994), the Lender can request that some portion of
the proceeds be used to pay down outstanding borrowings under the New Credit
Facility.
In accordance with the New Credit Facility, the Company is required to use
interest exchange or insurance agreements to effectively convert a portion of
its floating rate debt to a fixed rate basis, thus reducing the impact of
interest rate changes on future income. Effective 60 days from the closing
of the New Credit Facility, the Lender requires that the lesser of (i) 50% of
the aggregate principal amount of outstanding borrowings or (ii) one-third of
the aggregate commitment participate in the interest rate protection. At
March 31, 1995, none of the outstanding long-term debt was subject to hedging
agreements.
During the first quarter of 1995, the Company borrowed $500,000 for the
acquisition of High Tech Communications Corp. ("High Tech"), $4.5 million for
the acquisition of Signet Paging of Charlotte, Inc. ("Signet"), $3.5 million
for the acquisition of Carrier Paging Systems, Inc. ("Carrier") and $3.9
million for working capital purposes under the New Credit Facility.
The Company has deferred payments outstanding related to the RCC Division
of Chicago Communication Service, Inc. ("ChiComm"), High Tech, Signet and
Carrier acquisitions of $950,000, $200,000, $4.2 million and $3.0 million,
respectively, which are due and payable one year from the closing of the
respective transactions. These balances are payable, at the Company's
discretion, either in cash or shares of the Company's Common Stock based on
market value at the date of payment. With regard to Contact Communications,
Inc. ("Contact"), Radio Call Company, Inc. ("Radio Call"), and Metropolitan
Houston Paging Services, Inc. ("Metropolitan"), the purchase price was paid
in full at closing.
NOTE C - ACQUISITIONS
In early 1993, the Company announced its plans to commence a program of
acquiring businesses that serve the commercial paging market and offer
operational synergies when integrated within the Company's SuperCenters.
During 1994, the Company acquired all of the outstanding stock of Contact,
substantially all of the paging assets of Radio Call and High Tech and
substantially all of the Chicago-area paging assets of ChiComm for $19.0
million, $7.8 million, $900,000 and $9.8 million, respectively. Also during
1994, the Company signed agreements to acquire the paging assets of All City
Communication Company, Inc. ("All City") for $6.6 million, Signet for $9.0
million (which acquisition was completed in March 1995) and Carrier for $6.5
million (which acquisition was completed in April 1995) and all the
outstanding stock of Metropolitan for $21.0 million (which acquisition was
completed in May 1995). The fair market value of the assets acquired in the
Signet acquisition was approximately $9.8 million, and consisted of current
assets of $1.1 million, equipment of $1.6 million and goodwill of $7.1
million. The Company assumed liabilities of $764,000. The five completed
acquisitions were all accounted for as purchases and were funded primarily by
borrowings under the New Credit Facility. In 1995, the Company signed letters
of intent to purchase the paging assets of American 900 Paging, Inc.
("Americom") for approximately $18.0 million and Lewis Paging, Inc.
("Lewis"), Gold Coast Paging, Inc. ("Gold Coast"), Denton Enterprises, Inc.
("Denton") and MetroTones, Inc. ("MetroTones") for approximately $9.5
million, collectively. The pending acquisitions are expected to close in 1995
and will be funded by borrowings under the New Credit Facility. The pending
acquisitions are subject to various conditions, including FCC, regulatory and
other third-party approvals and the execution of definitive agreements.
The pro forma unaudited results of operations for the three months ended
March 31, 1995 and 1994, (which include acquisitions closed as of March 31,
1995), assuming consummation of the purchases at the beginning of the periods
indicated, are as follows (in thousands, except per share data):
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------- -------
<S> <C> <C>
Net revenues........................... $11,490 $11,970
Net income (loss)...................... 118 (30)
Net income (loss) per common share..... .02 (.01)
</TABLE>
These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which
actually would have resulted had the acquisitions been made as of those dates
or of results which may occur in the future.
NOTE D - INCOME TAXES
The reconciliation of income tax computed at the U.S. Federal statutory tax
rates to income tax expense is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
-------- -------
<S> <C> <C>
Tax at U.S. statutory rate............ $144 $147
Non-deductible goodwill amortization.. 167 59
State income tax...................... 43 23
Other................................. 4 6
----- -----
Provision for income taxes............ $358 $235
===== =====
</TABLE>
During the three months ended March 31, 1995, the Company paid
approximately $4,000 in Federal and state income taxes, compared to $39,000
for the comparable period ended March 31, 1994.
NOTE E - SUBSEQUENT EVENTS
On April 1, 1995, the Company completed the acquisition of substantially
all of the paging assets of Carrier for consideration of approximately $6.5
million. The transaction includes a deferred payment of approximately $3.0
million which is due and payable one year from the closing of the
transaction. The deferred payment is payable at the Company's discretion,
either in cash or shares of the Company's Common Stock based on market value
at the date of payment. On May 3, 1995, the Company completed the
acquisition of all of the outstanding capital stock of Metropolitan for
approximately $21 million which was paid in cash at closing. These
acquisitions were accounted for as purchases and were funded primarily by
borrowings under the New Credit Facility.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides wireless messaging services through its paging and
security systems operations. Until 1994, paging services were provided solely
to members of the healthcare industry. Beginning in 1994, the Company
broadened its paging focus through the acquisition of paging businesses
serving the general commercial marketplace. As a result of completed and
anticipated acquisitions, the Company's results of operations for prior
periods may not be indicative of future performance.
In both its paging and security systems operations, the Company builds and
operates communications systems and generates revenues from the sale and
lease of pagers, IPT systems and security devices and related access fees.
The Company's revenues are derived primarily from fixed monthly, quarterly,
annual and bi-annual fees charged to customers for paging and security
tracking services. While a subscriber remains in service, operating results
benefit from this recurring monthly revenue stream with minimal requirements
for additional selling expenses or other fixed costs. However, certain
variable costs such as telephone and equipment charges are directly related
to the number of pagers in service.
Each month a percentage of the customer base disconnects service for a
variety of reasons. ProNet does, however, place substantial emphasis on
customer care and quality of service and as a result during 1994 had one of
the lowest average monthly disconnect ("churn") rates in the paging industry
- - approximately 1.8%, compared to an industry average of approximately 2.9%.
In the future, the Company expects that it will experience a higher churn
rate among small businesses, individual consumers and other subscribers than
it has experienced historically with its healthcare subscribers. The
Company's monthly churn rate in the security tracking business is lower than
in its paging business - currently approximately 0.6%.
Currently, recurring revenues consist of two components - service fees and
unit leasing fees. As the Company pursues its strategy of expanding into new
markets, increasing its coverage within its existing service areas and
broadening its customer base and distribution channels, the percentage of
customers who own and maintain ("COAM") their paging equipment rather than
leasing it is likely to increase. This, together with competitive factors,
may result in declining recurring revenues per subscriber since these
customers will not pay a leasing fee as part of their monthly charge.
However, the Company will not incur the capital costs related to these COAM
pagers. Additionally, average revenue per unit ("ARPU") for pagers served
through resellers is lower than for direct sales due to the wholesale rates
charged to this distribution channel. Such resellers do, however, assume all
selling, marketing, subscriber management and other related costs that would
otherwise be incurred by the Company.
Product sales and costs are also likely to increase as the business mix
shifts in favor of COAM units. The Company's objective is to break even on
product sales, but it may selectively offer discounts due to promotional
offers or competitive pressures.
The Company currently enjoys low operating costs per unit due to the
efficiency of its operations. It expects that the development of its business
around its SuperCenters will result in substantial economies of scale and
consolidation of operating and selling expenses that will help it retain this
competitive advantage.
Earnings before other income (expense), income taxes, depreciation and
amortization ("EBITDA") is a standard measure of operating performance in the
paging industry. The Company's EBITDA has grown at a compound annual rate of
over 30% over the past four years. EBITDA growth is expected to continue
although near term margins may be slightly impacted by start-up costs
associated with certain SuperCenters and the buildout of existing and
acquired frequencies in its marketplaces. The Company, unlike a number of its
competitors, has generated net income in recent years. It should be noted,
however, that non-cash and financing-related charges for the Company's
acquisition program have the potential to negatively impact earnings in the
future.
<PAGE>
PAGING SYSTEMS' RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1994 AND 1995
Net revenues and gross margin for paging systems consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1994 1995
------- -------
(in thousands)
<S> <C> <C>
Revenues
Pager lease and access fees....... $ 4,727 $ 9,187
Product sales..................... 548 2,085
------- -------
Total revenues...................... 5,275 11,272
Cost of products sold............... (458) (2,007)
------- -------
Net revenues........................ 4,817 9,265
Cost of pager lease and access
fees............................... (1,249) (2,220)
------- -------
Gross margin........................ $ 3,568 $ 7,045
======= =======
</TABLE>
PAGING SYSTEMS' NET REVENUES for the quarter ended March 31, 1995 increased
to $9.3 million, a 92% increase from $4.8 million for the quarter ended March
31, 1994. For the quarter ended March 31, 1995, recurring pager lease and
access fees increased to $9.2 million, a 94% increase from $4.7 million for
the comparable period in 1994. The increase in recurring revenues and net
revenues was primarily the result of a 79% increase in pagers in service to
404,713 at March 31, 1995 from 225,477 at March 31, 1994. The increase in
pagers in service was primarily the result of the acquisitions of Radio Call,
ChiComm and High Tech in 1994 and the acquisition of Signet during the first
quarter of 1995. In 1994 and 1995, most of the Company's growth in pagers in
service has been from acquisitions. Internal growth accounted for 18,519 net
new pagers in service during the quarter ended March 31, 1995, representing
an annual growth rate of approximately 21%.
ARPU was $8.38 for the month of March 1995 compared to $9.64 for the month
of March 1994. This decrease was due to the Company's continued acquisitions
of commercial paging businesses, which traditionally have lower ARPU than
healthcare operations since most commercial pagers are COAM and do not
generate leasing fees. The Company believes that ARPU will continue to
decrease, although at a slower rate, as the Company continues to become more
involved in the commercial paging business and expands its reseller
operations, which tend to generate lower revenues per subscriber.
PRODUCT SALES LESS COST OF PRODUCTS SOLD were $78,000 for the quarter ended
March 31, 1995, compared to $90,000 for the comparable period in 1994.
Historically, the Company has primarily leased equipment to customers rather
than selling it, whereas the industry trend is towards increased COAM pagers.
In certain of the Company's markets, pagers are being sold at a slight
discount to cost in order to gain market share. As the Company's commercial
operations continue to grow, management anticipates that product sales will
increase but that margins on these sales will be lower than have been
achieved prior to 1995 in the healthcare industry. Management also
anticipates that the Company's margins may vary from market to market due to
competition and other factors.
RECLASSIFICATION OF COSTS. During 1994, the Company restructured its
technical, sales and operational functions into its decentralized SuperCenter
strategy. To reflect this restructuring financially, certain costs that were
classified as cost of pager lease and access fees and sales and marketing
expenses in 1994 were reclassified to be general and administrative expenses
in 1995. In the aggregate, costs of pager lease and access fees, sales and
marketing expenses and general and administrative expenses increased by 100%
for the quarter ended March 31, 1995, compared to the same period last year
as a result of the Company's internal growth and acquisitions. However,
these costs did not change significantly as a percentage of net revenues. In
total, these costs were $6.6 million (71% of paging systems' net revenues)
for the three months ended March 31, 1995, compared to $3.4 million (70% of
paging systems' net revenues) for the comparable period in 1994.
<PAGE>
PAGING SYSTEMS' GROSS MARGIN (net revenues less cost of pager lease and
access fees) was $7.0 million (76% of paging systems' net revenues) for the
three months ended March 31, 1995, compared to $3.6 million (74% of paging
systems' net revenues) for the comparable period in 1994. The increase in
gross margin as a percentage of paging systems' net revenues was due to the
reclassification of approximately $700,000 in cost of pager lease and access
fees to general and administrative expenses in the first quarter of 1995 as
described above. The Company currently anticipates that these margins will
not change significantly in the future as cost efficiencies and integration
savings are achieved through acquisitions. The cost of pager lease and
access fees increased to $2.2 million for the three months ended March 31,
1995, compared to $1.2 million for the comparable period of the prior year,
as a result of the increased costs of servicing a substantially larger
subscriber base resulting from both internal growth and acquisitions.
PAGING SYSTEMS' SALES AND MARKETING EXPENSES were $1.6 million (17% of
paging systems' net revenues) for the three months ended March 31, 1995,
compared to $1.2 million (25% of paging systems' net revenues) for the
comparable period of the prior year. The decrease as a percentage of paging
systems' net revenues was due to the reclassification of approximately
$800,000 of such expenses to general and administrative expenses in the first
quarter of 1995 as described above. These expenses are not expected to change
significantly in the future as a percentage of paging systems' net revenues.
PAGING SYSTEMS' GENERAL AND ADMINISTRATIVE EXPENSES were $2.8 million (30%
of paging systems' net revenues) for the quarter ended March 31, 1995,
compared to $925,000 (19% of paging systems' net revenues) for the comparable
period in 1994. The increase as a percentage of paging systems' net revenues
was due to the reclassification of $1.5 million in operating, sales and
marketing expenses to general and administrative expenses in the first
quarter of 1995, plus the cost of additional management hired in the fourth
quarter of 1994 and the first quarter of 1995, offset by savings resulting
from consolidating paging operations into the Company's SuperCenters. These
expenses as a percentage of net revenues are expected to decrease over time
as a result of general and administrative expenses being amortized across a
larger subscriber base as well as savings resulting from the consolidation of
acquisitions.
PAGING SYSTEMS' DEPRECIATION AND AMORTIZATION EXPENSES are better expressed
as a percentage of paging systems' recurring revenues since product sales do
not require any capital investment. Paging systems' depreciation and
amortization expenses for the three months ended March 31, 1995 were $2.3
million, a 106% increase from $1.1 million for the comparable period in 1994.
These expenses were 25% of paging systems' recurring revenues for the three
months ended March 31, 1995, compared to 24% for the comparable period in
1994. The increase was primarily due to the amortization of intangibles
arising from the acquisitions of Contact, Radio Call, ChiComm, High Tech and
Signet. The Company believes that depreciation and amortization expenses as a
percentage of paging systems' recurring revenues may increase in the short
term as a result of acquisitions and continued capital investment in paging
equipment to support the Company's growth.
EBITDA for paging systems' operations was $2.7 million (29% of paging
systems' net revenues) for the three months ended March 31, 1995, compared to
$1.4 million (30% of paging systems' net revenues) for the three months ended
March 31, 1994. Consolidation savings in general and administrative expenses
were offset by lower margins on product sales by Contact, Radio Call,
ChiComm, High Tech and Signet, which sell pagers at a lower margin or at a
slight discount to cost compared to the Company's healthcare communications
operations. The Company believes EBITDA margins may decrease in the short
term due to increased commercial paging activity as a result of internal
growth and future acquisitions of commercial paging operations, but will
thereafter increase over time as the Company integrates the acquired operations
and achieves resulting economies of scale and operating efficiencies.
<PAGE>
SECURITY SYSTEMS' RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1994 AND 1995
Security systems' net revenues and gross margin consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1994 1995
------ ------
(in thousands)
<S> <C> <C>
Revenues
Security systems' equipment fees...... $1,235 $1,301
Other security systems' income........ 53 111
------ ------
Total revenues.......................... 1,288 1,412
Cost of other security systems.......... (12) (59)
------ ------
Net revenues............................ 1,276 1,353
Cost of security systems' equipment
services............................... (334) (246)
------ ------
Gross margin............................ $ 942 $1,107
====== ======
</TABLE>
SECURITY SYSTEMS' EQUIPMENT FEES increased 5% to $1.3 million for the three
months ended March 31, 1995, from $1.2 million for the comparable period in
1994. The increase was due to the installation of two new systems since March
31, 1994, as well as expansion of and additional penetration in existing
markets. The number of TracPacs in service increased 3% to 27,106 at March
31, 1995, from 26,374 at March 31, 1994.
OTHER SECURITY SYSTEMS' INCOME LESS COST OF OTHER SECURITY SYSTEMS was
$52,000 for the three months ended March 31, 1995, compared to $41,000 for
the comparable period in 1994. Such income fluctuates depending on the type
and volume of equipment sold. The Company does not anticipate significantly
increasing this area of security systems' operations.
