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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NO. 0-19494
PAGING NETWORK, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 04-2740516
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14911 QUORUM DRIVE
DALLAS, TEXAS 75240
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (972) 801-8000
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ---------------------------- -----------------------------------------
Common Stock, $.01 par value The Nasdaq Stock Market
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
As of March 19, 1999, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was $422,411,000.
As of March 19, 1999, 103,959,140 shares of the Registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of the Registrant to
be held during 1999 are incorporated by reference in Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
Paging Network, Inc. (the Company) is a recognized leader in providing
wireless messaging and information delivery services. The Company provides
service in all 50 states, the District of Columbia, the U.S. Virgin Islands,
Puerto Rico, Canada, and Spain, including service in all of the largest 100
markets (in population) in the United States, and owns a minority interest in a
wireless messaging company in Brazil.
The main services of the Company are display, alphanumeric, 1 1/2-way,
and two-way wireless messaging services, as well as content and information
services. As of December 31, 1998, display and alphanumeric units in service
represented approximately 85.2% and approximately 14.5%, respectively, of the
Company's total units in service with subscribers. The total units in service
has grown from 3,069,000 at December 31, 1993 to 10,110,000 at December 31,
1998, a compounded annual growth rate of approximately 26.9%.
In 1998, the Company made significant progress toward its previously
announced goal of creating a platform for long-term profitable growth. To
achieve these objectives, the Company is aggressively restructuring its domestic
operations (the Restructuring), including eliminating redundant administrative
operations by consolidating certain key support functions. In addition to the
Restructuring, the Company is developing for distribution branded, customized
value-added wireless information and has begun creating customized wireless
information management services for its corporate clients. The Company has made
considerable progress toward the completion of the build-out of its advanced
wireless network. The Company has also completed a thorough review of its
customers and prospects by market in order to design a sales and marketing
organizational structure that will be more clearly aligned with its customers'
needs and with the Company's overall strategic direction.
STRATEGY
The Company is recognized as a leader in providing wireless messaging
and information delivery services. The Company believes it holds significant
strategic advantages over its competitors. The Company had 10,110,000 units in
service as of December 31, 1998, owns more spectrum resources than any of its
competitors, and has built the largest nationwide sales and distribution
organization in the industry. The Company believes that when completed, its
advanced wireless network will be the largest and most sophisticated network in
North America.
In early 1998, the Company announced its intention to realign its
strategy from rapid expansion and subscriber growth towards profitable growth.
The major components of this realignment were to focus its sales efforts on more
profitable services, restructure its support functions for the entire Company
into centralized facilities (the Centers of Excellence), and launch new,
value-added advanced messaging services for its customers.
Profitable services - In an effort to increase the overall
profitability of its services, the Company has increased its focus towards
higher value products and services such as alphanumeric and nationwide paging.
In addition, in an effort to reduce the number of customers using unprofitable
services, the Company has instituted certain price initiatives including setting
appropriate minimum pricing levels for new business and selectively increasing
prices to existing customers using certain services.
As a result of these actions, the Company experienced a net decrease in
domestic units in service during the second half of 1998, which trend the
Company expects to continue during the first half of 1999. Also as a result of
these actions, the Company experienced its first year-to-year increase in
average revenue per unit (ARPU). The Company is continuing to review its pricing
structure for all of its services.
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Restructuring - In order to provide its customers with improved levels
of service and to benefit from the scale advantages afforded by its market
position, the Company has begun to consolidate certain key support functions for
the entire Company into the Centers of Excellence. Support functions to be
consolidated into these Centers of Excellence include customer service, billing
and accounting, order fulfillment and inventory management, and certain
technical operations. The Company launched the Centers of Excellence in the
fourth quarter of 1998 on a pilot basis, and expects to consolidate all of its
existing support functions into these Centers of Excellence during 1999.
As a result of the Restructuring, the Company recorded a charge of
$74.0 million, or $0.72 per share (basic and diluted), during the quarter ended
March 31, 1998. Although the Company is currently experiencing duplicative costs
that are negatively affecting its operating results, the Company expects to
realize annual recurring performance improvements and cost savings of $45
million to $55 million after the Restructuring is completed.
New Advanced Messaging Services - The offering of new advanced
messaging services and wireless information products is designed to
differentiate the Company from its competitors and provide additional revenue
and cash flow growth. In 1998, the Company formed dedicated groups to launch
branded content and information services as well as advanced wireless
integration services. The Company expects to begin to generate revenue from each
of these areas in 1999.
Content Services - The Company's content and information services
efforts are designed to bring a wide variety of information services to its
customers' subscriber devices. The Company intends to provide its customers with
the ability to customize packages according to unique content preferences by
using the Company's Internet Store. In order to provide information that is
attractive to its customers, the Company has entered into strategic alliances
with several content providers, including: Yahoo! - for branded information,
Entertainment Sports Programming Network (ESPN) - for sports information, Cable
News Network (CNN) - for news information, The Golf Channel - for golf
information, Tribune Media Services - for television listings and entertainment
information, AccuWeather - for weather information, and LottoNet - for lottery
information. The Company intends to begin offering its content services to
customers beginning in the second quarter of 1999.
Advanced Wireless Integration - In 1998, the Company formed a dedicated
Advanced Wireless Integration Group (AWIG) to focus on creating customized
wireless information management services for its corporate clients. The
Company's efforts in this area are to create integrated software and hardware
systems that deliver enhanced value to its customers by allowing them to access
vital company information from a variety of sources, including company
intranets, remote industrial assets, or mobile employees. The Company believes
its services will allow its customers to better organize and manage the flow of
information within their business environments.
In 1998, the Company acquired Silverlake Communications, Inc., a
developer of wireless messaging software, to bolster the Company's ability to
develop customized wireless solutions for its customers.
SALES AND DISTRIBUTION
The Company's services are sold through both direct and indirect sales
channels. The direct channel consists of selling services to customers through a
variety of sources, including locally deployed sales representatives, storefront
locations, and the Company's Internet Store. The indirect channel consists of
selling services to customers primarily through resellers. The Company is not
dependent on any single customer, as no single subscriber or reseller accounted
for more than 0.9% of the Company's revenues from services, rent and maintenance
plus product sales less the cost of products sold (Net Revenues) in 1998.
As of December 31, 1998, direct sales accounted for approximately 47.8%
of the Company's overall units in service, and the indirect channel (which
includes resellers and retailers) represented approximately 52.2%. In the direct
channel, the Company charges a monthly fee for its services and leases or sells
subscriber devices to customers. In the indirect channel, the Company provides
services under marketing agreements to third party resellers at wholesale
monthly service rates. In addition, the Company sells or, in a limited number of
cases, leases subscriber devices to resellers. Resellers, in turn, sell the
Company's services to end
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users. Resellers are responsible for all costs associated with servicing their
customers, including billing and collections, although in some situations
resellers contract with the Company to provide various fulfillment, billing, and
customer service functions.
The Restructuring, which began in 1998, will transition back office
functions to the Centers of Excellence throughout 1999, and will allow the field
sales operations to focus solely on sales. In addition, the Company has recently
completed a thorough review of its customers and prospects by market in order to
design a sales and marketing organizational structure that will be more clearly
aligned with its customers' needs and with the Company's overall strategic
direction. The new sales and marketing organizational structure will enable the
Company to market a broadly diversified portfolio of products to a highly
sophisticated set of customers. The structure is based on the following
principles:
o Align sales and marketing objectives to be consistent with the
Company's overall business objectives.
o Build a marketing organization focused on growing existing products
and services and developing new products, services, and initiatives
to drive profitable growth.
o Stratify the sales organization and apply focused training programs
and compensation plans that will develop the skill sets necessary
to successfully penetrate each customer group.
o Provide the necessary support systems, processes, and tools to
achieve targeted sales objectives.
The new field sales structure is scheduled to be implemented during the
first half of 1999. The structure will include defined account segmentation and
appropriately focused selling skills, career paths for all sales colleagues,
performance measurements to continually reevaluate sales efforts, specified
training curriculums for each selling group, and market competitive compensation
plans. This structure is designed to support the Company's objective of
increased sales results and effectiveness.
MARKETING
The Company promotes its products and services through a variety of
programs, including television, print, radio, newspaper, yellow pages
advertising, direct mail, telemarketing, and co-op programs.