SECURITY SYSTEMS' GROSS MARGIN was $1.1 million (82% of security systems'
net revenues) for the three months ended March 31, 1995, compared to $942,000
(74% of security systems' net revenues) for the comparable period in 1994. In
the first quarter of 1995, the Company expanded two existing systems and
therefore incurred lower period costs in relation to its regularly scheduled
maintenance on its existing systems than it did in the first quarter of 1994.
The Company anticipates that these margins will increase slightly in the near
future as more subscribers are added to existing systems and as systems are
installed in new or existing markets.
SECURITY SYSTEMS' SALES AND MARKETING EXPENSES were $71,000 (5% of security
systems' net revenues) for the three months ended March 31, 1995, compared to
$66,000 (5% of security systems' net revenues) for the comparable period in
1994. The Company currently anticipates hiring additional management in the
near future to accelerate the growth of security systems' net revenues.
Therefore, these expenses should grow at or slightly above the rate of growth
in the related security systems' net revenues and should increase slightly as
a percentage of these revenues.
SECURITY SYSTEMS' GENERAL AND ADMINISTRATIVE EXPENSES were $189,000 (14% of
security systems' net revenues) for the three months ended March 31, 1995,
compared to $221,000 (17% of security systems' net revenues) for the
comparable period in 1994. This decrease in general and administrative
expenses was the result of the decreased burden of corporate overhead as a
result of the Company's expanded paging operations. Because overhead is
allocated based on total revenues, the Company currently believes that
security systems' general and administrative expenses will decrease as
continued acquisitions of paging operations cause a greater percentage of
general and administrative expenses to be allocated to paging systems'
operations rather than security systems' operations.
SECURITY SYSTEMS' DEPRECIATION AND AMORTIZATION EXPENSES are better
expressed as a percentage of recurring revenues since product sales do not
require any capital investment. Depreciation and amortization expenses for
security systems' operations were $416,000 for the quarter ended March 31,
1995 (32% of security systems' recurring revenues),
<PAGE>
compared to $367,000 (30% of security systems' recurring revenues) for the
comparable period in 1994. These increases were a result of the capital
investment necessary to support the expansion into new markets as well as growth
within existing markets. The Company believes that this trend in depreciation
and amortization should continue due to the relationship of capital investment
to recurring revenue.
EBITDA for the security systems' operations was $847,000 (63% of security
systems' net revenues) for the three months ended March 31, 1995, compared to
$657,000 (51% of security systems' net revenues) for the same period in 1994.
This increase was due to lower period costs in relation to regularly
scheduled maintenance on existing systems as a result of increased system
installations and decreases in general and administrative expenses as a
result of these costs being expensed across a larger combined subscriber base.
OTHER INCOME (EXPENSE)
Other income (expense) includes interest income generated from short-term
investments and interest expense incurred under the New Credit Facility. The
period-to-period fluctuation in interest expense has resulted primarily from
changes in the outstanding amounts under the New Credit Facility. Interest
expense increased in 1994 as a result of the increased borrowings to fund
acquisitions made during the year.
FEDERAL INCOME TAXES
The Company made approximately $4,000 of estimated U.S. Federal and state
tax payments for 1995 during the first three months of 1995. At December 31,
1994, the Company had net operating loss carryforwards of $3.3 million for
income tax purposes that expire in years 2004 through 2007. For the year
ended December 31, 1994, the primary differences between the U.S. Federal
statutory tax rate and the effective rate in the Company's historical
financial statements are state income taxes and the amortization of goodwill
related to the acquisition of stock of Contact, which is not deductible for
tax purposes. The Company anticipates that in the future the primary
differences between the U.S. Federal statutory tax rate and the effective
rate in the Company's financial statements will continue to be state income
taxes and the amortization of goodwill related to stock acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
During 1992, 1993 and 1994, the Company financed the majority of its
growth, other than acquisitions, through internally generated funds. Net cash
provided by operating activities was $6.7 million in 1992, $7.1 million in
1993 and $9.8 million in 1994. The acquisitions of Contact, Radio Call,
ChiComm and High Tech in 1994 and Signet in 1995 were financed under the New
Credit Facility. The Company anticipates that its ongoing capital needs,
including the pending acquisitions, will be funded with the proceeds of its
1994 common stock offering, borrowings under the New Credit Facility and net
cash generated by operations.
CAPITAL EXPENDITURES
As of March 31, 1995, the Company had invested $40.2 million in system
equipment and pagers for its 12 major metropolitan markets and $10.8 million
in system equipment and TracPacs for its 26 security systems.
Capital expenditures for paging systems' equipment and pagers (excluding
assets acquired pursuant to the completed acquisitions) were $4.0 million in
each of 1992 and 1993, $5.0 million in 1994 and $1.2 million for the three
months ended March 31, 1995. Capital expenditures for security systems'
equipment and TracPacs were $1.5 million in each of 1992 and 1993, $763,000
for 1994 and $300,000 for the three months ended March 31, 1995.
At March 31, 1995, the Company had invested $3.8 million, primarily in
pager inventories, compared to $4.6 million at December 31, 1994. The
decrease was due to better inventory management as the SuperCenters generated
operating efficiencies. Inventory balances are expected to remain at higher
levels than in prior years as a result of increased subscriber growth.
<PAGE>
Except for those assets acquired through acquisitions, the Company expects
to meet its capital requirements in 1995 with cash generated from operations.
Although the Company had no material binding commitments to acquire capital
equipment at March 31, 1995, the Company anticipates capital expenditures for
the remainder of 1995 to be approximately $13.2 million for the purchase of
pagers and system equipment for its current paging systems' operations and
approximately $1.9 million for the manufacture of TracPacs and the purchase of
system equipment for its security systems' operations.
ACQUISITIONS
In early 1993, the Company announced its plans to commence a program of
acquiring businesses that serve the commercial paging market and offer
operational synergies when integrated within the Company's SuperCenters.
During 1994, the Company acquired all of the outstanding stock of Contact,
substantially all of the paging assets of Radio Call and High Tech and
substantially all of the Chicago-area paging assets of ChiComm for $19.0
million, $7.8 million, $900,000 and $9.8 million, respectively. Also during
1994, the Company signed agreements to acquire the paging assets of All City
for $6.6 million, Signet for $9.0 million (which acquisition was completed in
March 1995) and Carrier for $6.5 million (which acquisition was completed in
April 1995) and all of the outstanding capital stock of Metropolitan for
$21.0 million (which acquisition was completed in May 1995). The seven
completed acquisitions were funded primarily by borrowings under the New
Credit Facility. In 1995, the Company signed letters of intent to purchase
the paging assets of Americom for approximately $18.0 million and Lewis, Gold
Coast, MetroTones and Denton for approximately $9.5 million, collectively.
These pending acquisitions are expected to close in 1995 and will be funded
by borrowings under the New Credit Facility. The pending acquisitions are
subject to various conditions, including FCC, regulatory and other third party
approvals and the execution of definitive agreements.
The Company has deferred payments outstanding related to the ChiComm, High
Tech, Signet and Carrier acquisitions of $950,000, $200,000, $4.2 million and
$3.0 million, respectively, which are due and payable one year from the
closing of the respective transactions. These balances are payable, at the
Company's discretion, either in cash or shares of the Company's Common Stock
based on market value at the date of payment. With regard to Contact, Radio
Call and Metropolitan, the purchase price was paid in full at closing.
FORMER AND NEW CREDIT FACILITIES
The Former Credit Facility was amended and restated in February 1995 to
increase the amount of available credit from $52 million to $125 million (the
"New Credit Facility"). The New Credit Facility is a revolving line of
credit which, in February 1997, will convert to a five and one half year term
loan maturing in July 2002. The term loan may be repaid at any time and will
be payable in quarterly installments, based on the principal amount
outstanding on the conversion date, in amounts ranging from 3.25% initially
to 5.75% over five and one half years.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
<TABLE>
<S> <C>
10.1 - Agreement dated August 18, 1982, between the Registrant and Coordinated Hospital and Institutional Paging,
Inc. (2)
10.2 - Agreement dated January 11, 1983, between the Registrant and Hospital Council of the National Capitol Area,
Inc. (2)
10.3 - Form of Investor Agreement dated as of June 18, 1984, between the Registrant and certain holders of the
Registrant's stock. (1)
10.4 - Form of Investor Agreement dated as of December 23, 1985, between the Registrant and certain holders of the
Registrant's stock. (1)
10.5 - Form of Indemnification Agreement between the Registrant and certain of the Registrant's Directors. (2)
10.6 - Deferred Compensation Plan of the Registrant. (3)
10.7 - 1987 Stock Option Plan of the Registrant. (4)
10.8 - Agreement dated June 15, 1988, between the Registrant and Texas Instruments Incorporated for the acquisition
of assets including the use of patents, technology and software related to ProNet Tracking Systems. (6)
10.9 - Office/Showroom/Warehouse Lease Agreement dated January 2, 1990, between the Registrant and Dal-Mac
Westridge I, Ltd., as amended. (8)
10.10 - Nonqualified Stock Option Agreement of the Registrant dated May 22, 1991. (9)
10.11 - Non-Employee Director Stock Option Plan of the Registrant. (9)
10.12 - Stock Purchase Agreement dated September 24, 1993, by and between the Registrant and Contact
Communications, Inc. (10)
10.13 - Amendment Letter No. One to Stock Purchase Agreement dated October 20, 1993, by and between the Registrant
and Contact Communications, Inc. (10)
10.14 - Amendment Letter No. Two to Stock Purchase Agreement dated January 4, 1994, by and between the Registrant
and Contact Communications, Inc. (10)
10.15 - Amendment Letter No. Three to Stock Purchase Agreement dated March 1, 1994, by and between the Registrant
and Contact Communications, Inc. (10)
10.16 - Asset Purchase Agreement dated March 22, 1994, by and among the Registrant, Radio Call Company, Inc., a
New York corporation, MRN Communications, Inc., a New York corporation, Radio Call Co. of N.J., Inc., a
New Jersey corporation, and Marvin R. Neuwirth. (11)
10.17 - 1994 Employee Stock Purchase Plan of the Registrant. (12)
10.18 - Asset Purchase Agreement dated May 5, 1994, by and among the Registrant, Chicago Communication Service,
Inc., an Illinois corporation, Gerald C. Bear, Gerald C Bear, Trustee of the Lewis Bear Trust, Leo Magiera and
Gerald Manikowski. (11)
10.19 - Employment Agreement dated May 18, 1994, by and between the Registrant and Jackie R. Kimzey. (13)
10.20 - Employment Agreement dated May 18, 1994, by and between the Registrant and David J. Vucina. (13)
10.21 - Change in Control Agreement dated May 18, 1994, by and between the Registrant and Bo Bernard. (13)
10.22 - Change in Control Agreement dated May 18, 1994, by and between the Registrant and Jan E. Gaulding. (13)
10.23 - Change in Control Agreement dated May 18, 1994, by and between the Registrant and Jeffery Owens. (13)
10.24 - Asset Purchase Agreement dated June 30, 1994, by and among the Registrant, All City Communication
Company, Inc., Robert J. von Bereghy, Maurice S. Meyers, Martin T. Franke, Virginia Franke, Personal
Representative of the Estate of Martin K. Franke, and Cove Communications of Wisconsin, Inc. (13)
10.25 - Amendment Agreement dated July 29, 1994, by and among the Registrant, Radio Call Company, Inc., a New
York corporation, MRN Communications, Inc., a New York corporation, Radio Call Co. of N.J., Inc., a New
Jersey corporation, and Marvin R. Neuwirth. (11)
10.26 - Amendment Agreement dated August 1, 1994, by and among the Registrant, All City Communication Company,
Inc., Robert J. von Bereghy, Maurice S. Meyers, Martin T. Franke, Virginia Franke, Personal Representative of
the Estate of Martin K. Franke, and Cove Communications of Wisconsin, Inc. (13)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.27 - Asset Purchase Agreement dated October 6, 1994, by and among Registrant, High Tech Communications Corp.
of Illinois, High Tech Communications Corp. of Texas, High Tech Communications Corp. and Infopage Inc.
(14)
10.28 - Form of PS-58 Split Dollar Agreement between the Registrant and each of its executive officers. (14)
10.29 - Asset Purchase Agreement dated December 5, 1994, among Carrier Paging Systems, Inc., Carrier
Communications Corp., Rick Kaminer, Harry Lowenthal and Contact Communications Inc. (15)
10.30 - Asset Purchase Agreement dated November 30, 1994, among Signet Paging of Charlotte, Inc., Eileen L. Knight,
John R. Knight, Sr., John R. Knight, Jr. and Contact Communications Inc. (15)
10.31 - Change in Control Agreement dated January 17, 1995, by and between the Registrant and Mark A. Solls. (16)
10.32 - Letter Agreement dated February 7, 1995, regarding the acquisition of substantially all of the paging assets of
Americom Paging Corporation, by and among Gregory W. Hadley, Mo Shebaclo, American 900 Paging, Inc. dba Americom
Paging Corporation and Contact Communications Inc. (16)
10.33 - Amended and restated Credit Agreement dated February 9, 1995, by and among the Registrant, The First
National Bank of Chicago, as Agent, and the Lenders party thereto. (16)
10.34 - Rights Agreement, dated as of April 5, 1995, between the Company and the Rights Agent, specifying the terms of
the Rights, which includes the form of Certificate of Designation of Series A Junior Participating preferred Stock
as Exhibit A, the form of Right Certificate as Exhibit B and the form of the Summary of Rights as Exhibit C.
(17)
10.35 - Letter Agreement dated March 31, 1995, regarding the acquisition of substantially all of the paging assets of
Lewis Paging, Inc., by and among Terry Lewis, Lewis Paging, Inc. and Contact Communications Inc. (18)
10.36 - Stock Purchase Agreement dated April 20, 1995, by and between the Registrant, Contact Communications Inc.,
Metropolitan Houston Paging Services, Inc., SLT Communications, Inc., Lufkin-Conroe Telecommunications Corp.
and GTE Southwest Incorporated. (18)
(b) REPORTS ON FORM 8-K. On March 13, 1995, the Company filed a Current Report on Form 8-K relating to the
acquisition of Signet.
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-14956) filed with the
Commission on June 10, 1987, and incorporated herein by reference.
(2) Filed as an Exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No. 33-
14956) filed with the Commission on July 10, 1987, and incorporated herein by reference.
(3) Filed as an Exhibit to Amendment No. 2 to the Company's Registration Statement on Form S-1 (File No. 33-
14956) filed with the Commission on July 15, 1987, and incorporated herein by reference.
(4) Filed as an Exhibit to Amendment No. 4 to the Company's Registration Statement on Form S-1 (File No. 33-
14956) filed with the Commission on July 29, 1987, and incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Current Report on Form 8-K, dated September 8, 1987, and incorporated
herein by reference.
(6) Filed as an Exhibit to the Company's Current Report on Form 8-K, dated July 21, 1988, and incorporated herein by
reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference.
(9) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference.
(10) Filed as an Exhibit to the Company's Current Report on Form 8-K, dated March 1, 1994, and incorporated herein
by reference.
(11) Filed as an Exhibit to the Company's Current Report on Form 8-K dated August 5, 1994, and incorporated herein
by reference.
(12) Filed as an Exhibit to the Company's Proxy Statement filed with the Commission on April 26, 1994, and
incorporated herein by reference.
(13) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994,
and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(14) Filed as an Exhibit to the Company's Registration Statement on Form S-2 (File No. 33-85696) filed with the
Commission on October 28, 1994, and incorporated herein by reference.
(15) Filed as an Exhibit to Amendment No. 2 to the Company's Registration Statement on Form S-2 (File No. 33-
85696) filed with the Commission on December 14, 1994, and incorporated herein by reference.
(16) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
(17) Filed as an Exhibit to the Company's Current Report on Form 8-K, filed with the Commission on April 19, 1995,
and incorporated herein by reference.
(18) Filed herewith.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRONET INC.