Traditionally, the Company has focused its marketing efforts primarily
on business users who have represented the majority of subscribers. However,
recent industry growth trends include an increasing percentage of individual
consumer (personal) messaging users. The Company plans to spur continued growth
through a number of marketing strategies, including advertising, new products
and services, promotions, and distribution channel expansion.
TRANSMISSION EQUIPMENT AND SUBSCRIBER DEVICES
The Company currently purchases its subscriber devices from multiple
competing sources, its transmitters from two competing sources, and its wireless
messaging terminals from Glenayre Technologies, Inc. (Glenayre). The Company
anticipates that transmission equipment and subscriber devices will continue to
be available for purchase from multiple sources, consistent with normal
manufacturing and delivery lead times.
The Company's own technical functions include testing of new subscriber
devices and transmission equipment, designing wireless transmission systems
using communications equipment and software purchased from vendors, and
installing and maintaining transmitters and associated communications equipment
to support the Company's transmission system. Because of the high degree of
compatibility among different models of transmitters, computers, and other
messaging equipment manufactured by suppliers, the Company is able to design its
systems without being dependent upon any single source of such equipment.
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INTERNATIONAL OPERATIONS
The Company's wholly owned subsidiary, Paging Network of Canada Inc.
(PageNet Canada), together with its Canadian partner, Madison Venture Corp.,
provides services similar to those offered in the United States, with sales
operations in Montreal, Ottawa, Quebec City, Toronto, and Vancouver. Services
cover a geographic area containing more than 75% of the Canadian population.
The Company owns 79.7% of Compania Europea De Radiobusqueda, S.A.
(CERSA), which provides services in Spain similar to those offered in the United
States, with sales operations in Madrid, Barcelona, and Bilbao. Services cover a
geographic area containing more than 75% of the Spanish population.
The Company holds a minority interest in a wireless messaging company in
Brazil (Paging Network do Brasil, S.A.). The Company, through its subsidiaries,
also owns frequency licenses in the United Kingdom, Argentina, and Chile, and is
currently assessing its options in these markets. The Company is not actively
considering opportunities for other international expansion at this time.
COMPETITION
The Company experiences direct competition from one or more competitors
in all the locations in which it operates. Competition for subscribers to the
Company's services in most geographic markets is based primarily on prices,
quality of services offered, and the geographic areas covered. The Company
believes that its prices, quality of services, and geographic coverage areas
generally compare favorably with those of its competitors.
Among the Company's competitors are AirTouch Communications, Inc., Arch
Communications Group Inc., Metrocall, Inc., PageMart Wireless, Inc., and Skytel
Communications, Inc. The Company also experiences indirect competition from
other services such as cellular telephone service (cellular) and broadband
personal communications services (PCS), which provide real-time wireless voice
communications and in some cases also offer messaging services. In addition to
technical and performance limitations associated with message delivery utilizing
these voice systems, these technologies are generally more highly priced than
the Company's services and their marketing and sales efforts are more directly
focused on voice.
The Company's initiative to provide value-added wireless information
and content services, as well as customized wireless integration and information
management services, is intended to further distinguish the Company from
cellular and PCS as well as other paging/messaging companies. The delivery of
information requires access to a significant amount of spectrum. The Company has
significantly more spectrum than any of its competitors, with three nationwide,
two-way narrowband PCS frequencies; six nationwide and numerous regional and
local one-way frequencies; and rights to blocks of two-way specialized mobile
radio (SMR) frequencies located throughout the country. Providing customized
wireless integration and information management services requires a highly
skilled, customer-focused sales and marketing approach, as well as significant
software development resources. The Company's Advanced Wireless Integration
Group provides this type of value added service to its customers. In addition,
the recent acquisition of Silverlake Communications, Inc. provides the Company
with significant software development resources to compete in this arena.
Future technological advances in the telecommunications industry could
create new services or products which could be competitive to the services
provided by the Company. The Company continuously evaluates new technologies and
applications in wireless services, although there can be no assurance that the
Company will not be adversely affected in the event of technological changes in
the marketplace.
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REGULATION
The Company's wireless messaging operations are subject to regulation
by the Federal Communications Commission (FCC) under the Communications Act of
1934, as amended (the Communications Act). The Company's operations are all
classified as Commercial Mobile Radio Services (CMRS) and are subject to common
carrier regulation by the FCC. The FCC has granted the Company licenses to use
the radio frequencies necessary to conduct its CMRS operations. Licenses issued
by the FCC to the Company set forth the technical parameters, such as power
strength and tower height, under which the Company is authorized to use those
frequencies. Each FCC license held by the Company has construction and
operational requirements within set time frames. The Communications Act was
amended in August 1993 (August 1993 Amendments) to permit the FCC to grant
certain applications for licenses which are mutually exclusive by competitive
bidding. The August 1993 Amendments do not permit auctions to be used for
license renewals or license modifications. The FCC is currently using auctions
to assign all new licenses over which CMRS can be offered.
The FCC licenses granted to the Company have varying terms of up to 10
years, at the end of which time renewal applications must be approved by the
FCC. In the past, FCC renewal applications have been routinely granted, in most
cases upon a demonstration of compliance with FCC regulations and adequate
service to the public. The FCC has granted each renewal license the Company has
filed. Although the Company is unaware of any circumstances which would prevent
the grant of any pending or future renewal applications, no assurance can be
given that any of the Company's licenses will be renewed by the FCC.
Furthermore, although revocation and involuntary modification of licenses are
extraordinary regulatory measures, the FCC has the authority to restrict the
operation of licensed facilities or revoke or modify licenses. The Company is
seeking an extension of time in which to meet construction benchmarks for
certain licenses acquired at auction. Failure to obtain such extensions could
result in the Company having to make capital expenditures it would prefer to
delay. No license of the Company has ever been revoked or modified
involuntarily.
The Communications Act requires licensees, such as the Company, to
obtain prior approval from the FCC for the transfer of control of any
construction permit or station license, or any rights thereunder. The
Communications Act also requires prior approval by the FCC of acquisitions of
other CMRS companies by the Company and transfers by the Company of a
controlling interest in any of its licenses or construction permits, or any
rights thereunder. The FCC has approved each acquisition and transfer of control
for which the Company has sought approval. The Company also regularly applies
for FCC authority to use additional frequencies, modify the technical parameters
of existing licenses, expand its service territory, provide new services, and
modify the conditions under which it provides service. Although there can be no
assurance that any requests for approval of applications filed by the Company
will be approved or acted upon in a timely manner by the FCC, or that the FCC
will grant the relief requested, the Company knows of no reason to believe any
such requests, applications, or relief will not be approved or granted. The
Company makes no representations, however, about the continued availability of
additional frequencies used to provide its services.
The Communications Act also limits foreign ownership of entities that
directly or indirectly hold certain licenses from the FCC, including certain of
those held by the Company. Because the Company holds licenses from the FCC only
through its subsidiaries, up to 25% of the Company's common stock can be owned
or voted by aliens or their representatives, a foreign government or its
representatives, or a foreign corporation, without restriction. However, if more
than 25% of the Company's common stock is owned or voted by aliens or their
representatives, a foreign corporation, or a foreign government or its
representatives, the Telecommunications Act of 1996 (the 1996 Act) gives the FCC
the right to revoke or refuse to grant licenses if the FCC finds that such
revocation or refusal serves the public interest. The FCC has indicated that,
pursuant to the World Trade Organization Telecommunications Agreement, it would
waive the 25% limitation in appropriate circumstances. Based upon information
obtained by the Company, it believes that substantially less than 25% of its
issued and outstanding common stock is owned by aliens or their representatives,
foreign governments or their representatives, or foreign corporations.
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Increased demand for telephone numbers, particularly in metropolitan
areas, is causing depletion of numbers in certain area codes. Recent plans to
address this increased demand have included certain elements that could impact
the Company's operations, including the take-back of numbers already assigned
for use and service-specific plans whereby only certain services, such as paging
and cellular, would be assigned numbers using a new area code, or plans which
require the pooling of blocks of numbers for use by multiple carriers. The
Company can provide no assurance that such plans will not be adopted by a
federal or state commission. In addition, the Company is actively participating
in proceedings before public service commissions where individual area code
relief plans are being considered and contain objectionable elements.
In addition to potential regulation by the FCC, several states have the
authority to regulate messaging services, except where such regulation
constitutes rate or entry, both of which have been preempted by the August 1993
Amendments, as interpreted by the FCC. A few states have also indicated that
they will continue asserting jurisdiction over transfers of a messaging
company's assets or operations. Nevertheless, all state approvals of
acquisitions or transfers made by the Company have been approved, and the
Company knows of no reason to believe such approvals will not continue to be
granted in connection with any future requests, even if states exercise that
review. The August 1993 Amendments do not preempt state regulatory authority
over other aspects of the Company's operations, and some states may choose to
exercise such authority. A few state and local governments have imposed
additional taxes or fees upon certain activities in which the Company is
engaged.
The 1996 Act amends the Communications Act of 1934. The new legislation
is intended to promote competition in local exchange services through the
removal of legal or other barriers to entry. Under the 1996 Act, the Regional
Bell Operating Companies and other local exchange carriers (LECs) may be
permitted to jointly market commercial mobile service in conjunction with their
traditional local exchange services. It imposes upon all telecommunications
carriers the duty to interconnect with the facilities and equipment of other
telecommunications carriers. The FCC has interpreted the 1996 Act to require
LECs to compensate wireless carriers for calls originated by customers of the
LECs which terminate on a wireless carrier's network. Simultaneously, the FCC
found unlawful certain charges levied against messaging carriers in the past
that have been assessed on a monthly basis by the LECs for the use of certain
network facilities, including telephone numbers. These findings by the FCC have
been challenged at the FCC and in the courts. The Company cannot predict with
certainty the ultimate outcome of these proceedings. For messaging companies,
compensation amounts may be determined in subsequent proceedings either at the
federal or state level, or may be determined based on negotiations between the
LECs and the messaging companies. Any agreements reached between the LECs and
messaging companies may be required to be submitted to state regulatory
commissions for approval. The Company has negotiated interconnection agreements
with certain major LECs and is in negotiations with other LECs.
The 1996 Act, as interpreted by the appropriate regulatory bodies,
requires commercial mobile service providers such as the Company to contribute
to "Universal Service" or other funds to assure the continued availability of
local exchange service to high cost areas, as well as to contribute funds to
cover other designated costs. The 1996 Act also limits the circumstances under
which states and local governments may deny a request by a commercial mobile
service provider to place facilities, and gives the FCC the authority to preempt
the states in some circumstances. Further, the 1996 Act requires that providers
of payphones be compensated for all calls placed from pay telephones to
toll-free numbers. This requirement increases the Company's costs of providing
toll-free number service.
The Communications Assistance for Law Enforcement Act (CALEA) requires
certain telecommunications companies, including the Company, to modify the
design of their equipment or services to ensure that electronic surveillance or
interceptions can be performed. Technical parameters applicable to the messaging
industry have been established but not acknowledged by all governmental bodies
to date. Therefore, the Company cannot determine at this time what compliance
measures will be required or the costs thereof. As part of, and in addition to,
implementation of the 1996 Act, the FCC has instituted proceedings addressing
the manner in which telecommunications carriers are permitted to jointly market
certain types of services, and the manner in which
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telecommunications carriers render bills for these services. Depending on the
outcome of these proceedings, the Company, and other telecommunications
carriers, could incur higher administration and other costs in order to comply.
TRADEMARKS
The Company markets its services under various names and marks,
including PageNet(R), PageMail(R), PageMate(R), PageNet Nationwide(R),
SurePage(R), FaxNow(R), and MessageNow(R), all of which are federally registered
service marks. The Company's federal mark registrations must be renewed at
various times between 1999 and 2005, in order to avoid expiration. The Company
has filed applications with the United States Patent and Trademark office to
register additional names and marks.
CORPORATE ORGANIZATION
During 1998, the Company conducted its operations in the United States
through 27 wholly owned subsidiaries, each of which operated in a specified
geographic area. Historically, the Company's subsidiaries operated largely as
independent business units making their own staffing, administrative,
operational, and marketing decisions within guidelines established by the senior
executive officers of the Company. The Company is reorganizing its operations
to, among other things, create an enhanced and expanded sales organization in
the United States and consolidate certain key support functions for the entire
Company into large-scale Centers of Excellence. In connection with this
initiative, the Company merged a substantial number of its operating
subsidiaries into PageNet, Inc., a first tier subsidiary of Paging Network,
Inc., effective December 31, 1998. The Company now has 8 wholly owned domestic
subsidiaries. The Restructuring is expected to be completed in 1999. See
"Business-Strategy" for an expanded discussion on the Restructuring of the
Company.
The Company conducts its international operations through 11 wholly and
partially owned subsidiaries.
SEASONALITY
Generally, the Company's results of operations are not significantly
affected by seasonal factors. However, historically, because of the number of
holidays during the fourth quarter of the year and adverse winter weather in the
fourth and first quarters of the year, which results in fewer selling days, the
growth rate of units placed in service has been somewhat lower during these
periods.
EMPLOYEES
The Company had approximately 5,000 employees as of December 31, 1998.
Of these, approximately 1,200 were engaged in various administrative, customer
service, and technical capacities at the Company's headquarters and its Centers
of Excellence. Approximately 3,800, including approximately 1,300 sales
personnel, were employed in the Company's domestic and international operating
offices. The Company expects to eliminate approximately 1,600 positions, net of
positions added, through the consolidation of redundant administrative
operations and certain key support functions into large-scale Centers of
Excellence. In addition, as of December 31, 1998, the Company was utilizing
approximately 2,100 temporary employees in various customer service and
administrative roles. The Company intends to reduce its reliance on temporary
employees following the completion of the Restructuring. None of the Company's
employees are represented by a labor union, and management believes that the
Company's employee relations are good.
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EXECUTIVE OFFICERS OF THE COMPANY (1)
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John P. Frazee, Jr. 54 Chairman of the Board of Directors, President and Chief
Executive Officer
Lynn A. Bace 45 Executive Vice President - Sales and Marketing
Mark A. Knickrehm 36 Executive Vice President and Chief Financial Officer
Edward W. Mullinix, Jr. 45 Executive Vice President - Operations
Scott D. Grimes 36 Senior Vice President - Advanced Wireless Integration Group
Timothy J. Paine 44 Senior Vice President - Customer Service
Douglas R. Ritter 40 Senior Vice President - Sales
William G. Scott 42 Senior Vice President - Systems and Technology
G. Robert Thompson 36 Senior Vice President - Process Improvement
Ruth Williams 42 Senior Vice President, General Counsel and Assistant Secretary
Julian B. Castelli 31 Vice President and Treasurer
J. Barry Duncan 41 Vice President and Controller
</TABLE>
(1) The executive officers listed and their respective positions are as of
February 1, 1999. During 1998, certain of these officers held different
positions than those listed.
John P. Frazee, Jr., has been a Director of the Company since 1995 and
has served as Chairman of the Board of Directors, President and Chief Executive
Officer since August 1997. Mr. Frazee was a private investor from August 1993 to
August 1997 and served as President and Chief Operating Officer of Sprint
Corporation from March 1993 to August 1993. Prior thereto, Mr. Frazee had been
Chairman and Chief Executive Officer of Centel Corporation, a telecommunications
company, from April 1988 to January 1993. Mr. Frazee also serves as a Director
of Security Capital Group, Inc., Dean Foods Company, Homestead Village
Incorporated, and Nalco Chemical Company, Inc.
Lynn A. Bace has served as Executive Vice President - Sales and
Marketing for the Company since December 16, 1998. Ms. Bace served as Senior
Vice President - Marketing for the Company from August 1998 to December 1998.
Prior thereto, Ms. Bace served as Executive Vice President and General Manager
for a division of Kraft Foods, Inc. from January 1995 to April 1997 and as Vice
President of Strategy for Kraft Foods, Inc. from September 1993 to January 1995.
Mark A. Knickrehm has served as Executive Vice President and Chief
Financial Officer for the Company since February 1998. Prior thereto, Mr.
Knickrehm was employed by McKinsey & Company, an international consulting firm,
from 1989 to February 1998, serving as a Partner since 1995.
Edward W. Mullinix, Jr., has served as Executive Vice President -
Operations for the Company since February 1998, and as Senior Vice President -
Strategic Planning for the Company from November 1997 to February 1998. Prior
thereto, Mr. Mullinix served as Senior Vice President of Finance and
Administration and Chief Financial Officer and was a Director of The Haskell
Company, from September 1995 to October 1997. Mr. Mullinix served as Vice
President - Finance for LCI, Ltd. from August 1994 to April 1995 and as Chief
Financial Officer for Mitchell Construction Company from September 1993 to April
1994.