(Registrant)
DATE: May 12, 1995 By: /s/ JAN E. GAULDING
-------------------------
Jan E. Gaulding
SENIOR VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
10.1 - Agreement dated August 18, 1982, between the Registrant and Coordinated Hospital and
Institutional Paging, Inc. (2)
10.2 - Agreement dated January 11, 1983, between the Registrant and Hospital Council of the National
Capitol Area, Inc. (2)
10.3 - Form of Investor Agreement dated as of June 18, 1984, between the Registrant and certain
holders of the Registrant's stock. (1)
10.4 - Form of Investor Agreement dated as of December 23, 1985, between the Registrant and certain
holders of the Registrant's stock. (1)
10.5 - Form of Indemnification Agreement between the Registrant and certain of the Registrant's
Directors. (2)
10.6 - Deferred Compensation Plan of the Registrant. (3)
10.7 - 1987 Stock Option Plan of the Registrant. (4)
10.8 - Agreement dated June 15, 1988, between the Registrant and Texas Instruments Incorporated for
the acquisition of assets including the use of patents, technology and software related to ProNet
Tracking Systems. (6)
10.9 - Office/Showroom/Warehouse Lease Agreement dated January 2, 1990, between the Registrant
and Dal-Mac Westridge I, Ltd., as amended. (8)
10.10 - Nonqualified Stock Option Agreement of the Registrant dated May 22, 1991. (9)
10.11 - Non-Employee Director Stock Option Plan of the Registrant. (9)
10.12 - Stock Purchase Agreement dated September 24, 1993, by and between the Registrant and
Contact Communications, Inc. (10)
10.13 - Amendment Letter No. One to Stock Purchase Agreement dated October 20, 1993, by and
between the Registrant and Contact Communications, Inc. (10)
10.14 - Amendment Letter No. Two to Stock Purchase Agreement dated January 4, 1994, by and
between the Registrant and Contact Communications, Inc. (10)
10.15 - Amendment Letter No. Three to Stock Purchase Agreement dated March 1, 1994, by and
between the Registrant and Contact Communications, Inc. (10)
10.16 - Asset Purchase Agreement dated March 22, 1994, by and among the Registrant, Radio Call
Company, Inc., a New York corporation, MRN Communications, Inc., a New York corporation,
Radio Call Co. of N.J., Inc., a New Jersey corporation, and Marvin R. Neuwirth. (11)
10.17 - 1994 Employee Stock Purchase Plan of the Registrant. (12)
10.18 - Asset Purchase Agreement dated May 5, 1994, by and among the Registrant, Chicago
Communication Service, Inc., an Illinois corporation, Gerald C. Bear, Gerald C Bear, Trustee of
the Lewis Bear Trust, Leo Magiera and Gerald Manikowski. (11)
10.19 - Employment Agreement dated May 18, 1994, by and between the Registrant and Jackie R.
Kimzey. (13)
10.20 - Employment Agreement dated May 18, 1994, by and between the Registrant and David J.
Vucina. (13)
10.21 - Change in Control Agreement dated May 18, 1994, by and between the Registrant and Bo
Bernard. (13)
10.22 - Change in Control Agreement dated May 18, 1994, by and between the Registrant and Jan E.
Gaulding. (13)
10.23 - Change in Control Agreement dated May 18, 1994, by and between the Registrant and Jeffery
Owens. (13)
10.24 - Asset Purchase Agreement dated June 30, 1994, by and among the Registrant, All City
Communication Company, Inc., Robert J. von Bereghy, Maurice S. Meyers, Martin T. Franke,
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Virginia Franke, Personal Representative of the Estate of Martin K. Franke, and Cove
Communications of Wisconsin, Inc. (13)
10.25 - Amendment Agreement dated July 29, 1994, by and among the Registrant, Radio Call Company,
Inc., a New York corporation, MRN Communications, Inc., a New York corporation, Radio Call
Co. of N.J., Inc., a New Jersey corporation, and Marvin R. Neuwirth. (11)
10.26 - Amendment Agreement dated August 1, 1994, by and among the Registrant, All City
Communication Company, Inc., Robert J. von Bereghy, Maurice S. Meyers, Martin T. Franke,
Virginia Franke, Personal Representative of the Estate of Martin K. Franke, and Cove
Communications of Wisconsin, Inc. (13)
10.27 - Asset Purchase Agreement dated October 6, 1994, by and among Registrant, High Tech
Communications Corp. of Illinois, High Tech Communications Corp. of Texas, High Tech
Communications Corp. and Infopage Inc. (14)
10.28 - Form of PS-58 Split Dollar Agreement between the Registrant and each of its executive officers.
(14)
10.29 - Asset Purchase Agreement dated December 5, 1994, among Carrier Paging Systems, Inc.,
Carrier Communications Corp., Rick Kaminer, Harry Lowenthal and Contact Communications
Inc. (15)
10.30 - Asset Purchase Agreement dated November 30, 1994, among Signet Paging of Charlotte, Inc.,
Eileen L. Knight, John R. Knight, Sr., John R. Knight, Jr. and Contact Communications Inc.
(15)
10.31 - Change in Control Agreement dated January 17, 1995, by and between the Registrant and Mark
A. Solls. (16)
10.32 - Letter Agreement dated February 7, 1995, regarding the acquisition of substantially all of the
paging assets of Americom Paging Corporation, by and among Gregory W. Hadley, Mo Shebaclo,
American 900 Paging, Inc. dba Americom Paging Corporation and Contact Communications Inc. (16)
10.33 - Amended and restated Credit Agreement dated February 9, 1995, by and among the Registrant,
The First National Bank of Chicago, as Agent, and the Lenders party thereto. (16)
10.34 - Rights Agreement, dated as of April 5, 1995, between the Company and the Rights Agent,
specifying the terms of the Rights, which includes the form of Certificate of Designation of
Series A Junior Participating preferred Stock as Exhibit A, the form of Right Certificate as
Exhibit B and the form of the Summary of Rights as Exhibit C. (17)
10.35 - Letter Agreement dated March 31, 1995, regarding the acquisition of substantially all of the
paging assets of Lewis Paging, Inc., by and among Terry Lewis, Lewis Paging, Inc. and Contact
Communications Inc. (18)
10.36 - Stock Purchase Agreement dated April 20, 1995, by and between the Registrant, Contact
Communications Inc., Metropolitan Houston Paging Services, Inc., SLT Communications, Inc.,
Lufkin-Conroe Telecommunications Corp. and GTE Southwest Incorporated. (18)
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-14956) filed with the
Commission on June 10, 1987, and incorporated herein by reference.
(2) Filed as an Exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No. 33-
14956) filed with the Commission on July 10, 1987, and incorporated herein by reference.
(3) Filed as an Exhibit to Amendment No. 2 to the Company's Registration Statement on Form S-1 (File No. 33-
14956) filed with the Commission on July 15, 1987, and incorporated herein by reference.
(4) Filed as an Exhibit to Amendment No. 4 to the Company's Registration Statement on Form S-1 (File No. 33-
14956) filed with the Commission on July 29, 1987, and incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Current Report on Form 8-K, dated September 8, 1987, and incorporated
herein by reference.
(6) Filed as an Exhibit to the Company's Current Report on Form 8-K, dated July 21, 1988, and incorporated herein by
reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference.
(8) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference.
(9) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference.
(10) Filed as an Exhibit to the Company's Current Report on Form 8-K, dated March 1, 1994, and incorporated herein
by reference.
(11) Filed as an Exhibit to the Company's Current Report on Form 8-K dated August 5, 1994, and incorporated herein
by reference.
(12) Filed as an Exhibit to the Company's Proxy Statement filed with the Commission on April 26, 1994, and
incorporated herein by reference.
(13) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994,
and incorporated herein by reference.
(14) Filed as an Exhibit to the Company's Registration Statement on Form S-2 (File No. 33-85696) filed with the
Commission on October 28, 1994, and incorporated herein by reference.
(15) Filed as an Exhibit to Amendment No. 2 to the Company's Registration Statement on Form S-2 (File No. 33-
85696) filed with the Commission on December 14, 1994, and incorporated herein by reference.
(16) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
(17) Filed as an Exhibit to the Company's Current Report on Form 8-K, filed with the Commission on April 19, 1995,
and incorporated herein by reference.
(18) Filed herewith.
</TABLE>
<PAGE>
CONTACT COMMUNICATIONS INC.
600 Data Drive, Suite 100
Plano, Texas 75075
VIA FACSIMILE
-------------
404-387-0606
March 31, 1995
Mr. Terry W. Lewis
President
Lewis Paging,Inc.
319 N. Tennessee Street
Cartersville, Georgia 30120
Dear Mr. Lewis:
This letter will confirm the understanding that Terry Lewis (the
"Shareholder"), and Lewis Paging, Inc., a Gerogia corporation, all of the
capital stock of which is owned by the Shareholder (the "Company"), have
reached with Contact Communications Inc., a Delaware corporation ("Buyer"),
a wholly owned subsidiary of ProNet Inc. ("ProNet"), with respect to the
acquisition ("Acquisition") by Buyer from the Company of those assets
described in EXHIBIT A attached hereto as "Acquired Assets" (the "Acquired
Assets").
1. The parties hereto shall immediately proceed with the further
negotiation, preparation and execution of a Definitive Agreement (herein so
called) containing, among other things, the terms and conditions set forth in
EXHIBIT A attached hereto. The parties intend that the Definitive Agreement
be executed no later than 5:00 p.m., Dallas time, May 15, 1995.
2. Following the date of execution hereof, the Shareholder and the
Company shall afford to Buyer through its officers, attorneys, accountants,
lenders and authorized representatives and affiliates free and full access to
the properties, books and records of the Company on reasonable notice during
normal business hours in order to permit Buyer to make such investigation of
the business, properties and operations of the Company as Buyer may deem
necessary. In the event Buyer determines not to proceed with the
Acquisition, any information furnished to, or obtained by, any party hereto,
its officers, attorneys, accountants, lenders or authorized representatives,
as a result of its investigations or otherwise in connection with the
Acquisition, shall be treated as confidential information except (a) to the
extent such information is otherwise public or generally available to the
public or (b) as required by law. In the event the Acquisition does not
occur, each party shall return to the other parties all written confidential
information furnished by the other parties to it or him and will not
thereafter use, for any purposes whatsoever, such confidential information,
or permit any such confidential information to be made publicly available.
3. The Shareholder and the Company represent and warrant to Buyer that
neither the Shareholder nor the Company has entered into any agreement
pursuant to which any person or
<PAGE>
Mr. Terry Lewis
March 31, 1995
Page 2
entity has obtained the right to acquire any portion of the securities or
assets of the Company (whether by purchase of assets or stock, by merger, or
otherwise) and (b) the execution, delivery and performance of this letter of
intent by the Shareholder and the Company do not and will not breach, violate
or conflict with, or permit the cancellation of, any agreement to which the
Company is a party or by which it or its properties is bound. In order to
induce Buyer to undertake the considerable effort and to incur the major
expenses associated with the Acquisition, the Shareholder and the Company
shall not, and shall use their best efforts to cause the officers, directors,
employees, and agents of the Company not to, (a) solicit, initiate or
encourage the submission of proposals or offers from any person or entity
for, or enter into any agreement or arrangement relating to, any acquisition
or purchase of any or all of the assets of, or securities of, or any merger,
consolidation, or business combination with, the Company or any subsidiary
thereof or (b) participate in any negotiations regarding, or, except as
required by legal process, furnish to any other person or entity any
information with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate, or encourage, any effort or attempt by
any other person or entity to do or seek any of the foregoing. In addition,
until 5:00 p.m., Dallas, Texas time, on May 15, 1995, the Shareholder and the
Company agree that neither the Shareholder nor the Company will enter into
any agreement or consummate any transaction that would interfere with the
consummation of the Acquisition. The Shareholder and the Company shall
promptly notify Buyer if any such proposal or offer described in this
paragraph, or any inquiry or contact with any person or entity with respect
thereto, is made. The notification under this paragraph shall include the
identity of the person or entity making such acquisition, offer or other
proposal, the terms thereof, and any other information with respect thereto
as Buyer may reasonably request.
4. No public announcement shall be made by Buyer, ProNet, the Company
or the Shareholder with respect to the transactions contemplated hereby
without the approval of the respective parties, unless otherwise required by
law; provided, however, it is specifically understood that ProNet shall issue
press releases regarding the execution of this letter of intent, the
execution of the Definitive Agreement and the Closing of the Acquisition.
5. This letter is intended merely to be a guide in the preparation of a
Definitive Agreement satisfactory to the parties hereto and nothing contained
herein shall be construed to preclude other provisions that are inconsistent
with the terms of the Acquisition outlined herein from being included in the
Definitive Agreement, provided such other provisions are satisfactory to all
parties to the Definitive Agreement. While the parties presently intend to
proceed promptly to complete the Definitive Agreement, it is expressly
understood that this is a letter of intent and that no liability or
obligation of any nature whatsoever is intended to be created between or
among any of the parties hereto except as set forth in paragraphs 2, 3 and 4
hereof.
<PAGE>
Mr. Terry Lewis
March 31, 1995
Page 3
If the foregoing sets forth your understanding with respect to this
matter, please execute the enclosed copies of this letter in the space
provided below for your signatures and return one fully executed copy to the
undersigned, whereupon this letter shall become a binding agreement among the
parties hereto and our respective heirs, successors and assigns as of the
date hereof.
CONTACT COMMUNICATIONS INC.
By: Mark A. Folls
Title: Vice President
Accepted and agreed to in all respects
as of April 3, 1995.
LEWIS PAGING, INC.
By: Terry T. Lewis
Title: President
TERRY LEWIS
- ---------------------
Terry Lewis
<PAGE>
EXHIBIT A
---------
TERM SHEET
----------
Nature of Transaction Sale of Assets
Purchase Price The Purchase Price shall be $4,300,000.
The Purchase Price shall be paid as follows:
(a) 60% in cash at closing and (b) the
balance payable in shares of common stock
of ProNet Inc. (valued at the then current
trading price) or cash (the "Deferred
Amount"), in Buyer's sole discretion,
within 12 months after the closing of the
Acquisition (each to be allocated between
the Acquired Assets and the Shareholders'
and the Company's Noncompetition Agreements
in amounts to be agreed to by the parties
hereto). Buyer shall pay the Company
interest at the rate of 6 1/2% per annum
on any portion of the Deferred Amount
(calculated from the date of Closing until
paid).
The shares of common stock to be delivered in
payment of the Deferred Amount, if any, shall
be the subject of a Registration Rights
Agreement between the Shareholders and ProNet
pursuant to which ProNet shall agree that
such shares shall be registered with the
Securities and Exchange Commission (the
"SEC") within 14 days after the delivery of
such shares to the Shareholders.
Purchase Price Adjustment The final Purchase Price may be subject to
adjustment in respect of the number of pagers
in service. Buyer will pay the Company for
the increase over 14,000 in the number of
pagers in service at the Closing. The amount
of compensation will be determined as
follows:
(a) $65 plus the Company's pager cost for
each leased pager added
(b) $25 for each reseller pager added
(c) $65 for each COAM (nonreseller) pager
sold
<PAGE>
Acquired Assets (a) The Company's radio paging systems,
including all affiliated networks for
continuity of such system and including
all pending applications, as well as any
proposed/pending transactions to acquire
paging systems or frequencies (except
Carolina Paging, which may be discussed
between the parties at a later date)
(collectively, the "System"), and any
frequencies licensed for radio paging in
such metropolitan areas held by the
Company but not currently used in the
operation of the System
(b) All of the System's pagers in the field
(provided the number of pagers in service
shall not be less than 13,000 at the date
of Closing)
(c) All of the tangible assets of the System
including receivers, transmitters, base
station equipment, inventory (of an
appropriate working level to supply the
System), furniture, fixtures and computer
equipment
(d) Accounts receivable
(e) To the extent assignable, all outstanding
licenses, authorizations, permits and
certificates issued to the Company by the
Federal Communications Commission and
other governmental authorities and all
pending applications with respect to the
same used by the Company in connection
with or necessary for the operation of
the System
Excluded Assets The Company's cash: the cash and cash
equivalents of the Company shall meet or
exceed the amount of Accounts Payable
existing on the date of the Closing. On or
prior to Closing, the Shareholders may retain
or dividend cash and cash equivalents in
excess of such Accounts Payable.
<PAGE>
Condition to Closing As a condition precedent to Buyer's
obligation to close the Acquisition, the
average of the Company's EBITDA (Earnings
before interest, taxes, depreciation and
amortization) shall equal or exceed $52,000
for the months commencing January 1995
through the Closing Date (except the $15,000
bonus to Bill Morris in the month of March
1995).
Noncompetition Agreement The Company and the Shareholder will agree
not to compete with Buyer in the area in
which the Company serves its customers for
a period of two years from the closing of
the Acquisition.