Scott D. Grimes has served as Senior Vice President - Advanced Wireless
Integration Group for the Company since January 14, 1999. Mr. Grimes served as
Senior Vice President - Sales Development and Operations for the Company from
April 1998 to January 1999, during which time he was responsible for the
establishment of the Advanced Wireless Integration Group. Prior thereto, Mr.
Grimes was employed by McKinsey & Company, an international consulting firm,
from 1991 to April 1998, serving as a Partner since 1996.
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Timothy J. Paine has served as Senior Vice President - Customer Service
for the Company since March 1998. Prior thereto, Mr. Paine served in various
positions for American Express Travel Related Services, Inc. from 1982 to March
1998, most recently as Vice President of Credit and Operations for the new
accounts branch of American Express Centurion Bank.
Douglas R. Ritter has served as Senior Vice President - Sales for the
Company since January 14, 1999. Mr. Ritter served as Senior Vice President -
Corporate Development for the Company from February 1998 to January 1999 and as
Vice President - Corporate Development for the Company from December 1997 to
February 1998. Mr. Ritter served as Vice President - Business Planning for the
Company from January 1996 to December 1997 and as Vice President - New Business
Development for the Company from July 1993 to January 1996.
William G. Scott has served as Senior Vice President - Systems and
Technology for the Company since February 1997 and as Vice President - Systems
and Technology for the Company from December 1995 to February 1997. Prior
thereto, Mr.
Scott served as President of Lion Software, Inc. from 1993 to 1995.
G. Robert Thompson has served as Senior Vice President - Process
Improvement for the Company since November 1998. Mr. Thompson served as Vice
President - Finance for the Company from February 1995 to November 1998 and was
Corporate Controller for the Company from 1990 to 1995.
Ruth Williams has served as Senior Vice President, General Counsel and
Assistant Secretary for the Company since May 1997. Prior thereto, Ms. Williams
was Associate General Counsel for First Data Corporation from September 1996 to
April 1997. Ms. Williams was employed by Automatic Data Processing, Inc. from
1986 to May 1996, most recently as Staff Vice President and Associate General
Counsel.
Julian B. Castelli has served as Vice President and Treasurer for the
Company since July 1998. Prior thereto, Mr. Castelli was employed by McKinsey &
Company, an international consulting firm, from August 1995 to July 1998,
serving as Engagement Manager from June 1997. Mr. Castelli served in the
Corporate Finance Department of Goldman, Sachs & Co. as a Financial Analyst from
1990 to 1993.
J. Barry Duncan has served as Vice President and Controller for the
Company since October 1998 and served as Corporate Controller for the Company
from May 1995 to October 1996. Mr. Duncan served as Vice President of Finance
for the Southwest Region of Unisource Worldwide, Inc. from October 1996 to
October 1998. Mr. Duncan served as Corporate Controller for Dal-Tile
International from February 1994 to May 1995 and was employed by Masco Tech,
Inc. from 1984 to February 1994, serving as Division Vice President of Finance
since 1992.
ITEM 2. PROPERTIES.
In July 1996, the Company purchased 44 acres of undeveloped land in
Plano, Texas for a new corporate headquarters. During 1998, the Company decided
to lease, rather than build, a new corporate headquarters and subsequently sold
the property in December 1998. Commencing in June 1998, the Company leased
office space for its corporate headquarters in Dallas, Texas under a five-year
lease term.
As of December 31, 1998, the Company leased office space in 108 cities
in 35 states in the United States and the District of Columbia, in 5 cities in 3
provinces in Canada, as well as 3 cities in 3 provinces in Spain, which are used
in conjunction with its operations. These office leases expire, subject to
renewal options, on various dates through December 31, 2007. As of December 31,
1998, the Company was obligated to pay a total of approximately $24.2 million
under such leases during 1999 (including amounts to be paid under leases for
certain office facilities to be closed as part of the Company's Restructuring,
but excluding any potential sublease income for such facilities). As part of the
Company's Restructuring, certain leases will be terminated prior to their
scheduled expiration, generally upon the payment of a termination fee, and
certain office space and facilities are expected to be subleased through the
expiration of the related leases, generally for amounts less than the Company's
lease commitments for such space. The estimated cost of these lease terminations
and office closures, net of projected sublease income, was recorded in the first
quarter of 1998 as part of the Restructuring charge discussed in Note 2 to the
Consolidated Financial Statements.
10
<PAGE> 11
The Company also leases sites for its transmitters on commercial
broadcast towers, buildings, and other fixed structures. As of December 31,
1998, the Company leased transmitter sites for approximately 10,000
transmitters. A few local municipalities have imposed moratoria on the
designation of new transmitter locations or on the addition of new towers.
Should these moratoria, or others, continue for extended periods of time, it
could affect the Company's and other wireless carriers' ability to offer
seamless coverage in those areas during the pendency of such moratoria.
As of December 31, 1998, the Company owned subscriber devices having a
net book value of approximately $311.1 million.
ITEM 3. LEGAL PROCEEDINGS.
LITIGATION
The Company is involved in various lawsuits arising in the normal
course of business. In management's opinion, the ultimate outcome of these
lawsuits will not have a material adverse effect on the Company's business,
financial position, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the fourth quarter of 1998.
11
<PAGE> 12
----------------------
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREOWNER
MATTERS.
The Company's Common Stock, $.01 par value (the Common Stock), is listed
on the Nasdaq Stock Market under the symbol "PAGE". The high and low trading
prices for each quarterly period of 1997 and 1998 for the Common Stock of the
Company are set forth below.
<TABLE>
<CAPTION>
PRICE RANGE
-----------
HIGH LOW
------- --------
<S> <C> <C>
1997
First Quarter 15 7/8 7 5/8
Second Quarter 9 3/4 5 3/4
Third Quarter 13 9/16 7 7/8
Fourth Quarter 14 1/8 10 3/8
1998
First Quarter 16 3/8 9 1/2
Second Quarter 16 5/8 12 1/2
Third Quarter 14 5/8 4 13/16
Fourth Quarter 7 3/8 3 9/16
</TABLE>
As of March 19, 1999, there were approximately 663 shareowners of
record. From January 1, 1997 through the date hereof, the Company has declared
no cash dividends on its Common Stock. The Company currently intends to follow a
policy of retaining all funds to finance the continued growth of the Company's
business and does not anticipate paying cash dividends or making other cash
distributions to shareowners in the foreseeable future. Certain covenants in the
Company's debt agreements restrict the payment of cash dividends by the Company.
On December 9, 1998, the Company exchanged 100,000 shares of its Common
Stock (the Restricted Shares) and certain additional consideration to acquire
all of the outstanding common stock of Silverlake Communications, Inc. from two
individuals. The sale of the Restricted Shares was completed pursuant to
exemption from registration under Section 4(2) of the Securities Exchange Act of
1934, as amended.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data for the five years ended
December 31, 1998, is derived from the Consolidated Financial Statements of the
Company. The data presented below should be read in conjunction with the
Company's Consolidated Financial Statements, the related Notes, and other
financial information included herein. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1994 1995 1996 1997 1998
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Services, rent and maintenance revenues $ 389,919 $ 532,079 $ 685,960 $ 818,461 $ 945,524
Product sales 99,765 113,943 136,527 142,515 100,503
--------- ----------- ----------- ----------- -----------
Total revenues 489,684 646,022 822,487 960,976 1,046,027
Cost of products sold (78,102) (93,414) (116,647) (121,487) (77,672)
--------- ----------- ----------- ----------- -----------
411,582 552,608 705,840 839,489 968,355
Services, rent and maintenance expenses 74,453 109,484 146,896 173,058 210,480
Selling expenses 60,555 67,561 82,790 102,995 104,350
General and administrative expenses 136,539 174,432 219,317 253,886 320,586
Depreciation and amortization expense 107,362 148,997 213,440 289,442 281,259
Restructuring charge (1) -- -- -- -- 74,000
Non-recurring charges (2) -- -- 22,500 12,600 --
--------- ----------- ----------- ----------- -----------
Total operating expenses 378,909 500,474 684,943 831,981 990,675
--------- ----------- ----------- ----------- -----------
Operating income (loss) 32,673 52,134 20,897 7,508 (22,320)
Interest expense (53,717) (102,846) (128,014) (151,380) (143,762)
Interest income 3,079 6,511 3,679 3,689 2,070
Minority interest -- -- 41 56 2,003
Equity in loss of an unconsolidated subsidiary -- -- (923) (1,276) --
--------- ----------- ----------- ----------- -----------
Loss before extraordinary item (17,965) (44,201) (104,320) (141,403) (162,009)
Extraordinary item (3) -- -- -- (15,544) --
--------- ----------- ----------- ----------- -----------
Net loss $ (17,965) $ (44,201) $ (104,320) $ (156,947) $ (162,009)
========= =========== =========== =========== ===========
Per common share data (basic and diluted):
Loss before extraordinary item $ (0.18) $ (0.43) $ (1.02) $ (1.38) $ (1.57)
Extraordinary item -- -- -- (0.15) --
--------- ----------- ----------- ----------- -----------
Net loss per share $ (0.18) $ (0.43) $ (1.02) $ (1.53) $ (1.57)
========= =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA:
(IN THOUSANDS) DECEMBER 31, 1994 1995 1996 1997 1998
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets $ 39,375 $ 259,096 $ 95,550 $ 105,214 $ 108,961
Total assets 706,008 1,228,338 1,439,613 1,597,233 1,581,244
Long-term obligations,
less current maturities 504,000 1,150,000 1,459,188 1,779,491 1,815,137
Total shareowners' deficit (39,908) (80,784) (182,175) (337,931) (490,419)
</TABLE>
(1) Represents a charge to reorganize the Company's domestic operations to
expand its sales organization, eliminate local and redundant administrative
operations, and consolidate certain key support functions located in
offices throughout the country into centralized facilities (the Centers of
Excellence).
(2) Amount in 1997 represents a provision to write-down certain subscriber
devices to their net realizable value; amount in 1996 relates to subscriber
devices leased by the Company to customers under an agreement with a
national marketing affiliate which were deemed to be unrecoverable from the
former customers of this marketing affiliate.
(3) Represents an extraordinary charge on the early retirement of certain
indebtedness.
13
<PAGE> 14
<TABLE>
<CAPTION>
OTHER DATA:
(IN THOUSANDS, EXCEPT UNIT DATA)
YEAR ENDED DECEMBER 31, 1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
EBITDA (1) $ 140,035 $ 201,131 $ 233,455 $ 280,186 $ 260,942
Adjusted EBITDA (2) $ 140,035 $ 201,131 $ 256,837 $ 309,550 $ 332,939
Free Cash Flow (3) $ (123,911) $ (207,493) $ (304,886) $ (166,506) $ (105,794)
Units in service
(at end of period) 4,409,000 6,738,000 8,588,000 10,344,000 10,110,000
Capital expenditures $ 213,308 $ 312,289 $ 437,388 $ 328,365 $ 297,041
</TABLE>
(1) Earnings before interest, income taxes, depreciation, and amortization.
(2) Earnings before interest, income taxes, depreciation, amortization,
minority interest, equity in loss of an unconsolidated subsidiary,
restructuring charge, non-recurring charges, and extraordinary loss.
(3) Adjusted EBITDA less capital expenditures (excluding payments for spectrum
licenses) and debt service.
EBITDA, Adjusted EBITDA, and Free Cash Flow are not measures defined in
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance in accordance with
generally accepted accounting principles.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
The statements contained in this filing that are not historical facts,
including but not limited to future capital expenditures, future borrowings,
performance and market acceptance of new products and services, impact of Year
2000 issues on the Company's operations, anticipated costs and expenses related
to, and the timetable for, the remediation of Year 2000 issues, expected annual
recurring performance improvements and cost savings as a result of a
restructuring of the Company's domestic operations (the Restructuring), and
sales productivity increases and incremental annual increases in revenues
expected to result from the Restructuring together with associated price
increases, are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. Among the factors that could cause
actual future results to differ materially are competitive pricing pressures,
growth rates, the introduction of products and services by competitors of the
Company, the performance of the Company's vendors and independent contractors,
third-party Year 2000 remediation plans, the introduction of competing
technologies, the transition of the Company's regional office operations into
centralized facilities (the Centers of Excellence) infrastructure, the
construction, testing and placement of the Company's advanced messaging network
into operation, and acceptance of the Company's products and services in the
marketplace.
INTRODUCTION
Throughout this section the Company makes reference to earnings before
interest, income taxes, depreciation, amortization, minority interest, equity in
loss of an unconsolidated subsidiary, restructuring charge, non-recurring
charges, and extraordinary loss (Adjusted EBITDA). EBITDA (earnings before
interest, income taxes, depreciation, and amortization) is a key performance
measure used in the wireless messaging industry and is one of the financial
measures by which the Company's covenants are calculated under the agreements
governing its debt obligations. EBITDA and Adjusted EBITDA are not measures
defined in generally accepted accounting principles and should not be considered
in isolation or as substitutes for measures of performance in accordance with
generally accepted accounting principles.
In 1998, the Company made significant progress toward its previously
announced goal of creating a platform for long-term profitable growth. To
achieve these objectives, the Company is aggressively implementing the
Restructuring, which includes eliminating redundant administrative operations by
consolidating certain key support functions. In addition to the Restructuring,
the Company is developing for distribution branded, customized value-added
wireless information and has begun creating customized wireless information
management services for its corporate clients. The Company has made considerable
progress toward the completion of the build-out of its advanced wireless
network. The Company has also completed a thorough review of its customers and
prospects by market in order to design a sales and marketing organizational
structure that will be more clearly aligned with its customers' needs and with
the Company's overall strategic direction.
15
<PAGE> 16
RESULTS OF OPERATIONS
The following table presents certain items in the Consolidated
Statements of Operations as a percentage of revenues from services, rent and
maintenance plus product sales less the cost of products sold (Net Revenues) for
the years ended December 31, 1996, 1997, and 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Net Revenues 100.0% 100.0% 100.0%
Operating expenses:
Services, rent and maintenance 20.8 20.6 21.7
Selling 11.7 12.3 10.8
General and administrative 31.1 30.2 33.1
Depreciation and amortization 30.2 34.5 29.1
Restructuring charge -- -- 7.6
Non-recurring charges 3.2 1.5 --
------ ------ ------
Operating income (loss) 3.0 0.9 (2.3)
Net loss (14.8) (18.7) (16.7)
EBITDA 33.1 33.4 26.9
Adjusted EBITDA 36.4 36.9 34.4
</TABLE>
Net Revenues for the year ended December 31, 1998 were $968.4 million,
an increase of 15.4% over $839.5 million for the year ended December 31, 1997.
Net Revenues for the year ended December 31, 1997 increased 18.9% from $705.8
million for the year ended December 31, 1996. Revenues from services, rent and
maintenance, which the Company considers its primary business, increased 15.5%
to $945.5 million for the year ended December 31, 1998, compared to $818.5
million for the year ended December 31, 1997. Services, rent and maintenance
revenues for the year ended December 31, 1997 increased 19.3% from $686.0
million for the year ended December 31, 1996. The increases from 1996 to 1997
were due to growth in the number of units in service with subscribers of the
Company. The increases from 1997 to 1998 were primarily due to an increase in
average revenue per unit resulting from pricing initiatives and the changing mix
of the Company's subscriber base toward higher revenue products and services.
In an effort to increase the overall profitability of its services, the
Company has increased its focus toward higher value products and services such
as alphanumeric and nationwide paging. In addition, in an effort to reduce the
number of customers using unprofitable services, the Company has instituted
certain price initiatives, including setting appropriate minimum pricing levels
for new business and selectively increasing prices to existing customers using
certain services. The Company expects these initiatives, along with sales
productivity increases associated with the Company's Restructuring which will
allow field sales personnel to focus solely on sales, to result in incremental
annual revenues in 1999 and beyond. However; as a result of these actions, the
Company experienced a net decrease in units in service during the second half of
1998, which trend the Company expects to continue during the first half of 1999.
Also as a result of these actions, the Company experienced its first
year-to-year increase in average revenue per unit (ARPU). The number of units in
service with subscribers at December 31, 1998, 1997, and 1996 was 10,110,000,
10,344,000, and 8,588,000, respectively. The average revenue per unit for the
Company's core domestic operations increased to $7.71 for the year ended
December 31, 1998, compared to $7.20 and $7.46, respectively, for the
corresponding periods of 1997 and 1996. The Company is continuing to review its
pricing structure for all of its services.