Representation and Warranties The Shareholder shall represent and warrant
that (a) neither he nor the Company has
entered into any agreement pursuant to which
any person or entity has obtained the right
to acquire any portion of the securities or
all or substantially all of the assets of
the Company (whether by purchase of assets or
stock, by merger or otherwise), and (b)
except as otherwise disclosed on the
appropriate disclosure schedule, the
execution, delivery and performance of
the Definitive Agreement by the Shareholder
and the Company do not and will not breach,
violate or conflict with, or permit the
cancellation of, any agreement to which the
Shareholder or the Company is a party or by
which any of them or their properties is
bound.
License Transfers Within 30 days after the parties have signed
this letter of intent, Buyer (with Seller's
assistance) shall apply with the Federal
Communications Commission for the transfer
of all licenses currently issued to the
Company (including any pending applications
with respect to the Company).
Liabilities The Company will pay or provide for payment
at closing for all of its liabilities so that
Buyer will be receiving the Acquired Assets
free and clear of all liabilities, liens and
encumbrances.
Indemnification/Offset Buyer shall have a right to offset against
the Deferred Amount for any damages resulting
from breaches of the Definitive Agreement
by the Company or the Shareholder.
<PAGE>
ProNet Guarantee ProNet shall guarantee the obligations of
Buyer contained in the Definitive Agreement.
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
April 20, 1995, among Contact Communications Inc., a Delaware corporation
("Buyer"), ProNet Inc., a Delaware corporation ("ProNet"), Metropolitan
Houston Paging Services, Inc., a Texas corporation (the "Company"), SLT
Communications, Inc., a Texas corporation ("SLT"), Lufkin-Conroe
Telecommunications Corp., a Texas corporation ("LCC"), and GTE Southwest
Incorporated, a Delaware corporation, ("GTE" and, collectively with SLT and
LCC, the "Sellers").
The parties hereto agree as follows:
ARTICLE I
AGREEMENT OF PURCHASE AND SALE
1.1 AGREEMENT. Upon the basis of the representations and warranties,
for the consideration, and subject to the terms and conditions set forth in
this Agreement, Sellers agree to sell to Buyer all of the outstanding shares
of common stock, $1.00 par value, of the Company (the "Shares") and Buyer
agrees to purchase the Shares from Sellers, for $21,000,000 (subject to
adjustment only as set forth herein) (the "Purchase Price"), payable in
accordance with the terms of Section 1.4 hereof.
1.2 PURCHASE PRICE. The aggregate purchase price payable by the Buyer
in consideration for the sale of the Shares (duly accompanied by stock powers
executed by the Sellers in blank) shall be an amount equal to the sum of (a)
$500,000 (the "Deposit"), which amount has been deposited with Nationsbank of
Texas, N.A. (the "Escrow Agent") as a deposit in accordance with the terms of
that certain Depository Agreement dated November 10, 1994, by and among the
Sellers, the Buyer, ProNet and the Escrow Agent (the "Deposit Escrow
Agreement"), a copy of which is attached hereto as EXHIBIT A , (b)
$20,500,000 payable in cash on the Closing Date (as defined in Section 1.3),
and (c) if the Closing does not take place by May 3, 1995, the amount
determined by multiplying the quotient of 21,000,000 divided by 164,361 by
the increase in Subscribers between March 15, 1995 and the Closing Date (if
applicable). "Subscribers" are defined as the aggregate of the Pagers,
Network lines, stand-alone Voicemail lines, pager/vms and Alphanumeric lines,
Group call lines, Overdial lines and WATS lines for whom the Company provides
service. The Purchase Price shall not be adjusted if the number of
Subscribers is less than 150,000 on the Closing Date. The Purchase Price
shall be paid by wire transfer of immediately available funds to an account
or accounts designated by each Seller.
1
<PAGE>
1.3 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of ProNet Inc., 600 Data Drive,
Suite 100, Plano, Texas 75075, at 9:00 a.m., local time, on the later of (a)
the last day of the month in which all Federal, state and local regulatory
approvals for the transactions contemplated hereby are received by Final
Order (as hereinafter defined), and the conditions to Closing set forth in
Sections 5.1 and 5.2 (the "Closing Conditions") have been satisfied or (b) at
least ten (10) days after such Final Order is received and the Closing
conditions have been satisfied, or at such other time and place and/or on
such other date as Buyer and Sellers may agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
1.4 DELIVERY AND PAYMENT. At the Closing, (i) Sellers shall deliver or
cause to be delivered to Buyer the stock certificates evidencing all of the
Shares (duly accompanied by stock powers executed by the Sellers in blank)
and (ii) Buyer shall deliver to each of the Sellers a wire transfer in
immediately available funds for 1/3 of the amount of the cash portion of the
Purchase Price to be paid on the Closing Date as provided in Section 1.2 (b)
and (c) hereof and (iii) the Escrow Agent shall deliver $166,666 (being 1/3
of the Deposit) to each of the Sellers by wire transfer of immediately
available funds and the interest accrued thereon to the Buyer.
1.5 DEPOSIT ESCROW AGREEMENT. Pursuant to the Deposit Escrow Agreement
and prior to the execution hereof, the Buyer has delivered the Deposit to the
Escrow Agent. After the Sellers have executed and delivered the Seller's
Closing Certificate (as defined in Section 5.1(a)) to Buyer and ProNet and
ProNet and Buyer have executed and delivered the Buyer's Closing Certificate
(as defined in Section 5.2(a)) to Sellers; Sellers, Buyer, ProNet and Sellers
shall execute the written instructions in the form of Exhibit B-1 and deliver
Exhibit B-1 to the Escrow Agent instructing the Escrow Agent to deliver the
Deposit to Sellers and the interest accrued thereof to the Buyer at the
Closing in accordance with Section 1.4 of this Agreement. If this Agreement
is terminated prior to Closing as provided for in Section 6.1, then the
parties shall follow the procedures set in Section 6.2.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and ProNet hereby jointly and severally represent and warrant to
each of the Sellers and the Company as follows (with the understanding that
Sellers and the Company are relying materially on such representations and
warranties in entering into and performing this Agreement):
2.1 DUE ORGANIZATION.
(a) Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and has full
corporate power and authority to enter into and perform this Agreement.
2
<PAGE>
(b) ProNet is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has full
corporate power and authority to enter into and perform this Agreement.
2.2 DUE AUTHORIZATION. The Buyer and ProNet have full corporate power
and authority to enter into and perform this Agreement and each other
agreement, instrument, and document required to be executed by the Buyer and
ProNet in connection herewith and all such agreements have been duly
authorized by the Board of Directors of Buyer and ProNet. Upon their
execution and delivery to the Company and the Sellers, this Agreement and
each other agreement, instrument and document required to be executed by
Buyer and ProNet in connection herewith have been duly and validly
authorized, executed, and delivered by Buyer and ProNet and constitute valid
and binding obligations of Buyer and ProNet enforceable in accordance with
their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, or other laws affecting the
enforcement of creditors' rights generally and the application of general
principles of equity. The execution, delivery, and performance of this
Agreement and each other agreement, instrument and document required to be
executed by Buyer and ProNet in connection herewith will not (a) violate any
federal, state, county, or local law, rule, or regulation applicable to Buyer
or ProNet or their respective properties, (b) violate or conflict with, or
permit the cancellation of, any agreement to which Buyer or ProNet is a party
or by which Buyer or ProNet or their respective properties are bound, (c)
permit the acceleration of the maturity of any indebtedness of, or any
indebtedness secured by the property of Buyer or ProNet, or (d) violate or
conflict with any provision of Buyer's or ProNet's certificate of
incorporation or by-laws. No action, consent, or approval of, or filing
with, any federal, state, county, or local governmental authority is required
in connection with the execution, delivery, or performance of this Agreement
by Buyer or ProNet (or any agreement or other document executed in connection
herewith by Buyer or ProNet) except for the filing described in Section 4.12
hereof.
2.3 REGULATORY CERTIFICATES. Neither Buyer or nor ProNet is aware of
any information concerning Buyer or ProNet that could, in Buyer's or ProNet's
reasonable judgment, cause the Federal Communications Commission ("FCC") or
any other regulatory authority to withhold or deny approval of the transfer
of the Licenses (as hereinafter defined) to Buyer.
2.4 FINANCIAL CAPACITY. Buyer and ProNet have sufficient cash or other
sources of funds to pay the Purchase Price in the manner specified in Section
1.2 and 1.4 and all related fees and expenses. In addition, if Buyer or
ProNet is relying upon any financing to be provided by third parties in order
to pay any part of the Purchase Price and related fees and expenses, Buyer or
ProNet has delivered to Sellers before the date hereof a true and correct
copy of a commitment letter from Buyer's financial institution for such
financing.
2.5 BROKERS. Except as disclosed on SCHEDULE 2.5, neither Buyer nor
ProNet has paid or become obligated to pay any fee or commission to any
broker, finder, investment banker, or other intermediary in connection with
the transactions contemplated by this Agreement in such a
3
<PAGE>
manner as to give rise to a valid claim against Seller for any broker's or
finder's fees or similar fees or expenses.
2.6 INVESTMENT. Buyer is acquiring the shares of the Company for
investment and for its own account and not with a view to the distribution
thereof. The Buyer and ProNet acknowledge that the shares are "restricted"
securities as defined in Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities Act"); that the shares have not been
registered under the Securities Act or applicable state securities laws; and
no further transfer or sale of the shares shall be made without registration
under the Securities Act or applicable state securities laws, unless an
exemption is available for such transfer or sale.
2.7 NO LITIGATION. There are no actions, suits, claims or proceedings,
either in equity or law, or governmental or administrative investigations, or
to the knowledge of Buyer or ProNet, threatened against Buyer or ProNet,
which question or challenge the validity of this Agreement or any action to
be taken by Buyer or ProNet pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
The Company and Sellers hereby jointly and severally represent and
warrant with respect to the Company's representations and warranties and GTE,
SLT and LCC individually represent and warrant only with respect to
themselves and the Shares owned by each of them, to Buyer and ProNet as
follows (with the understanding that Buyer and ProNet are relying materially
on each such representation and warranty in entering into and performing this
Agreement):
3.1 CAPITALIZATION; OWNERSHIP OF SHARES. The authorized capital stock
of the Company consists of 2000 shares of common stock, $1.00 par value, of
which 1800 are issued and outstanding and no shares are held in the Company's
treasury. All such issued and outstanding Shares are duly authorized,
validly issued, fully paid, and nonassessable. All of the Shares are owned
of record and beneficially by Sellers as set forth on SCHEDULE 3.1 attached
hereto. None of the Shares were issued or will be transferred under this
Agreement in violation of any preemptive or preferential rights of any person.
3.2 NO LIENS ON SHARES. The Shares are free and clear of any liens,
restrictions, security interests, claims, rights of another, or encumbrances;
none of the Shares are subject to any outstanding options, warrants, calls,
or similar rights of any other person to acquire the same; none of the Shares
are subject to any restrictions on transfer thereof (except as discussed in
Section 2.6 herein); and GTE, SLT and LCC each has the full power and
authority to convey, and will convey to Buyer at Closing, good and marketable
title to the Shares, free and clear of any liens, restrictions, security
interests, claims, rights of another, or encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. There are no authorized or
outstanding warrants, options, or rights of any kind to acquire from the
Company or from GTE, SLT and
4
<PAGE>
LCC, any equity or debt securities of the Company or securities convertible
into or exchangeable for equity or debt securities of the Company.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas
and has full power and authority to carry on its business as now conducted
and as proposed to be conducted. Complete and correct copies of the
certificate of incorporation and by-laws of the Company and all amendments
thereto have been delivered to Buyer and have been certified by the Secretary
of the Company. The Company is qualified to do business and is in good
standing in the states set forth on SCHEDULE 3.4 attached hereto, which
states represent every jurisdiction where such qualification is required
except where failure to be so qualified would not have a material adverse
effect on the business, properties, or assets of the Company, taken as a
whole.
3.5 SUBSIDIARIES. The Company does not directly or indirectly have (or
possess any options or other rights to acquire) any subsidiaries or any
direct or indirect ownership interests in any person, business, corporation,
partnership, association, joint venture, trust, or other entity.
3.6 DUE AUTHORIZATION. The Company and each of the Sellers have full
corporate power and authority to enter into and perform this Agreement and
each other agreement, instrument, and document required to be executed by the
Company and the Sellers in connection herewith and all such agreements have
been duly authorized by the Board of Directors of the Company and each of the
Sellers. Upon their execution and delivery to Buyer and ProNet, this
Agreement and each other agreement, instrument, and document required to be
executed in connection herewith shall have been duly and validly executed and
delivered by the Company and Sellers and shall constitute valid and binding
obligations of the Company and Sellers enforceable in accordance with their
terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, or other laws affecting the enforcement of
creditors' rights generally and the application of general principles of
equity. The execution, delivery, and performance of this Agreement and each
other agreement, instrument, and document required to be executed in
connection herewith by the Sellers and the Company in connection herewith
will not (a) violate any federal, state, county, or local law, rule, or
regulation applicable to the Company, Sellers, or the Company's properties,
except where such violation would not have a material adverse effect on the
business, properties or assets of the Company, taken as a whole, (b) violate
or conflict with, or permit the cancellation of, any agreement to which the
Company or Sellers is a party, or by which any of them or the Company's
properties is bound, or result in the creation of any lien, security
interest, charge, or encumbrance upon any of such properties, except which
would not have a material adverse effect on the business, properties or
assets of the Company taken as a whole, (c) permit the acceleration of the
maturity of any indebtedness of, or indebtedness secured by the property of,
the Company, or (d) violate or conflict with any provision of the certificate
of incorporation or by-laws of the Company. No action, consent, or approval
of, or filing with, any governmental authority is required to be obtained by
or with respect to the Company or Sellers in connection with the execution,
delivery, or performance of this Agreement by the Company or Sellers (or any
agreement or other document executed in connection herewith by the Company or
Sellers) except for the filing described in Section 4.12 hereof.
5
<PAGE>
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein
so called) of the Company have been delivered to Buyer by Sellers and the
Company:
(a) Audited balance sheets and audited statements of operations,
retained earnings, and cash flow of the Company as of and for the two
years ended December 31, 1992 and December 31, 1993, together with, in
each case, the notes thereto and the report of Arthur Andersen LLP with
respect thereto (collectively, the "Audited Financial Statements"); and
(b) Unaudited balance sheets and statements of operations, retained
earnings, and cash flow of the Company as of and for the year ended
December 31, 1994, together with the notes thereto (collectively, the
"Unaudited Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and fairly present the financial position, results of
operations, and changes in financial position of the Company as of the
indicated dates and for the indicated periods (except, in the case of the
Unaudited Financial Statements, for the absence of notes thereto and subject
to normal year-end audit adjustments and accruals required to be made in the
ordinary course of business which are not materially adverse and are
consistent with past practices). Except to the extent reflected or provided
for in the balance sheet included in the Unaudited Financial Statements or as
disclosed to Buyer and ProNet as set forth on SCHEDULE 3.7 attached hereto,
the Company has no liabilities or obligations (whether absolute, contingent,
or otherwise), other than open-account current liabilities incurred in the
ordinary course of business subsequent to December 31, 1994; and Sellers and
the Company have no knowledge of any basis for the assertion of any such
liability or obligation. Except as set forth on SCHEDULE 3.7, since December
31, 1994, there has been no material adverse change in the financial
position, assets, results of operations, or business of the Company, taken as
a whole. Except as set forth on SCHEDULE 3.7, to the best knowledge of
Sellers and the Company without independent inquiry, there are no current or
pending developments or circumstances which would have a material adverse
effect on the financial position, assets, results of operations, business, or
prospects of the Company, taken as a whole. The termination of employment of
the SLT Employees (as hereinafter defined) who may be hired by ProNet or the
Buyer upon consummation of the Closing shall not result in any severance,
termination, or other payment liability or obligation of the Company.