16
<PAGE> 17
Product sales decreased 29.5% to $100.5 million (10.4% of Net Revenues)
for 1998 compared to $142.5 million (17.0% of Net Revenues) for 1997. The
decrease in product sales and corresponding decrease in cost of products sold
from 1997 to 1998 resulted primarily from the Company's efforts to reduce the
number of customers using unprofitable services through certain pricing
initiatives, which resulted in a substantial decrease in sales through the
Company's reseller channel.
Services, rent, and maintenance expenses increased 21.6% to $210.5
million (21.7% of Net Revenues) for the year ended December 31, 1998, compared
to $173.1 million (20.6% of Net Revenues) for the year ended December 31, 1997.
Services, rent, and maintenance expenses for the year ended December 31, 1997
increased by 17.8% from $146.9 million (20.8% of Net Revenues) for the year
ended December 31, 1996. The increases in services, rent, and maintenance
expenses and the increase as a percentage of Net Revenues from 1997 to 1998 were
partially attributable to an increase in telephone expenses associated with the
enactment of regulations requiring providers of payphones be compensated for all
calls placed from payphones to toll-free numbers. This requirement increased the
Company's cost of providing toll-free number service commencing in the fourth
quarter of 1997. Also contributing to the increases were increased contracted
dispatch costs related to advanced messaging units placed in service during 1998
and expenses associated with an increase in transmitter sites. The increase in
services, rent, and maintenance expenses from 1996 to 1997 was the result of
growth in the number of units in service with subscribers, expenses associated
with an increase in transmitter sites, expansion of nationwide transmission
networks, costs incurred by the Company's Canadian operations, and costs
associated with the Company's advanced messaging operations (primarily VoiceNow
service during 1997).
Selling expenses were relatively flat for the year ended December 31,
1998, compared to the year ended December 31, 1997. Selling expenses were $104.4
million (10.8% of Net Revenues) for the year ended December 31, 1998, compared
to $103.0 million (12.3% of Net Revenues) for the year ended December 31, 1997.
Selling expenses for the year ended December 31, 1997 increased by 24.4% from
$82.8 million (11.7% of Net Revenues) for the year ended December 31, 1996. The
decrease in selling expenses as a percentage of Net Revenues from 1997 to 1998
resulted primarily from a lower amount of sales commissions paid in conjunction
with the net decline in units in service with subscribers during 1998 and an
overall decrease in certain marketing research, development costs, and
advertising expenses associated with the Company's advanced messaging
operations, due mainly to the decline in such costs related to its VoiceNow
service, which was partially offset by an increase in such costs related to its
new two-way service. The marketing research, development costs, and advertising
expenses associated with the Company's advanced messaging operations are
expected to grow in future periods due to expanded promotion of its two-way
service. The increase in selling expenses and the increase as a percentage of
Net Revenues from 1996 to 1997 resulted primarily from certain marketing
research, development costs, and advertising expenses associated with the
Company's advanced messaging operations (primarily VoiceNow service during
1997), and from the addition of sales personnel to support the growth from 1996
to 1997 in both Net Revenues and the number of units in service with
subscribers.
General and administrative expenses increased 26.3% to $320.6 million
(33.1% of Net Revenues) for the year ended December 31, 1998, compared to $253.9
million (30.2% of Net Revenues) for the year ended December 31, 1997. General
and administrative expenses for the year ended December 31, 1997 increased by
15.8% from $219.3 million (31.1% of Net Revenues) for the year ended December
31, 1996. The increase in general and administrative expenses and the increase
as a percentage of Net Revenues from 1997 to 1998 was primarily related to
expenses associated with establishing the Company's Centers of Excellence,
redundant operating costs associated with operating both its new Centers of
Excellence infrastructure and its traditional decentralized infrastructure, and
increased levels of contract labor utilized during the transition to the Centers
of Excellence infrastructure. The increase in general and administrative
expenses from 1996 to 1997 occurred to support the growth in the number of units
in service with subscribers. The decrease in general and administrative expenses
as a percentage of Net Revenues from 1996 to 1997 was due to higher Net Revenues
in 1997.
Depreciation and amortization expense decreased 2.8% to $281.3 million
(29.1% of Net Revenues) for the year ended December 31, 1998, compared to $289.4
million (34.5% of Net Revenues) for the year ended December 31, 1997.
Depreciation and amortization expense for the year ended December 31, 1997
increased by
17
<PAGE> 18
35.6% from $213.4 million (30.2% of Net Revenues) for the year ended December
31, 1996. The decrease in depreciation and amortization expense from 1997 to
1998 resulted primarily from certain property and equipment becoming fully
depreciated, certain non-current assets becoming fully amortized, and the
decline in capital expenditures by the Company. The increase in depreciation and
amortization expense from 1996 to 1997 was primarily attributable to the
increase in the number of subscriber devices owned by the Company and leased to
subscribers during 1997, as compared to 1996, the increase in computer and
wireless messaging equipment used by the Company in its operations, changes in
subscriber device depreciation, and the commencement of spectrum license
amortization. Effective January 1, 1997, the Company shortened the depreciable
life of its subscriber devices from four to three years, and revised the related
residual values, in order to better reflect the estimated periods during which
the subscriber devices remain in service. The change in depreciable lives and
residual values and the commencement of spectrum license amortization and
certain other costs associated with the introduction of the Company's VoiceNow
service increased net loss by approximately $27 million for the year ended
December 31, 1997. The Company expects to commence depreciation and amortization
on the majority of the assets related to its Centers of Excellence during the
first quarter of 1999 and its advanced messaging operations during the second
and third quarters of 1999, which in total is expected to increase depreciation
and amortization expense in 1999 by approximately $30 million to $35 million.
In 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5
"Reporting on the Cost of Start-Up Activities" (SOP 98-5), which requires the
expensing of all start-up costs as incurred as well as writing off the remaining
unamortized balance of capitalized start-up costs as of the date of the adoption
of SOP 98-5. The Company adopted the provisions of SOP 98-5 as of January 1,
1999, and recorded a charge of $37.0 million as the cumulative effect of a
change in accounting principle to write-off all unamortized start-up costs as of
January 1, 1999. The Company estimates that the impact of adopting SOP 98-5 will
be an increase in services, rent, and maintenance and general and administrative
expenses of approximately $5 million for the year ended December 31, 1999, for
costs that will be expensed in 1999 that otherwise would have been capitalized
prior to the adoption of SOP 98-5, and a decrease in depreciation and
amortization expense of approximately $5 million for the year ending December
31, 1999. See further discussion in Note 4 to the Consolidated Financial
Statements.
The Company recorded a restructuring charge of $74.0 million during the
quarter ended March 31, 1998, as a result of a Restructuring approved by the
Company's Board of Directors on February 8, 1998. As part of the Restructuring,
the Company is reorganizing its operations to expand its sales organization and
eliminate redundant administrative operations by consolidating certain key
support functions into Centers of Excellence. The Company expects to eliminate
approximately 1,600 positions, net of positions added, through the consolidation
of redundant administrative operations and key support functions located in
offices throughout the country. The Company launched the Centers of Excellence
in the fourth quarter of 1998 on a pilot basis, and expects to consolidate all
of its existing support functions into these Centers of Excellence during 1999.
Although the Company is currently experiencing duplicative costs associated
with establishing the Centers of Excellence while maintaining its traditional
decentralized infrastructure that negatively affected its operating results in
the fourth quarter of 1998 and are expected to continue to do so through the
first half of 1999, the Company expects to realize annual recurring performance
improvements and cost savings of $45 million to $55 million after the
Restructuring is completed. See further discussion in Note 2 to the Consolidated
Financial Statements.
The non-recurring charge of $12.6 million in 1997 represents a
write-down of certain subscriber devices to their net realizable value. The
non-recurring charge of $22.5 million in 1996 represents a provision to
write-off in excess of 400,000 subscriber devices leased by the Company to
customers under an agreement with a national marketing affiliate. During 1996,
the Company experienced significant cancellations by the customer base developed
through this affiliate and, as a result, did not expect to recover such
subscriber devices from the former customers of this marketing affiliate.
As a result of the above factors, Adjusted EBITDA increased 7.6% to
$332.9 million (34.4% of Net Revenues) for 1998, compared to $309.6 million
(36.9% of Net Revenues) for 1997. Adjusted EBITDA for 1997 increased by 20.5%
from $256.8 million (36.4% of Net Revenues) for 1996. Adjusted EBITDA and
Adjusted EBITDA as a percentage of Net Revenues for 1998 were negatively
impacted by the Company's advanced messaging operations, the formation of its
Centers of Excellence, and its international operations. Adjusted
18
<PAGE> 19
EBITDA and Adjusted EBITDA as a percentage of Net Revenues for 1997 were
negatively impacted by the introduction of the Company's VoiceNow service and
its international operations. Adjusted EBITDA and Adjusted EBITDA as a
percentage of Net Revenues for 1996 were negatively impacted by the Company's
international operations.
Interest expense, net of amounts capitalized, was $143.8 million for
the year ended December 31, 1998, compared to $151.4 million for the year ended
December 31, 1997. Interest expense, net of amounts capitalized, was $128.0
million for the year ended December 31, 1996. The decrease in interest expense
from 1997 to 1998 was primarily attributable to an increase in interest
capitalized, a decrease in interest rates on outstanding borrowings under the
Company's $1.0 billion domestic credit agreement (the Credit Agreement), and the
redemption of the Company's $200.0 million 11.75% Senior Subordinated Notes
(11.75% Notes) on May 14, 1997, which the Company redeemed utilizing funds with
lower interest rates borrowed under the Company's Credit Agreement. The Company
recorded an extraordinary loss of $15.5 million in the second quarter of 1997 on
the early retirement of the 11.75% Notes. The extraordinary loss was comprised
of the redemption premium of $11.8 million and the write-off of unamortized
issuance costs of $3.7 million. The increase in interest expense from 1996 to
1997 was primarily due to the higher average level of indebtedness outstanding
during 1997. The average level of indebtedness outstanding during 1997 was $1.7
billion, compared to $1.2 billion outstanding during 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations and expansion into new markets and product
lines required substantial capital investment for the development and
installation of wireless communications systems and for the procurement of
subscriber devices and related equipment. Furthermore, the Company is currently
in the process of building an advanced messaging network over which it can
deploy new enhanced messaging services and customized wireless information.
Capital expenditures (excluding payments for spectrum licenses) were $437.4
million, $328.4 million, and $297.0 million, respectively, for the years ended
December 31, 1996, 1997, and 1998.
Capital expenditures related to the Company's core domestic operations
were $376.9 million, $219.7 million, and $192.3 million, respectively, for the
years ended December 31, 1996, 1997, and 1998. The decrease in core domestic
capital expenditures in 1998 was primarily due to a reduction in the Company's
network-related expenditures pertaining to geographic coverage and capacity
expansion. The Company believes it offers competitive geographic coverage and
further expansion will be undertaken only as the Company deems appropriate.
Also, during 1997, the Company began instituting programs to utilize subscriber
devices more effectively and to more closely control subscriber device capital
expenditures, including efficiencies established in the logistics management of
the subscriber device ordering process. In addition to the programs to utilize
subscriber devices more effectively, the decrease in core domestic capital
expenditures in 1997 was also attributable to increased efficiencies in
infrastructure deployment. Two other major areas of capital expenditures in 1998
were the Centers of Excellence and the advanced messaging network. Capital
expenditures related to establishing the Company's Centers of Excellence,
including new systems implementations, were $56.7 million for the year ended
December 31, 1998. Capital expenditures related to the Company's buildout of its
advanced messaging network were $46.7 million, $103.9 million, and $97.4
million, respectively, for the years ended December 31, 1996, 1997, and 1998.
The amount of capital expenditures may fluctuate from quarter to
quarter and on an annual basis due to several factors, including the variability
of units in service with subscribers. Based on current expectations, the Company
anticipates the total amount of capital expenditures to slightly decrease in
1999 as compared to 1998, as it substantially completes capital expenditures
made in connection with the Company's expansion of its advanced messaging
network and the establishment of its Centers of Excellence. With the substantial
completion of these capital expenditures in 1999, the Company expects aggregate
capital expenditures in 2000 to decrease as compared to 1999.
19
<PAGE> 20
During 1998, capital expenditures were funded primarily by net cash
provided by operating activities of $277.0 million, as well as incremental
borrowings. Net cash provided by operating activities increased $126.5 million
for the year ended December 31, 1998, as compared to the same period of 1997.
The increase resulted primarily from a decrease in net loss before restructuring
charge of $68.9 million, an increase in accounts payable of $70.0 million, and a
decrease in inventories of $19.7 million. The increase in accounts payable
during 1998 resulted from the timing of invoices at year-end 1998 related to
additional capital expenditures incurred in the fourth quarter of 1998 and
additional expenses in the fourth quarter of 1998 related to the Centers of
Excellence.
As of December 31, 1998, the Company had $565.0 million of borrowings
under its Credit Agreement. As of March 15, 1999, this amount had increased to
$614.0 million. Under the Credit Agreement, the Company is able to borrow,
provided it meets certain financial covenants, the lesser of $1.0 billion or an
amount based primarily upon the Company's domestic EBITDA for the most recent
fiscal quarter. As of December 31, 1998, $65.8 million was available for
additional borrowings as of that date based on the Company's domestic EBITDA for
the fourth quarter of 1998. The availability of additional borrowings in periods
subsequent to December 31, 1998 is based upon the Company's domestic EBITDA for
such future periods. The Company anticipates that, similar to the fourth quarter
of 1998, domestic EBITDA will be negatively impacted during the first half of
1999 by (i.) expenses associated with establishing the Company's Centers of
Excellence infrastructure while at the same time maintaining its traditional
decentralized infrastructure, and (ii.) expenses related to the completion of
the Company's advanced messaging network. However, the Company currently
anticipates that it will have sufficient capital resources to complete the
Centers of Excellence infrastructure and advanced messaging network and to make
other planned capital expenditures.
The two credit agreements of the Company's Canadian subsidiaries
provide for total borrowings of approximately $70 million. As of December 31,
1998, approximately $45.1 million of borrowings were outstanding under the
credit facilities. Additional borrowings are available under these facilities,
provided such borrowings are either collateralized or certain financial
covenants are met. As of December 31, 1998, the Company's Canadian subsidiaries
are in compliance with all financial covenants of their separate credit
agreements; however, the Company has entered into negotiations with its lenders
to modify certain covenants that the Company believes may not be satisfied
during the second and third quarters of 1999. Although the Company anticipates
that these negotiations will be successful and will not result in a material
change in borrowing capacity or interest expense, no assurance can be made that
such result will be attained.
The deficiency in Free Cash Flow, defined as Adjusted EBITDA less
capital expenditures (excluding payments for spectrum licenses) and debt
service, for the Company's consolidated operations for the years ended
December 31, 1996, 1997, and 1998 was $304.9 million, $166.5 million, and
$105.8 million, respectively. Free Cash Flow is not a measure defined in
generally accepted accounting principles and should not be considered in
isolation or as a substitute for a measure of performance in accordance with
generally accepted accounting principles. The improvements in Free Cash Flow in
1997 and 1998 were primarily the result of decreases in capital expenditures and
increases in Adjusted EBITDA in the Company's core domestic operations, as
previously noted. Payments for spectrum licenses totaled $109.2 million for
1996, $92.9 million for 1997, and $13.1 million for 1998.
Inflation is not a material factor affecting the Company's business.
System equipment and transmission costs have generally not increased and
subscriber device costs have declined significantly over time. General operating
expenses such as salaries, employee benefits, and occupancy costs are, however,
subject to normal inflationary pressures.
YEAR 2000 READINESS DISCLOSURE
Year 2000 issues affect virtually all companies and organizations
throughout the world. Many existing computer programs were designed and
developed to use and store only two digits to identify a calendar year, without
considering the capability of properly recognizing the upcoming change in the
century. If not corrected by January 1, 2000, the Company could potentially
experience system failures or interruptions, such as a temporary inability to
deliver paging transmissions, system generation of erroneous data, or other
disruptions of normal business operations.