3.8 CONDUCT OF BUSINESS; CERTAIN ACTIONS. Except as set forth on
SCHEDULE 3.8 attached hereto, since December 31, 1994, the Company has
conducted its businesses and operations in the ordinary course and consistent
with its past practices and has not (a) paid or declared any dividend or
distribution or purchased or retired any indebtedness from any holder of
capital stock of the Company (a "Shareholder") and has not purchased,
retired, or redeemed any capital stock from any Shareholder, (b) increased
the compensation of any of the directors, officers, or employees of the
Company, except for wage and salary increases made in the ordinary course of
business and consistent with the past practices of the Company, (c) made any
capital expenditures exceeding $50,000 individually, (d) sold any asset (or
any group of related assets) in any transaction (or series of related
transactions) in which the purchase price for such asset (or
6
<PAGE>
group of related assets) exceeded $10,000 (other than sales of inventory or
paging services in the ordinary course of business), (e) discharged or
satisfied any lien or encumbrance or paid any material obligation or
liability, absolute or contingent, other than current liabilities incurred
and paid in the ordinary course of business, (f) made or guaranteed any loans
or advances to any party whatsoever, (g) suffered or permitted any lien,
security interest, claim, charge, or other encumbrance to arise or be granted
or created against or upon any of the assets of the Company (other than the
Company's antenna sites), real or personal, tangible or intangible, or, to
the best knowledge of Sellers and the Company, suffered or permitted any
lien, security interest, claim, charge, or other encumbrance to arise or be
granted or created against or upon any antenna site of the Company, (h)
cancelled, waived, or released any of the Company's debts, rights, or claims
against third parties, except in the ordinary course of business, (i) amended
the certificate of incorporation or by-laws of the Company, (j) made or paid
any severance or termination payment to any employee, consultant, or sales
representative, (k) made any change in the method of accounting of the
Company, (l) made any investment or commitment therefor in any person,
business, corporation, association, partnership, joint venture, trust, or
other entity, (m) made, entered into, amended, or terminated any written
employment contract, or created, made, amended, or terminated any bonus,
stock option, pension, retirement, profit sharing, or other employee benefit
plan or arrangement, or withdrawn from any "multi-employer plan" (as defined
in Section 414(f) of the Internal Revenue Code of 1986, as amended (the
"Code")) so as to create any liability under Article IV of ERISA (as
hereinafter defined) to any entity, (n) amended, except in the ordinary
course of business, or experienced a termination of any material contract,
agreement, lease, franchise, or license to which the Company is a party, (o)
entered into any other material transactions except in the ordinary course of
business, (p) entered into any contract, commitment, agreement, or
understanding to do any acts described in the foregoing clauses (a)-(o) of
this Section 3.8, (q) suffered any material damage, destruction, or loss
(whether or not covered by insurance) to any assets, (r) experienced any
strike, slowdown, or demand for recognition by a labor organization by or
with respect to any of the employees of the Company, or (s) experienced or
effected any shutdown, slow-down, or cessation of any operations conducted
by, or constituting part of, the Company.
3.9 PROPERTIES. Attached hereto as SCHEDULE 3.9 is a list and
description of all real and personal properties (excluding, in the case of
personal properties, any asset having a book value of less than $10,000 as of
December 31, 1994) owned or leased by the Company as of the date hereof.
Except as expressly set forth on SCHEDULE 3.9 attached hereto, the real and
personal properties of the Company are free and clear of all liens, security
interests, claims, rights of another, and encumbrances. The physical
properties owned or utilized by the Company in the conduct of its business
are in good operating condition and repair, normal wear and tear excepted,
and are free from material defects. Except as otherwise set forth on
SCHEDULE 3.9 attached hereto, the Company has full and unrestricted legal and
equitable title to or a valid leasehold interest in all such properties. To
the best knowledge of Sellers and the Company, the operation of the
properties and business of the Company in the manner in which they are now
and have been operated does not violate in any material respect any zoning
ordinances, municipal regulations, or other rules, regulations, or laws
except where such violation would not have a material adverse effect on the
business, properties or assets of the Company. To the best knowledge of
Sellers and the Company, no covenants, easements, rights-of-way, or
regulations of record impair in any
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material respect the uses of the respective properties of the Company for the
purposes for which they are now operated which would have a material adverse
effect on the business, properties or assets of the Company. Except as
described on SCHEDULE 3.9 attached hereto, to the best knowledge of Sellers
and the Company, there are no past, present, or proposed conditions,
activities, actions, or plans which may prevent compliance by the Company
with any law related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, or release, of any pollutant, contaminant, chemical, or industrial
toxic or hazardous substance or waste ("Hazardous Substance Issues") or any
regulations, plans, judgments, injunctions, or notices promulgated or
approved thereunder applicable to the operations, properties, or assets of
the Company, or which may give rise to any liability of the Company, or
otherwise form the basis of any claims, actions, demands, suits, proceedings,
hearings, studies, or investigations against or relating to the Company,
based on or related to any Hazardous Substance Issues.
3.10 LICENSES AND PERMITS. Attached hereto as SCHEDULE 3.10 is a list
of all federal, state, county, and local governmental licenses, certificates,
and permits held or applied for by the Company ("Licenses"). Except as
disclosed on SCHEDULE 3.10, to the best knowledge of Sellers and the Company,
the Company has complied in all material respects, and is in compliance in
all material respects, with the terms and conditions of all such licenses,
certificates, and permits, and to the best knowledge of Sellers and the
Company, no material violation of any such licenses, certificates, or permits
or the laws or rules governing the issuance or continued validity thereof has
occurred which violation would have a material adverse effect on the
business, properties or assets of the Company. No additional license,
certificate, or permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
business of the Company which, if not obtained, would materially and
adversely affect the business or properties of the Company, taken as a whole.
Except as set forth on SCHEDULE 3.10, no claim has been made by any
governmental authority to the effect that a license, permit, or order is
necessary in respect of the business conducted by the Company.
3.11 INTELLECTUAL RIGHTS. Attached hereto as SCHEDULE 3.11 is a list
and description of all patents, trademarks, tradenames, and copyrights and
applications therefor owned by or registered in the name of the Company or in
which the Company has any right, license, or interest. The Company is not a
party to any license agreements, as licensor or licensee, with respect to any
patents, trademarks, trade names, or copyrights. The Company has good and
marketable title to or the right to use such assets as set forth on SCHEDULE
3.11 and all inventions, processes, designs, formulae, trade secrets, and
know-how which the Company believes are necessary for the conduct of its
business, without the payment of any royalty or similar payment. To the best
knowledge of Sellers and the Company, the Company is not infringing any
patent, trademark, tradename, or copyright of others, and Sellers and the
Company are not aware of any infringement by others of any such rights owned
by the Company.
3.12 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 3.12, to
the best knowledge of Sellers and the Company, the Company and Sellers have
complied in all material respects, and are in compliance in all material
respects, with all federal, state, county, and local laws, rules,
regulations, policies, precedents, and orders applicable to the Company's
business and
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have filed with the proper authorities all statements, reports, and responses
to requests for information (including, but not limited to, requests by the
Federal Communications Commission ("FCC") concerning any application
currently pending before the FCC filed by the Company) required by the laws,
rules, regulations, policies, precedents, and orders to which the Company or
any of its properties or operations are subject. Except as set forth on
SCHEDULE 3.12, within the past two (2) years, no claim has been made by any
governmental authority, whether federal, state, or local, or by any person or
other entity (and, to the best knowledge of Sellers and the Company, no such
claim is anticipated), to the effect that the business conducted by the
Company fails to comply, in any respect, with any law, rule, regulation,
policy, precedent, or ordinance of any governmental authority. Without
limiting the foregoing in any manner or respect whatsoever, except as set
forth on SCHEDULE 3.12, Sellers and the Company represent and warrant that to
the best knowledge of Sellers and the Company, the Company has complied with
and, up to and including the Closing, will comply in all material respects
with all rules, regulations, policies, precedents, and orders of the Federal
Aviation Administration ("FAA") and the FCC with respect to marking,
lighting, notification, and approval of each and every tower used in the
business conducted by the Company.
3.13 INSURANCE. Attached hereto as SCHEDULE 3.13 is a list of all
policies of insurance and all fidelity bonds held by or applicable to the
Company at any time within the past two years, which schedule sets forth in
respect of each such policy the policy name, policy number, carrier, term,
type of coverage, deductible amount or self-insured retention amount, and
limits of coverage. All such insurance policies are in full force and
effect, and none of the insurers thereunder have notified the Sellers or the
Company of any termination or increase in the premiums payable thereunder.
To the best knowledge of Sellers and the Company, no event relating to the
Company has occurred which will result in a retroactive upward adjustment of
premiums under any such policies or which is likely to result in any
prospective upward adjustment in such premiums. The insurance currently held
by the Company is in such amount and is of such type and scope as is
customary in the industry in which the Company is engaged. Except as
disclosed on SCHEDULE 3.13 attached hereto, there has been no material change
in the type of insurance coverage maintained by the Company during the past
two years which has resulted in any period during which the Company had no
insurance coverage. Excluding insurance policies which have expired and been
replaced, no insurance policy of the Company has been cancelled within the
last two years and, to the best knowledge of Sellers and the Company, no
threat has been made to cancel any insurance policy of the Company within
such period.
3.14 BENEFIT PLANS. The Company neither maintains nor contributes to
any "employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Company has no liability, and will incur no liability due to the
consummation of the transactions contemplated by this Agreement, with respect
to any employee benefit plan.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as SCHEDULE 3.15 is a
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory
notes, loan agreements, other evidences of indebtedness, and oral or written
agreements with any finder, broker, or sales agent in which the Company has
agreed to
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pay a fee or any other consideration for finding a buyer for any of the
Shares or the assets of the Company) to which the Company is a party or by
which the Company or its properties are bound, pursuant to which the
obligations thereunder of either party thereto are in respect of any such
individual contracts, commitments, leases, or other agreements during the
term thereof, $25,000 or greater, or which are otherwise material to the
business of the Company, taken as a whole (including, without limitation, all
mortgages, deeds of trust, security agreements, pledge agreements, and
similar agreements and instruments and all confidentiality agreements).
Except as set forth on SCHEDULE 3.15 attached hereto, the Company is not and,
to the best knowledge of Sellers and the Company, no other party thereto is
in default (and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a default) under any such
contracts, commitments, leases, or other agreements, and the Company has not
waived any right under any such contracts, commitments, leases, or other
agreements, except where such default or waiver would not have a material
adverse effect on the business, properties or assets of the Company. Except
as set forth on SCHEDULE 3.15 attached hereto, the Company has not guaranteed
any obligations of any other person.
3.16 CLAIMS AND PROCEEDINGS. Except for pending investigations of
Sellers or the Company by the FCC (of which neither Sellers nor the Company
has any knowledge), attached hereto as SCHEDULE 3.16 is a list and
description of all claims, actions, suits, proceedings, and investigations
pending or, to the best knowledge of Sellers and the Company, threatened
against or affecting the Company or any of its properties or assets, at law
or in equity, or before or by any court, municipal or other governmental
department, commission, board, agency, or instrumentality. Except as set
forth on SCHEDULE 3.16 attached hereto, the Company has not been, and the
Company is not now, subject to any order, judgment, decree, stipulation, or
consent of any court, governmental body, or agency. No inquiry, action, or
proceeding has been asserted, instituted, or, to the best knowledge of
Sellers and the Company, threatened to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge the
validity of such transactions or any part thereof or seeking damages on
account thereof. To the best knowledge of Sellers and the Company, except as
set forth on SCHEDULE 3.16, there is no basis for any such valid claim or
action or any other claims or actions which would, or could reasonably be
expected to (individually or in the aggregate), have a material adverse
effect on the business, operations, financial condition, or prospects of the
Company, taken as a whole, or result in a material liability of the Company.
3.17 TAXES. All federal, foreign, state, county, and local income,
gross receipts, excise, property, franchise, license, sales, use, utility,
withholding, employment, payroll and any other tax, custom and duty
(collectively, "Taxes") returns, reports, and declarations of estimated tax
(collectively, "Returns") which were required to be filed by the Company on
or before the date hereof have been filed within the time and in the manner
provided by law, and all such Returns are true and correct and accurately
reflect the Tax liabilities of the Company. All Taxes, assessments,
penalties, and interest which have become due pursuant to such Returns have
been paid or adequately accrued in the Financial Statements. The provisions
for Taxes reflected on the balance sheet contained in the Unaudited Financial
Statements are adequate to cover all of the Company's estimated Tax
liabilities for the respective periods then ended and all prior periods. The
Company has not executed any presently effective waiver or extension of any
statute of limitations against
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assessments and collection of Taxes. There are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits
(collectively, "Tax Actions") with respect to any Taxes owed or allegedly
owed by the Company. As of the date of the Closing, the Company's federal
income tax returns have not been audited by the Internal Revenue Service, and
no Taxes other than as set forth on the Financial Statements are payable by
the Company. There are no tax liens on any of the assets of the Company.
Proper and accurate amounts have been withheld and remitted by each Company
from and in respect of all persons from whom it is required by applicable law
to withhold for all periods in compliance with the tax withholding provisions
of all applicable laws and regulations. Neither the Company nor any other
corporation has filed an election under section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), that is applicable to the
Company or any assets held by the Company. The Company has not made an
election to be taxed under subchapter S of the Code. The Company is not a
party to any tax sharing agreement with any Shareholder or any other person.
The Company utilizes the accrual method of accounting for federal income tax
purposes.
3.18 PERSONNEL. The Company has no employees or sales representatives.
Certain employees of SLT Cable TV, Inc., a wholly-owned subsidiary of SLT
("SLT Cable") provide services to the Company pursuant to an oral agreement
bewteen the Company, SLT and SLT Cable. All of such employees whose primary
duties are the provision of services to the Company (the "SLT Cable
Employees") are identified on SCHEDULE 3.18 attached hereto. SCHEDULE 3.18
also includes a list of the names and annual rates of compensation of the
directors and officers of the Company and of the SLT Cable Employees whose
annual rates of compensation at December 31, 1994 (including base salary,
bonus, commissions, and incentive pay) exceeded or are expected to exceed
$50,000. SCHEDULE 3.18 attached hereto also lists the bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, SLT Cable
employees during the Company's 1994 fiscal year and to the date hereof.
SCHEDULE 3.18 attached hereto also contains a brief description of all
material terms of employment agreements to which the Company and/or SLT Cable
is a party with respect to the SLT Cable employees and all severance benefits
which any director or officer of the Company, or SLT Cable employee or sales
representative is or may be entitled to receive. The Company and SLT Cable
have made available to Buyer accurate and complete copies of all such
employment agreements, and all other agreements, plans, and other instruments
to which the Company and/or SLT Cable is a party with respect to the SLT
Cable employees and under which SLT Cable's employees are entitled to receive
benefits of any nature. To the best knowledge of Sellers and the Company,
there is no pending or threatened labor dispute or union organization
campaign involving the SLT Cable Employees. None of the SLT Cable Employees
are represented by any labor union or organization. The Company is in
compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours and is not engaged in any unfair labor
practices. There is no unfair labor practice claim against the Company or
SLT Cable with respect to the SLT Cable Employees before the National Labor
Relations Board or any strike, labor dispute, work slowdown, or work stoppage
pending or, to the best knowledge of Sellers and the Company, threatened
against or involving the Company or SLT Cable with respect to the SLT Cable
employees. The employment of any or all of the SLT Cable
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Employees by ProNet or the Buyer will not violate the terms of any
noncompetition or similar agreement that covers any such SLT Cable Employee.
3.19 ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.19
attached hereto, all of the accounts, notes, and loans receivable that have
been recorded on the books of the Company are bona fide and represent amounts
validly due. Except as set forth on SCHEDULE 3.19, to the best knowledge of
Sellers and the Company, all of such accounts, notes, and loans receivable
are free and clear of any security interests, liens, encumbrances, or other
charges; none of such accounts, notes, or loans receivable are subject to any
offsets or claims of offset; and none of the obligors of such accounts,
notes, or loans receivable have given notice that they will or may refuse to
pay the full amount thereof or any portion thereof.
3.20 BANK ACCOUNTS. Attached hereto as SCHEDULE 3.20 is a list of all
banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.21 AGENTS. Except as set forth in SCHEDULE 3.21 attached hereto, the
Company has not designated or appointed any person or other entity to act for
it or on its behalf pursuant to any power of attorney or any agency which is
presently in effect.
3.22 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
EMPLOYEES. Except as disclosed in SCHEDULE 3.22 attached hereto, the Company
is not indebted to any of its officers, directors, stockholders, the SLT
Cable Employees, sales representatives, or any affiliates thereof or has
indebtedness owed to it from any of its officers, directors, stockholders,
employees, sales representatives, or any affiliates thereof excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of business of the Company and
consistent with the Company's past practices.
3.23 COMMISSION SALES CONTRACTS. Except as disclosed in SCHEDULE 3.23
attached hereto, the Company neither employs nor has any relationship with
any individual, corporation, partnership, or other entity whose compensation
from the Company is in whole or in part determined on a commission basis.
3.24 CERTAIN CONSENTS. Except as set forth on SCHEDULE 3.24 attached
hereto, there are no consents, waivers, or approvals required to be executed
and/or obtained from third parties in connection with the execution,
delivery, and performance of this Agreement or the Deposit Escrow Agreement
and the transactions contemplated hereby or thereby.
3.25 INTEREST IN COMPETITORS, SUPPLIERS, LENDERS, AND CUSTOMERS.
Except as set forth on SCHEDULE 3.25 attached hereto, no Shareholder,
officer, or director of the Company or any affiliate of any such Shareholder,
officer, or director has any ownership interest in any paging competitor,
supplier, lender, or customer of the Company or any property used in the
operation of the business of the Company.
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3.26 INVENTORY. Except as set forth on SCHEDULE 3.26 attached hereto,
the inventories shown on the balance sheet contained in the Unaudited
Financial Statements consist of (and the inventories of the Company at the
Closing will consist of items of a quality and quantity usable and readily
saleable in the ordinary course of business by the Company.
3.27 WARRANTIES. Attached hereto as SCHEDULE 3.27 is a list and brief
description of all warranties and guarantees made by the Company to third
parties with respect to any products sold or services rendered by it. Except
as set forth on SCHEDULE 3.27 attached hereto, no claims for breach of
product or service warranties to customers have been made against the Company
since December 31, 1994. Except as set forth on SCHEDULE 3.27, to the best
knowledge of Sellers and the Company, and without independent inquiry, no
state of facts exists, or event has occurred, which may form the basis of any
present claim against the Company for liability on account of any express or
implied warranty to any third party.
3.28 CUSTOMERS AND SUPPLIERS. SCHEDULE 3.28 attached hereto contains a
true, correct, and complete list of (a) the ten largest customers (measured
in dollar volume of revenue) of the Company, taken as a whole, during the
years ended December 31, 1993 and December 31, 1994, and (b) the ten largest
suppliers (measured in dollar volume of purchases) of the Company, taken as a
whole, during the years ended December 31, 1993 and December 31, 1994.
3.29 REGULATORY CERTIFICATES. Neither Sellers nor the Company is aware
of any information concerning Sellers, the Company, or any of their
operations that could, in Sellers' or the Company's reasonable judgment,
cause the FCC or any other regulatory authority not to issue the Final Order
granting all applications as set forth in Section 4.12 herein.
ARTICLE IV
COVENANTS
4.1 INSPECTION. From the date hereof to the Closing, Sellers shall
give and cause the Company to give, and the Company shall give, to Buyer and
its officers, attorneys, accountants, and representatives free, full, and
complete access during reasonable business hours at times mutually agreed to
by the parties (and subject to Buyer's obligation to furnish Sellers and the
Company with 72 hours' notice of its desire for such access on any particular
day or for a particular period of days) to all books, records, tax returns,
files, correspondence, personnel, facilities, and properties of the Company;
provide Buyer and its officers, attorneys, accountants, and representatives
with access to all information and material pertaining to the business and
affairs of the Company as Buyer may deem reasonably necessary or appropriate;
and use their best efforts to afford Buyer and its officers, attorneys,
accountants, and representatives the reasonable opportunity to meet along
with the Company's representatives certain mutually agreed upon customers and
suppliers of the Company to discuss the business, condition (financial or
otherwise), operations, and prospects of the Company so long as it does not
interfere with the operations of the Company. At the Closing, Sellers and
the Company shall deliver to Buyer the originals of all minute books and
stock transfer records of the Company. Any investigation by
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Buyer or its officers, attorneys, accountants, or representatives shall not
in any manner affect the representations and warranties of Sellers contained
herein except as otherwise provided for in this Agreement. Buyer represents
that it is a sophisticated entity that was advised by knowledgeable counsel
and financial advisors and, to the extent it deemed necessary, other advisors
in connection with the Agreement and has conducted its own independent review
and evaluation of the Company and its business.
4.2 COMPLIANCE. From the date hereof to the Closing, neither Sellers
nor the Company shall take or fail to take any action which action or failure
to take such action shall cause the representations and warranties made by
Sellers and the Company herein to be untrue or incorrect as of the Closing.
4.3 SATISFACTION OF ALL CONDITIONS PRECEDENT. From the date hereof to
the Closing, each party shall use their best efforts to satisfy all
conditions precedent hereunder by the Closing.
4.4 NO SOLICITATION. From the date hereof to June 30, 1995 (unless
this Agreement is otherwise terminated in accordance with Section 6.1),
neither the Company nor Sellers shall offer any of the Shares or the Company
(or a material part of its assets in one transaction or a series of
transactions) for sale, or solicit offers to buy any Shares or the Company
(or a material part of its assets in one transaction or in a series of
related transactions), or hold discussions with any party (other than Buyer)
looking toward such an offer or solicitation or toward a merger or
consolidation of the Company with or into another entity or any similar
transaction. Sellers shall not, and shall not allow the Company to, and the
Company shall not, enter into any agreement with any party other than Buyer
with respect to the sale or other disposition of either the capital stock or
the assets of the Company or with respect to any merger, consolidation, or
similar transaction involving the Company.
4.5 NOTIFICATION AS TO CERTAIN MATTERS. Each party will promptly
notify the other party of any information of which it becomes aware on or
before the Closing Date that would cause any representation or warranty of
such other party contained in this Agreement not to be true and correct as of
the date on which it was made or as of the Closing Date.
4.6 NOTICE OF BREACH. From the date hereof to the Closing, Sellers and
the Company shall, immediately upon becoming aware thereof, give detailed
written notice to Buyer of the occurrence of any event which would cause or
constitute a breach, or if the Company or the Sellers has received notice
from a third party of a threatened occurrence of any event which would cause
or constitute a breach, of any of their covenants, agreements,
representations, or warranties contained or referred to herein or in any
document delivered in accordance with the terms hereof.
4.7 NOTICE OF LITIGATION. From the date hereof to the Closing,
immediately upon becoming aware thereof, Sellers and the Company shall notify
Buyer of (a) any suit, action, or proceeding (including, without limitation,
any Tax Action or proceeding involving a labor dispute or grievance or union
recognition) to which the Company becomes a party or which is threatened
against the Company, (b) any order or decree or any complaint praying for an
order or decree
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restraining or enjoining the consummation of this Agreement or the
transactions contemplated hereby, or (c) any notice from any tribunal of its
intention to institute an investigation into, or to institute a suit or
proceeding to restrain or enjoin the consummation of, this Agreement or the
transactions contemplated hereby or to nullify or render ineffective this
Agreement or such transactions if consummated.
4.8 CONTINUATION OF INSURANCE COVERAGE. From the date hereof to the
Closing, Sellers shall cause the Company to, and the Company shall, keep in
full force and effect insurance coverage for the Company and its assets and
operations comparable in amount and scope to the coverage now maintained
covering the Company and its assets and operations (provided, however, that
such insurance is available to Sellers and the Company). In the event any
such insurance becomes unavailable to Sellers or the Company, Sellers and the
Company shall give Buyer prompt written notice thereof.
4.9 UPDATING INFORMATION. As of the Closing, Sellers and the Company
shall update all information set forth in the schedules to this Agreement.
4.10 FINANCIAL STATEMENTS. Until the Closing, as soon as available,
and in any event within 30 days after the end of each calendar month after
December, 1994, Sellers and the Company shall furnish to Buyer balance sheets
statements of operations, retained earnings, and cash flows of the Company
for such month prepared in accordance with the generally accepted accounting
principles applied in the preparation of the Audited Financial Statements
(except for the absence of notes to such monthly financial statements and
subject to normal year-end adjustments and accruals required to be made in
the ordinary course of business which are not materially adverse and are
consistent with past practices). Such monthly financial statements shall
fairly present the financial position, results of operations, and changes in
financial position as of the indicated dates and for the indicated periods.
4.11 INTERIM OPERATIONS OF THE COMPANY.
(a) From the date hereof to the Closing, Sellers shall cause the
Company to, and the Company shall, conduct its business only in the
ordinary course consistent in all material respects with past practice,
and the Company shall not, unless Buyer gives its prior written approval,
(i) amend or otherwise change its certificate of incorporation or by-laws,
as each such document is in effect on the date hereof, (ii) issue or sell,
or authorize for issuance or sale, additional shares of any class of
capital stock, or issue, grant, or enter into any subscription, option,
warrant, right, convertible security, or other agreement or commitment
of any character obligating the Company to issue securities, (iii)
declare, set aside, make, or pay any dividend or other distribution with
respect to its capital stock, except for dividends of cash or cash
equivalents (excluding accounts receivable) in excess of accounts payable
(including amounts due as of Closing under the Castille Agreement as set
forth in Section 4.14 herein), (iv) redeem, purchase, or otherwise
acquire, directly or indirectly, any of its capital stock, (v) except in
the ordinary course of business and pursuant to the Company's 1995 Budget
as set forth in SCHEDULE 4.11 attached hereto, sell, pledge, dispose of,
or encumber, or agree to sell, pledge,
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dispose of, or encumber, any assets of the Company, or authorize any
capital expenditure in excess of $10,000 individually or $20,000 in the
aggregate for the Company, (vi) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, or other
business organization or division thereof, or enter into any contract,
agreement, commitment, or arrangement with respect to any of the
foregoing, (vii) incur any indebtedness for borrowed money, issue any
debt securities, or enter into or modify any contract, agreement,
commitment, or arrangement with respect thereto, (viii) enter into,
amend, or terminate any employment agreement with any director, officer,
or employee of the Company or SLT Cable Employee otherwise than in the
ordinary course of business, or, other than as set forth in Section 4.14
hereof, take any action with respect to the grant or payment of any
severance or termination pay other than pursuant to policies or agreements
of the Company in effect on the date hereof, (ix) enter into, extend, or
renew any lease for office or manufacturing space, or (x) except as
required by law, adopt, amend, or terminate any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment, or other employee benefit plan, agreement, trust, fund, or
arrangement for the benefit or welfare of any officer, employee, or sales
representative of the Company or SLT Cable Employee, or withdraw from any
multi-employer plan so as to create any liability under Article IV of
ERISA to any entity, (xi) grant any increase in compensation to any
director, officer, or employee or sales representative of the Company or
SLT Cable Employee except for in increases consistent with past practices
and in the ordinary course of business.
(b) From the date hereof to the Closing, Sellers shall cause the
Company to, and the Company shall, use their best efforts to preserve
intact the business organization of the Company, to keep available in all
material respects the services of each Company's present officers and key
employees, to preserve intact each Company's banking relationships and
credit facilities, to preserve the goodwill of those having business
relationships with the Company, and to comply with all applicable laws.
4.12 REGULATORY APPROVALS. With the full cooperation and assistance of
Sellers and the Company, Buyer shall file with the FCC, the FAA, and with all
state regulatory agencies, commissions, or other entities having jurisdiction
over the Company's business, applications in a form mutually agreed upon by
Buyer, ProNet, Sellers and the Company for consent to transfer to the Buyer
of the Licenses, currently held by the Company. The Buyer shall use all
commercially reasonable efforts to file and prosecute such applications so as
to permit the Closing to occur. Approval of the aforementioned applications
by the FCC, the FAA, and by any applicable state agencies, commissions, or
other entities shall be by Final Order (and such approvals shall hereinafter
collectively be referred to as the "Final Order"). As used in this
Agreement, any such approval shall only be a Final Order if (a) the action of
the subject governmental agency approving the application has not been
reversed, stayed, enjoined, set aside, annulled, or suspended, (b) with
respect to such approval, no timely request for stay, motion, or petition for
reconsideration or rehearing, application, or request for review, or notice
of appeal or other judicial petition for review is pending, and (c) the time
for filing any such request, motion, petition, application, appeal, or
notice, and for the entry of orders staying, reconsidering, or
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reviewing the subject governmental agency's own motion, shall have expired.
Any action by a governmental authority approving the application subject to
conditions which:
(a) materially adversely affect the operation or the conduct of the
Company's business as conducted by Sellers immediately prior to the
Closing Date (if either party shall disagree as to what constitutes a
condition materially adverse for purposes of this subparagraph, the
disagreement shall be resolved by an arbiter, if Buyer and Sellers
mutually agree, or by a final judgment of a court of competent
jurisdiction); or
(b) require payment (by Sellers or Buyer) of fines or forfeitures
for prior or continuing violations of orders, policies, regulations or
rules of any regulatory agency;
shall not be deemed a Final Order until such time as:
(a) the Buyer notifies the Sellers in writing of its willingness to
accept such materially adverse conditions; or
(b) such payments (by Sellers or Buyer) of fines or forfeitures are
made to the appropriate regulatory agency;
respectively. If the conditions are neither accepted by Buyer, or satisfied
by payment of the fines or forfeitures by Sellers or Buyer, as the case may
be, within 60 days of the date when the regulatory approval was released on a
public notice or otherwise publicly disclosed, then Buyer or Sellers (in the
event that Buyer fails to pay the fines or forfeitures that are the subject
of the conditions) shall have the right to terminate this Agreement upon
written notice to the other party or parties and shall be relieved of all
obligations hereunder as provided in Article VI hereof.
4.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Sellers shall cause all
directors and officers of the Company to deliver their written resignations
to Buyer, which resignations shall be effective at or before the Closing and
shall be in form and substance reasonably satisfactory to Buyer. Except as
set forth in SCHEDULE 4.13, each such resignation shall state that the
Company is not in any way indebted or obligated to the resigning party for
termination pay, loans, advances, or otherwise except for accrued salary.
4.14 GULF COAST ELECTRONICS AGREEMENT. Prior to the Closing, Sellers
shall cause the Company to record to accounts payable all unpaid amounts due
under the Agreement for Purchase and Sale of Radio Station Authorization
dated December 14, 1994 between Gulf Coast Electronics, Inc. and the Company.
Such amounts in accounts payable shall be subject to the restrictions on the
issuance of dividends according to Section 4.11(a)(iii).
4.15 EMPLOYMENT OFFERS. Sellers and the Company shall make available
to ProNet and Buyer all personnel and similar records (excluding medical
records) for all SLT Cable Employees, subject in each case to the consent of
the SLT Cable Employee. Sellers and the Company shall cooperate with ProNet
and Buyer in facilitating ProNet's and Buyer's communication with the SLT
Cable Employees, including, but not limited to, providing ProNet and Buyer
with reasonable
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access to interview the SLT Cable Employees prior to Closing. Effective as of
the Closing, Sellers will cause the employment of any SLT Cable Employee
designated by ProNet or Buyer to be terminated, subject to ProNet's or
Buyer's agreement to cause the Company to offer employment to such designated
SLT Cable Employees.
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF BUYER. Unless waived in writing by
the Buyer, and only in Buyer's absolute and sole discretion, the obligations
of Buyer to consummate the transactions contemplated hereby are subject to
the fulfillment of each of the following conditions:
(a) The representations and warranties of Sellers and the Company
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing;
Sellers and the Company shall have performed and complied in all material
respects with all agreements required by this Agreement to be performed or
complied with by Sellers and the Company at or prior to the Closing; and
Sellers shall have delivered to Buyer a certificate ("Seller's Closing
Certificate") in substantially the form attached as SCHEDULE 5.1(a), dated
the Closing Date and signed by Sellers, certifying each of the foregoing,
or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct,
in which event, if the Closing occurs, any claim with respect to matters
so specified shall be waived by Buyer.
(b) No action or proceeding shall have been instituted or threatened
against Sellers or the Company for the purpose or with the possible effect
of enjoining or preventing the consummation of this Agreement or seeking
damages on account thereof.
(c) During the period from the date hereof to the Closing, there
shall not have occurred any material casualty or material damage (whether
or not insured) to any facility, property, or equipment owned or used by
the Company; there shall have been no material adverse change in the
financial condition, business, properties, or operations of the Company,
taken as a whole, since December 31, 1994; and the business of the Company
shall have been conducted only in the ordinary course consistent with past
practices except as otherwise disclosed pursuant to this Agreement.
(d) Buyer shall have received the minute books and stock transfer
records contemplated by Section 4.1 hereof and the resignations
contemplated by Section 4.14 hereof.
(e) The consents and approvals listed on SCHEDULE 3.24 required in
connection with the execution, delivery, and performance of this Agreement
shall have been obtained.
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(f) All necessary action (corporate or otherwise) shall have been
taken by Sellers and the Company to authorize, approve, and adopt this
Agreement and the consummation and performance of the transactions
contemplated hereby, and Buyer shall have received a certificate, dated
as of the Closing Date, executed by Sellers and the President or Vice
President of the Company to the foregoing effect.
(g) Buyer shall have received from Sellers the stock certificates
representing all of the Shares duly accompanied by stock powers duly
executed in blank.
(h) Each director, officer, employee, and sales representative of
the Company who has any loan outstanding and payable to the Company at the
Closing Date shall have repaid such loan (including, without limitation,
all accrued interest) in full on the Closing Date.
(i) Sellers shall have entered into a Noncompetition Agreement with
Buyer and the Company in the form of Exhibit C attached hereto (the
"Noncompetition Agreement").
(j) Buyer shall have received the legal opinion of counsel to
Sellers and the Company, in form and substance satisfactory to the
parties.
(k) Buyer shall have received the legal opinion of FCC counsel
to Sellers and the Company, in form and substance satisfactory to the
parties.
(l) The Company and its assets and operations shall have been
covered by insurance comparable in amount and scope to the coverage
maintained by the Company covering the Company and its assets and
operations on the date hereof.
(m) The value of the cash and cash equivalents (excluding accounts
receivable) of the Company shall meet or exceed the amount of accounts
payable of the Company existing on the date of the Closing. Subject to
the preceding sentence, on or prior to the Closing, the Sellers may retain
or dividend cash and cash equivalents (excluding accounts receivable) in
excess of such accounts payable.
(n) On the date of the Closing, the number of the Company's
Subscribers shall equal or exceed 150,000.
The decision of Buyer to consummate the transactions contemplated hereby
without the satisfaction of any of the preceding conditions shall not
constitute a waiver of any of Sellers' or the Company's representations,
warranties, covenants, or indemnities herein except as provided for in this
Agreement.
5.2 CONDITIONS TO OBLIGATIONS OF SELLERS. Unless waived in writing by
the Seller, and only in Sellers' absolute and sole discretion, the
obligations of Sellers to consummate the transactions contemplated hereby are
subject to the fulfillment of the following conditions:
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(a) The representations and warranties of Buyer and ProNet contained
in this Agreement shall be true and correct in all material respects at
and as of the Closing with the same effect as though such representations
and warranties had been made on and as of the Closing; Buyer and ProNet
shall have performed and complied in all material respects with all
agreements required by this Agreement to be performed or complied with by
Buyer and ProNet at or prior to the Closing; and Buyer and ProNet shall
have delivered to Sellers a certificate ("Buyer's Closing Certificate")
in substantially the form attached as SCHEDULE 5.2(a), dated the Closing
Date and signed by Buyer and ProNet, certifying each of the foregoing,
or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct,
in which event, if the Closing occurs, any claim with respect to matters
so specified shall be waived by Sellers.
(b) Buyer or ProNet shall have delivered to Sellers the Purchase
Price for the Shares in accordance with Sections 1.2 and 1.4 hereof.
(c) All necessary action (corporate or otherwise) shall have been
taken by Buyer and ProNet to authorize, approve, and adopt this Agreement
and the consummation and performance of the transactions contemplated
hereby, and Sellers shall have received a certificate, dated as of the
Closing Date, executed by the President or Vice President of Buyer and
ProNet to the foregoing effect.
(d) No action or proceeding shall have been instituted or threatened
against Buyer or ProNet for the purpose or with the possible effect of
enjoining or preventing the consummation of this Agreement or seeking
damages on account thereof.
ARTICLE VI
TERMINATION
6.1 TERMINATION. This Agreement may be terminated prior to the Closing
by (a) the mutual consent of Buyer, ProNet and Sellers, (b) Sellers upon the
failure of Buyer or ProNet to perform or comply in any material respect with
any of its covenants or agreements contained herein prior to the Closing or
if any representation or warranty of Buyer and ProNet hereunder shall not
have been true and correct in any material respect as of the time at which
such was made, (c) Buyer and ProNet upon the failure of Sellers or the
Company to perform or comply in any material respect with any of its
covenants or agreements contained herein prior to the Closing or if any
representation or warranty of Sellers or the Company hereunder shall not have
been true and correct in any material respect as of the time at which such
was made (provided, that a party shall not be entitled to exercise its right
of termination under subsection (b) or (c) if (i) the breach is capable of
being cured to the non-breaching party's reasonable satisfaction and the
breaching party is diligently proceeding with its best efforts to effect such
cure (but in no event shall the period of such default continue in excess of
45 days) or (ii) the party attempting to terminate is,
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at the time of any such attempted termination, in breach of any term hereof),
(d) either Buyer or Sellers if the Closing does not occur by September 30,
1995 (provided that no party may terminate this Agreement pursuant to this
clause (d) if such party is, at the time of any such attempted termination,
in breach of any term hereof) or (e) either Buyer or Sellers as permitted by
Section 4.12 hereof.
6.2 EFFECT OF TERMINATION.
(a) If this Agreement is terminated pursuant to clauses (a), (d) or
(e) of Section 6.1 hereof, the Sellers, Buyer and ProNet shall instruct the
Escrow Agent to distribute the Deposit and the interest accrued thereon in
such manner as they may mutually agree or as instructed by a court of law.
(b) If this Agreement is terminated by Sellers pursuant to Section
6.1(b), upon receipt of written notice of termination from the Sellers,
Buyer and ProNet shall execute and deliver, along with Sellers, written
instructions to the Escrow Agent in the form of Exhibit B-2 instructing the
Escrow Agent to deliver the Deposit and the interest accrued thereon to the
Sellers; it being understood and agreed, however, that such Deposit and the
interest accrued thereon represent the parties' best estimate of the minimal
damages that Sellers will suffer as a result of Buyer's or ProNet's breach
of this Agreement, but that (i) such deposit shall not constitute liquidated
damages, and (ii) Sellers shall be entitled to recover any additional
damages that they may suffer as a result of Buyer's or ProNet's breach of
this Agreement subject to the limitations of Section 7.2(e).
(c) If this Agreement is terminated by Buyer pursuant to Section
6.1(c), upon receipt of written notice of termination from Buyer, Sellers
shall execute, and deliver along with Buyer and ProNet, written instructions
to the Escrow Agent in the form of Exhibit B-3 instructing the Escrow Agent
to deliver the Deposit and the interest accrued thereon to the Buyer; it
being understood, and agreed, however, that Buyer and ProNet shall be
entitled to recover any and all damages that they may suffer as a result of
Seller's breach of this Agreement subject to the limitations of Section
7.2(e).
ARTICLE VII
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Each of the representations and warranties contained in Sections
3.1, 3.2 and 3.3 hereof will survive the Closing and remain in full force and
effect indefinitely. Each of the representations and warranties contained in
Section 3.17 hereof will survive the Closing but will terminate, without
further action, as of 11:59 p.m. on the third anniversary of the Closing
Date. Each of the other representations and warranties contained in this
Agreement will survive the Closing (unless specifically waived in writing)
but will terminate, without further action, as of
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11:59 p.m. on the first anniversary of the Closing Date. Any claim for
indemnification with respect to any alleged breach of any representation or
warranty not asserted by notice given as herein provided that specifically
identifies a particular breach and the underlying facts relating thereto,
which notice is given within the applicable period of survival for such
representation or warranty, may not be pursued and is irrevocably waived
after such time. Without limiting the generality or effect of the foregoing,
no claim for indemnification with respect to any representation or warranty
will be deemed to have been properly made except to the extent it is based
upon a Third Party Claim made or brought, or to the extent of Indemnifiable
Losses actually incurred by an Indemnitee, prior to the expiration of the
survival period for such representation or warranty.
7.2 LIMITATIONS ON LIABILITY.
(a) For purposes of this Agreement, (i) "Affiliate" means, when
used with reference to Buyer, ProNet or Sellers, any person that directly
or indirectly controls or is controlled by or is under the common control
of Buyer, ProNet or Sellers, as the case may be, (ii) "Indemnification
Payment" means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement, (iii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iv) "Indemnifying Party"
means any person or entity required to provide indemnification under this
Agreement, and (v) "Indemnifiable Losses" means any losses, liabilities,
damages, charges, penalties and expenses and any claims, demands or suits by
any person or entity, including, without limitation, any applicable federal,
state or local governmental authority, and costs and expenses actually
incurred in connection with any actions, suits, demands, assessments,
judgments and settlements and reasonable attorneys' fees and expenses
(collectively "Primary Losses"), in any such case (x) reduced by the amount
of Net Insurance Benefits and any Tax Benefits to the Indemnitee as a result
of the Primary Losses involved, (y) subject to the limitations set forth
elsewhere herein, including without limitation Section 7.2(f) hereof, and
(z) provided that the underlying liability or obligation is not the result
of any action taken or omitted to be taken by any Indemnitee. For purposes
of this Section 7.2, a "Tax Benefit" shall be considered to result from
Primary Losses if, as a direct consequence of such Primary Losses, the
Indemnitee becomes entitled to a reduction in any federal, state or local
income or franchise tax payable by the Indemnitee in the year in which such
Primary Losses are realized. The amount of any such tax benefit for
purposes of this Section 7.2 shall be deemed to be the amount of the
reduction to which the Indemnitee is entitled as aforesaid based on the
highest federal, state and local income and franchise tax rates applicable
to Indemnitee for the year in which such Primary Losses are realized. For
purposes of this Section 7.2, the amount of any "Net Insurance Benefits"
shall be the remainder of any insurance proceeds recovered by the Indemnitee
from any third party with respect to the relevant Primary Losses less any
increased insurance premiums and related costs and expenses incurred by such
Indemnitee as a result of the event or condition resulting in the payment of
such proceeds. The parties hereto acknowledge and agree that, for purposes
of determining the amount of Indemnifiable Losses hereunder for any purpose
[such as, determining whether the $75,000.00 deductible set forth in Section
7.2(d) hereof has been surpassed or determining whether the $10,500,000.00
cap
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in Section 7.2(e) has been reached], such amount shall always be computed by
subtracting from the Primary Losses the amount of such net insurance
benefits and tax benefits. For example, if Sellers breach a representation
or warranty herein, the breach results in Primary Losses to ProNet and Buyer
of $100,000.00, the tax benefit to ProNet and Buyer from such Primary Losses
equals $35,000.00, no net insurance benefits result from such Primary
Losses, and ProNet, Buyer and their Affiliates have incurred no other
Indemnifiable Losses, then ProNet's and Buyer's Indemnifiable Losses shall
equal $65,000.00 and ProNet and Buyer shall not be entitled to recover such
Indemnifiable Losses due to the limitation set forth in Section 7.2(d)
hereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, if the Closing occurs, (i) no claim for indemnification may be
asserted under Section 7.3(a) with respect to any matter disclosed to Buyer
or ProNet in writing at or before the Closing, including without limitation
any information contained in written materials provided to ProNet or Buyer
during its due diligence review of the Company, and (ii) no claim for
indemnification may be asserted under Section 7.3(b) with respect to any
matter disclosed to Sellers in writing at or before the Closing.
(c) As between Sellers and any Affiliate of Sellers (including,
before Closing, the Company), on the one hand, and Buyer and/or ProNet and
any Affiliate of Buyer and/or ProNet, on the other hand, the rights and
obligations set forth in this Article 7 will be the exclusive rights and
obligations with respect to the liabilities and obligations of the parties
hereto and/or any breach of the representations, warranties and covenants
contained in this Agreement. Without limiting the foregoing, as a material
inducement to entering into this Agreement, to the fullest extent permitted
by law, each of the parties waives any claim or cause of action that it
otherwise might assert, including without limitation under the common law or
federal or state securities, trade regulation, environmental or other laws,
by reason of the liabilities and obligations of the parties hereto and/or
any breach of the representations, warranties or covenants contained in this
Agreement, except for claims or causes of action brought under and subject
to the terms and conditions of this Article 7.
(d) Notwithstanding any other provision of this Agreement or of any
applicable law, (i) ProNet, Buyer and their Affiliates (including, after
Closing, the Company) shall not be entitled to indemnification hereunder
unless and until their Indemnifiable Losses exceed $75,000.00 [in which case
they shall be entitled to indemnification for all of their Indemnifiable
Losses except for the first $75,000.00 thereof, subject to the limitations
contained in Section 7.2(e) hereof], and (ii) the Sellers and their
Affiliates shall not be entitled to indemnification hereunder unless and
until their Indemnifiable Losses exceed $75,000.00 [in which case they shall
be entitled to indemnification for all of their Indemnifiable Losses except
for the first $75,000.00 thereof, subject to the limitations contained in
Section 7.2(e) hereof].
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(e) Notwithstanding any other provision of this Agreement, other
than Section 7.6 hereof, (i) the indemnification obligations of Sellers
under Section 7.3(a) hereof are several and shall not individually exceed
$3,500,000.00 or collectively exceed $10,500,00.00, and (ii) the
indemnification obligations of Buyer and ProNet under Section 7.3(b) will
not collectively exceed $10,500,000.00.
(f) No Indemnifying Party shall be liable to or obligated to
indemnify any Indemnitee hereunder for any consequential, special, multiple,
punitive or exemplary damages including, but not limited to, damages arising
from loss or interruption of business, profits, business opportunities or
goodwill, loss of use of facilities, loss of capital, claims of customers,
or any cost or expense related thereto, except to the extent such damages
have been recovered by a third person and are the subject of a Third Party
Claim for which indemnification is available under the express terms of this
Article 7.
7.3 INDEMNIFICATION.
(a) Subject to the other sections of this Article 7, Sellers will
indemnify, defend and hold harmless Buyer and its Affiliates, directors,
officers, agents and representatives from all Indemnifiable Losses relating
to, resulting from or arising out of (i) a breach by any of Sellers or the
Company of any of the representations and warranties contained in this
Agreement or in any agreement or document executed in connection with the
Closing of the transactions contemplated hereby [including without
limitation the certificates to be delivered by Sellers pursuant to Sections
5.1(a) and 5.1(f) hereof], and (ii) a breach by Sellers or the Company of
any covenant of Sellers or the Company contained in this Agreement or in any
agreement or document executed in connection with the Closing of the
transactions contemplated hereby.
(b) Subject to the other sections of this Article 7, Buyer and
ProNet will indemnify, defend and hold harmless Sellers, the Company, and
their Affiliates, directors, officers, agents and representatives from all
Indemnifiable Losses relating to, resulting from or arising out of (i) a
breach by Buyer or ProNet of any of the representations or warranties
contained in this Agreement or in any agreement or document executed in
connection with the Closing of the transactions contemplated hereby
[including without limitation the certificates to be delivered by Buyer and
ProNet pursuant to Sections 5.2(a) and 5.2(c) hereof], and (ii) a breach by
Buyer or ProNet of any covenant of Buyer or ProNet contained in this
Agreement or in any agreement or document executed in connection with the
Closing of the transactions contemplated hereby.
(c) Payments made under this Section shall be treated by Buyer,
ProNet and Sellers as purchase price adjustments and Buyer, ProNet and
Sellers shall file all Tax Returns consistent with such treatment.
Notwithstanding anything to the contrary contained herein, Buyer and ProNet
shall not be indemnified or reimbursed for any tax consequences arising from
receipt of an indemnity payment including without limitation any adjustments
to the basis of any asset resulting from an adjustment to the purchase price
or any additional or reduced taxes resulting from any such basis adjustment.
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7.4 DEFENSE OF CLAIMS.
(a) If any Indemnitee receives notice of the assertion of any claim
or of the commencement of any action or proceeding by any person or entity
that is not a party to this Agreement or an Affiliate of such a party (a
"Third Party Claim") against such Indemnitee, with respect to which an
Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably
prompt written notice thereof, but in any event not later than ten calendar
days after receipt of notice of such Third Party Claim; provided, however,
that the failure of the Indemnitee to exercise promptness in such
notification shall only relieve the Indemnifying Party from its obligation
to indemnify the Indemnitee pursuant to this Article 7 to the extent that
the Indemnifying Party is materially prejudiced by such failure (whether as
a result of the forfeiture of substantive rights or defenses or otherwise).
Upon receipt of notification of a Third Party Claim, the Indemnifying Party
shall be entitled, upon written notice to the Indemnitee, to assume the
investigation and defense thereof with counsel reasonably satisfactory to
the Indemnitee. Whether or not the Indemnifying Party elects to assume the
investigation and defense of any Third Party Claim, the Indemnitee shall
have the right to employ separate counsel and to participate in the
investigation and defense thereof; provided, however, that the Indemnitee
shall pay the fees and disbursements of such separate counsel unless (i)
the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee, or (iii) the named parties to the proceeding in which such
claim, demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel
for all Indemnitees in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or
circumstances. The Indemnifying Parties shall obtain the prior written
approval of the Indemnitee before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such Third Party
Claim or any liability in respect thereof if, pursuant to or as a result of
such settlement, compromise, admission, or acknowledgment, injunctive or
other equitable relief would be imposed against the Indemnitee or if such
settlement, compromise, admission, or acknowledgment could have a material
adverse effect on its business or, in the case of any Indemnitee who is a
natural person, on his of her assets or interests [provided, however, that
the parties hereby acknowledge and agree that such a material adverse effect
shall not be deemed to have occurred if such settlement, compromise,
admission or acknowledgment involves the payment of monetary damages only
and the Indemnifying Parties in fact pay all such damages, other than the
deductible set forth in Section 7.2(d) hereof]. Without the prior written
consent of an Indemnitee, no Indemnifying Party shall consent to the entry
of any judgment or enter into any settlement that does not include as an
unconditional term
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thereof the giving by each claimant or plaintiff to the Indemnitee of a
release from all liability in respect of such Third Party Claim.
(b) In any case in which an Indemnitee seeks indemnification
hereunder which is not subject to Section 7.4(a) hereof because no Third
Party Claim is involved, the Indemnitee shall give the Indemnifying Parties
reasonably prompt written notice of any Indemnified Costs that he, she or it
claims are subject to indemnification under the terms hereof, but in any
event not later than 30 calendar days after the Indemnitee becomes aware of
the information, act or omission giving rise to such claim for
indemnification; provided, however, that the failure of the Indemnitee to
exercise promptness in such notification shall only relieve the Indemnifying
Party from its obligation to indemnify the Indemnitee pursuant to this
Article 7 to the extent that the Indemnifying Party is materially prejudiced
by such failure (whether as a result of the forfeiture of substantive rights
or defenses or otherwise).
(c) If after the making of any Indemnification Payment the amount
of the Indemnifiable Loss to which such payment relates is reduced by
recovery, settlement or otherwise under any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by or against any other
entity, the amount of such reduction (less any costs, expenses, premiums or
taxes incurred in connection therewith) will promptly be repaid by the
Indemnitee to the Indemnifying Party. Upon making any Indemnification
Payment, the Indemnifying Party will, to the extent of such Indemnification
Payment, be subrogated to all rights of the Indemnitee against any third
party that is not an Affiliate of the Indemnitee in respect of the
Indemnifiable Loss to which the Indemnification Payment relates; provided
that (i) the Indemnifying Party shall then be in compliance with its
obligations under this Agreement in respect of such Indemnifiable Loss and
(ii) until the Indemnitee recovers full payment of its Indemnifiable
Loss, all claims of the Indemnifying Party against any such third party on
account of said Indemnification Payment will be subrogated and subordinated
in right of payment to the Indemnitee's rights against such third party.
Without limiting the generality or effect of any other provision of this
Article 7, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect
the above-described subrogation and subordination rights.
7.5 INDEMNIFICATION FROM LAWSUIT. Notwithstanding any other term or
provision hereof, Sellers jointly and severally agree to indemnify, defend
and hold harmless ProNet, Buyer, the Company and their Affiliates, directors,
officers, agents and representatives from all Primary Losses resulting from
or arising out of the allegations in that certain lawsuit styled NATIONAL
BUSINESS MARKETING CONSULTANTS, DBA "TEXAS 900 PAGING", V. METROPOLITAN
HOUSTON PAGING SERVICES, INC., Cause No. 94-7559-B, in the 117th Judicial
District Court in Nueces County, Texas (the "Texas 900 Lawsuit"), and any
appeal, lawsuit, claim, arbitration or other judicial, arbitral or other
proceeding related to such allegations, including without limitation any
Primary Losses resulting from or arising out of such allegations that may be
made in any subsequent lawsuit filed after any nonsuit or dismissal of the
Texas 900 Lawsuit, but specifically excluding any Primary Losses
26
<PAGE>
arising out of allegations which pertain to events which occur after the
Closing (collectively, the "Texas 900 Matter"). Buyer, ProNet and the
Company hereby agree to cooperate with Sellers in all reasonable respects in
the defense of the Texas 900 Matter and in any and all settlement
negotiations related thereto, and hereby authorize Sellers to take any and
all such actions with respect to the reseller contract (the "Texas 900
Contract") at issue in the Texas 900 Matter as may be, in Sellers'
discretion, necessary or desirable to effect a settlement of the Texas 900
Matter, including without limitation termination of the Texas 900 Contract or
the modification of the terms and provisions thereof. The parties agree that
any such termination or settlement shall not be deemed to be a breach of any
of Sellers' or the Company's representations, warranties and covenants
contained in this Agreement. Notwithstanding the foregoing, if Sellers
modify the Texas 900 Contract in a manner that materially increases the
obligations of the Company thereunder, Sellers shall reimburse Buyer for all
actual out-of-pocket costs and expenses incurred by the Company as a result
of any such increased obligations of the Company under the Texas 900
Contract. The provisions of this Section 7.5, including without limitation
the settlement authorization granted to Sellers by Buyer, ProNet and the
Company, shall survive the Closing.
ARTICLE VIII
MISCELLANEOUS
8.1 COLLATERAL AGREEMENTS, AMENDMENTS, AND WAIVERS. This Agreement
(together with the documents delivered pursuant hereto) supersedes all prior
documents, understandings, and agreements, oral or written, relating to this
transaction and constitutes the entire understanding among the parties with
respect to the subject matter hereof. Any modification or amendment to, or
waiver of, any provision of this Agreement (or any document delivered
pursuant to this Agreement unless otherwise expressly provided therein) may
be made only by an instrument in writing executed by the party against whom
enforcement thereof is sought (provided that Sellers shall be empowered to
waive any provision of this Agreement on behalf of the Company).
8.2 SUCCESSORS AND ASSIGNS. Neither Buyer's, the Company's, nor Sellers'
rights or obligations under this Agreement may be assigned (except that Buyer
may assign its rights and obligations to any subsidiary or other affiliate
(as such term is defined in Rule 144 under the Securities Act of 1933, as
amended) thereof), but no such assignment shall in any way operate to relieve
Buyer or ProNet of its obligations hereunder and shall be jointly and
severally liable for any non-performance. Any assignment in violation of the
foregoing shall be null and void. Subject to the preceding sentences of this
Section 8.2, the provisions of this Agreement (and, unless otherwise
expressly provided therein, of any document delivered pursuant to this
Agreement) shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors, and
assigns.
27
<PAGE>
8.3 EXPENSES. Buyer shall pay all of its costs and expenses incurred in
connection with this Agreement other than the Filing Fees (as hereinafter
defined). Sellers, and not the Company, shall pay all of the Sellers'
attorneys' fees and finder's, broker's, and sales agent's fees incurred in
connection with this Agreement. Buyer and Sellers shall each pay one-half of
the filing, publication, and related fees charged to make the filings
described in Section 4.13 hereof (the "Filing Fees"). The Company shall pay
all of its costs and expenses incurred in connection with this Agreement
other than the Filing Fees.
8.4 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its severance from
this Agreement.
8.5 INFORMATION AND CONFIDENTIALITY. Each party hereto agrees that such
party shall hold in strict confidence all information and documents received
from any other party hereto, and if the Closing does not occur each such
party shall return to the other parties hereto all such documents then in
such receiving party's possession without retaining copies, and ProNet agrees
to comply until the Closing with that certain letter agreement dated as of
October 5, 1994, between Daniels and Associates and ProNet (the "Daniels
Letter"); provided, however, that each party's obligations under this Section
8.5 shall not apply to (a) any information or document required to be
disclosed by law or (b) any information or document in the public domain.
8.6 WAIVER. No failure or delay on the part of any party in exercising
any right, power, or privilege hereunder or under any of the documents
delivered in connection with this Agreement shall operate as a waiver of such
right, power, or privilege; nor shall any single or partial exercise of any
such right, power, or privilege preclude any other or future exercise thereof
or the exercise of any other right, power, or privilege. Pursuant to the
terms of the Daniels Letter, Buyer or ProNet may disclose such information to
its lender, provided such lender agrees to comply with the terms of the
Daniels Letter.
8.7 NOTICES. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any
document delivered pursuant to this Agreement) shall be given in writing and
shall be deemed received (a) when personally delivered to the relevant party
at its or his address as set forth below or (b) if sent by mail, on the third
day following the date when deposited in the United States mail, certified or
registered mail, postage prepaid, to the relevant party at its address
indicated below or (c) if sent by overnight mail service, on the next day
following the date when deposited with the overnight mail service, postage
prepaid, to the relevant party at its address indicated below:
28
<PAGE>
To Buyer: Contact Communications Inc.
600 Data Drive, Suite 100
Plano, Texas 75075
Attention: David J. Vucina
Fax: (214) 964-9570
To ProNet: ProNet Inc.
600 Data Drive, Suite 100
Plano, Texas 75075
Attention: David J. Vucina
Fax: (214) 964-9570
With a copy to: Mark A. Solls
(for Buyer Vice President and General Counsel
and ProNet) ProNet Inc.
600 Data Drive, Suite 100
Plano, Texas 75075
Fax: (214) 964-9570
To SLT: Robert C. Brown, III
SLT Communications, Inc.
14141 Southwest Freeway
Suite 6600
Sugar Land, Texas 77478
Fax: (713) 491-2551
with a copy to: Francis X. Frantz
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72203
Fax: (501) 661-0962
To LCC: Larry Ross
Lufkin-Conroe Communications, Inc.
P.O. Box 909
Lufkin, Texas 75901
Fax: (409) 637-4614
To GTE: C. F. Bercher
GTE Telephone Operations
600 Hidden Ridge, HQE04E52
Irving, Texas 75038
Fax: (214) 718-2801
29
<PAGE>
with a copy to: Richard M. Cahill
GTE Telephone Operations
600 Hidden Ridge, HQE04E08
Irving, Texas 75038
Fax: (214) 718-2809
Each party may change its or his address for purposes of this Section 8.7 by
proper notice to the other parties.
8.8 PUBLIC ANNOUNCEMENT. All press releases and other public
announcements concerning this Agreement and the transactions contemplated
hereby must be approved by Buyer and Sellers prior to publication, except for
such releases and announcements as Buyer or Sellers may be required to make
under applicable law or the rules of any national stock exchange applicable
to such party or its affiliates.
8.9 FURTHER ASSURANCES. At, and from time to time after, the Closing,
at the request of Buyer, but without further consideration, Sellers shall
execute and deliver such other instruments of conveyance, assignment,
transfer, and delivery and take such other action as Buyer may reasonably
request in order more effectively to consummate the transactions contemplated
hereby.
8.10 NO THIRD-PARTY BENEFICIARIES. Other than the Indemnified Parties
not parties hereto, no person or entity not a party to this Agreement shall
be deemed to be a third-party beneficiary hereunder or entitled to any rights
hereunder.
8.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
8.12 PRONET GUARANTEE. ProNet hereby unconditionally guarantees the
payment, performance and accuracy of all of all of the obligations,
representations, warranties, agreements and covenants of Buyer as set forth
in this Agreement. Any breach of such obligations, representations,
warranties and covenants by Buyer shall entitle Sellers and the Company to
all remedies against ProNet under Section 6.1(b), 6.2(b) and Article 7, as
appropriate.
8.13 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree
that, without limiting any other remedy available to Pronet and the Buyer at
law or in equity, ProNet and the Buyer shall be able to specifically enforce
the terms of this Agreement.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in one or more counterparts (all of which shall constitute one and the same
agreement) as of the day and year first above written.
HOUSTON METROPOLITAN
PAGING SERVICE, INC. CONTACT COMMUNICATIONS INC.
By:__________________________ By:________________________________
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
SLT COMMUNICATIONS, INC. PRONET INC.
By:__________________________ By:________________________________
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
GTE SOUTHWEST INCORPORATED
By:__________________________
Name:________________________
Title:_______________________
LUFKIN-CONROE
TELECOMMUNICATIONS CORP.
By:__________________________
Name:________________________
Title:_______________________
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in one or more counterparts (all of which shall constitute one and the same
agreement) as of the day and year first above written.
HOUSTON METROPOLITAN
PAGING SERVICE, INC. CONTACT COMMUNICATIONS INC.
By:__________________________ By:________________________________
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
SLT COMMUNICATIONS, INC. PRONET INC.
By: JIM KIMSEY By:________________________________
Name: Jim Kimsey David J. Vucina
Title: Senior Vice President President and
Chief Operating Officer
GTE SOUTHWEST INCORPORATED
By:__________________________
Name:________________________
Title:_______________________
LUFKIN-CONROE
TELECOMMUNICATIONS CORP.
By:__________________________
Name:________________________
Title:_______________________
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in one or more counterparts (all of which shall constitute one and the same
agreement) as of the day and year first above written.
HOUSTON METROPOLITAN
PAGING SERVICE, INC. CONTACT COMMUNICATIONS INC.
By: G.I. ROSS By:________________________________
Name: G.I. Ross David J. Vucina
Title: Chairman President and
Chief Operating Officer
SLT COMMUNICATIONS, INC. PRONET INC.
By:__________________________ By:________________________________
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
GTE SOUTHWEST INCORPORATED
By:__________________________
Name:________________________
Title:_______________________
LUFKIN-CONROE
TELECOMMUNICATIONS CORP.
By: G.I. ROSS
Name: G.I.Ross
Title: Chairman
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in one or more counterparts (all of which shall constitute one and the same
agreement) as of the day and year first above written.
HOUSTON METROPOLITAN
PAGING SERVICE, INC. CONTACT COMMUNICATIONS INC.
By:__________________________ By:________________________________
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
SLT COMMUNICATIONS, INC. PRONET INC.
By:__________________________ By:________________________________
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
GTE SOUTHWEST INCORPORATED
By: C.F. BERCHER APPROVED AS TO FORM AND LEGALITY
Name: C.F. Bercher T. Robinson
Title: Vice President- Attorney, GTE Telephone Operations
Consumer Markets Date: 4-19-95
LUFKIN-CONROE
TELECOMMUNICATIONS CORP.
By:__________________________
Name:________________________
Title:_______________________
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
in one or more counterparts (all of which shall constitute one and the same
agreement) as of the day and year first above written.
HOUSTON METROPOLITAN
PAGING SERVICE, INC. CONTACT COMMUNICATIONS INC.
By:__________________________ By: DAVID J. VUCINA
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
SLT COMMUNICATIONS, INC. PRONET INC.
By:__________________________ By: DAVID J. VUCINA
Name:________________________ David J. Vucina
Title:_______________________ President and
Chief Operating Officer
GTE SOUTHWEST INCORPORATED
By:__________________________
Name:________________________
Title:_______________________
LUFKIN-CONROE
TELECOMMUNICATIONS CORP.
By:__________________________
Name:________________________
Title:_______________________
35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements for Pronet Inc. for the three months
ended March 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,369
<SECURITIES> 0
<RECEIVABLES> 5,245
<ALLOWANCES> 591
<INVENTORY> 3,848
<CURRENT-ASSETS> 16,567
<PP&E> 54,774
<DEPRECIATION> 26,880
<TOTAL-ASSETS> 86,972
<CURRENT-LIABILITIES> 9,182
<BONDS> 0
<COMMON> 65
0
0
<OTHER-SE> 50,347
<TOTAL-LIABILITY-AND-EQUITY> 50,412
<SALES> 12,684
<TOTAL-REVENUES> 12,684
<CGS> 2,066
<TOTAL-COSTS> 4,532
<OTHER-EXPENSES> 7,383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 386
<INCOME-PRETAX> 424
<INCOME-TAX> 358
<INCOME-CONTINUING> 66
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0
</TABLE>