20
<PAGE> 21
The Company has implemented a task force and developed a comprehensive
plan to address Year 2000 issues, and is utilizing both internal and external
resources to identify, renovate, and test its systems. The Company has developed
an approach to address Year 2000 issues that includes phases for inventory of
business processes and systems, assessment of Year 2000 risk, remediation,
testing, implementation and evaluation. The Company has completed the inventory
and assessment phases for all business processes. The remediation and testing
phases are ongoing. The Company is in the process of testing its software
application systems and its embedded systems, such as its paging terminals and
paging network. To date, a number of the Company's systems have either been
fully tested or partially tested, while other systems are scheduled to be
tested. Many applications are currently Year 2000 compliant, and those that are
not have been earmarked for retirement, replacement, or remediation. In
connection with the Restructuring, the Company is currently in the process of
replacing all of its core systems for its new Centers of Excellence. The Company
has completed Year 2000 readiness assessment and testing on these systems. All
of the Company's critical messaging and business applications are expected to be
retired, replaced or remediated by mid-year 1999. Implementations of replacement
systems or remediated systems have been completed for several critical systems,
while others are in process or scheduled to be performed. All implementations
related to Year 2000 issues are scheduled to be completed by mid-year 1999. The
evaluation phase for the Year 2000 project will be conducted in the latter half
of 1999, and will consist of business process reviews to ensure all Year 2000
issues have been addressed.
The Company anticipates its total cost associated with correcting Year
2000 problems, including the expenses necessary to remediate the Company's
existing systems and costs related to the collection of third-party Year 2000
readiness information, to be $3 million to $5 million, of which approximately
$1.5 million has been incurred as of December 31, 1998. In addition, in
connection with the Restructuring, the Company is currently in the process of
replacing all of its core systems for its new Centers of Excellence at an
estimated cost of approximately $80 million to $100 million.
The Company is working with Motorola, Inc., Glenayre Technologies,
Inc., and other primary vendors that currently supply the Company with
subscriber devices, wireless messaging terminals, and network facilities, to
assess their Year 2000 readiness. The Company's primary vendors are making the
preparations necessary for their products and services to be ready for the Year
2000. However, there can be no assurance that third parties, on which the
Company's business relies, will successfully remediate their systems on a timely
basis. The Company also relies on the provision of electrical power and
telecommunications transmission services in the operation of its business. The
Company has queried all of its primary electrical and telecommunications
suppliers regarding Year 2000 compliance. Each supplier queried believes that it
will be Year 2000 compliant by the end of 1999. The Company has no means of
confirming these statements, nor any ability to ensure Year 2000 compliance by
these suppliers. The Company believes that although it may experience power
and/or transmission outages related to Year 2000 noncompliance, these outages
will be limited in both scope and duration and will not have a material adverse
effect on the Company's ability to operate nor on its results of operations. In
addition, the possibility of power and/or transmission outages is being
addressed in the contingency planning process described below.
The Company is working with a globally recognized consulting firm to
develop contingency plans to mitigate the impact of its potential system
failures related to Year 2000 issues. The contingency plans will address the
risk of potential failures related to internal software applications, embedded
systems, infrastructure, and third-party systems (including electrical power and
telecommunications transmission services). The contingency plans are expected to
be completed by mid-year 1999.
The cost of the Company's Year 2000 project and the timetable on which
the Company believes it will complete this project are based on management's
best estimates and include assumptions regarding third-party modification plans.
However, in particular due to the potential impact of third-party modification
plans, there can be no assurance that these estimates and this timetable will be
achieved, and actual results could differ materially from those anticipated. The
Company's business, financial position, or results of operations could be
materially
21
<PAGE> 22
adversely affected by the failure of its computer systems and applications, or
those operated by third parties, to properly operate or manage dates beyond
1999. In addition, disruptions in the economy generally resulting from Year 2000
issues could materially adversely affect the Company. The amount of any
potential liability or lost revenue cannot be estimated at this time.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The risk inherent in the Company's market risk sensitive instruments is
the potential loss arising from adverse changes in interest rates and foreign
currency exchange rates. The Company's earnings are affected by changes in
interest rates due to the impact those changes have on the Company's
variable-rate debt obligations, which represented approximately 33.9% of its
total long-term obligations as of December 31, 1998. If interest rates average
one percent more in 1999 than they did during 1998, the Company's interest
expense would increase by approximately $5.9 million. The impact of an increase
in interest rates was determined based on the impact of the hypothetical change
in interest rates on the Company's variable-rate long-term obligations as of
December 31, 1998. Market risk for fixed-rate long-term obligations is estimated
as the potential increase in fair value resulting from a hypothetical one
percent decrease in interest rates and amounts to approximately $67.8 million
based on discounted cash flow analyses. The preceding sensitivity analyses do
not, however, consider the effects that such changes in interest rates may have
on overall economic activity, nor does it consider additional actions the
Company may take to mitigate its exposure to such changes. Actual results may
differ from the above analyses.
The Company's earnings are also affected by foreign exchange rate
fluctuations between the U.S. dollar and the Canadian dollar and Spanish peseta.
In addition, the Company is subject to market risk related to its net
investments in its Canadian and Spanish subsidiaries. However, the impact of
such market risk exposures as a result of foreign exchange rate fluctuations has
not been, and is not expected to be, material based on the relative
insignificance of the Company's Canadian and Spanish subsidiaries to the
Company's financial position or results of operations. As of December 31, 1998,
the Company was not engaged in other activities that would cause exposure to the
risk of material earnings or cash flow loss due to changes in interest rates,
foreign currency exchange rates, or market commodity prices.
22
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors 24
Consolidated Statements of Operations for the years ended December 31, 1998, 1997, and 1996 25
Consolidated Balance Sheets as of December 31, 1998 and 1997 26
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, and 1996 27
Consolidated Statements of Shareowners' Deficit for the years ended December 31, 1998, 1997, and 1996 28
Notes to Consolidated Financial Statements 29
</TABLE>
23
<PAGE> 24
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareowners
Paging Network, Inc.
We have audited the accompanying consolidated balance sheets of Paging Network,
Inc. as of December 31, 1998 and 1997, and the related consolidated statements
of operations, cash flows and shareowners' deficit for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Paging Network,
Inc. at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
February 15, 1999
24
<PAGE> 25
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Information)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Services, rent and maintenance revenues $ 685,960 $ 818,461 $ 945,524
Product sales 136,527 142,515 100,503
----------- ----------- -----------
Total revenues 822,487 960,976 1,046,027
Cost of products sold (116,647) (121,487) (77,672)
----------- ----------- -----------
705,840 839,489 968,355
Operating expenses:
Services, rent and maintenance 146,896 173,058 210,480
Selling 82,790 102,995 104,350
General and administrative 219,317 253,886 320,586
Depreciation and amortization 213,440 289,442 281,259
Restructuring charge -- -- 74,000
Non-recurring charges 22,500 12,600 --
----------- ----------- -----------
Total operating expenses 684,943 831,981 990,675
----------- ----------- -----------
Operating income (loss) 20,897 7,508 (22,320)
Other income (expense):
Interest expense (128,014) (151,380) (143,762)
Interest income 3,679 3,689 2,070
Minority interest 41 56 2,003
Equity in loss of an unconsolidated
subsidiary (923) (1,276) --
----------- ----------- -----------
Total other income (expense) (125,217) (148,911) (139,689)
----------- ----------- -----------
Loss before extraordinary item (104,320) (141,403) (162,009)
Extraordinary loss -- (15,544) --
----------- ----------- -----------
Net loss $ (104,320) $ (156,947) $ (162,009)
=========== =========== ===========
Net loss per share (basic and diluted):
Loss before extraordinary item $ (1.02) $ (1.38) $ (1.57)
Extraordinary loss -- (0.15) --
----------- ----------- -----------
Net loss per share $ (1.02) $ (1.53) $ (1.57)
=========== =========== ===========
</TABLE>
See accompanying notes
25
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,924 $ 3,077
Accounts receivable (less allowance for doubtful accounts of
$6,670 and $11,119 in 1997 and 1998, respectively) 63,288 84,440
Inventories 24,114 6,379
Prepaid expenses and other assets 14,888 15,065
----------- -----------
Total current assets 105,214 108,961
Property, equipment, and leasehold improvements, at cost 1,387,560 1,452,870
Less accumulated depreciation (469,526) (547,599)
----------- -----------
Net property, equipment, and leasehold improvements 918,034 905,271
Other non-current assets, at cost 659,661 629,372
Less accumulated amortization (85,676) (62,360)
----------- -----------
Net other non-current assets 573,985 567,012
----------- -----------
$ 1,597,233 $ 1,581,244
=========== ===========
LIABILITIES AND SHAREOWNERS' DEFICIT
Current liabilities:
Accounts payable $ 42,640 $ 96,478
Accrued expenses 36,854 49,692
Accrued interest 40,085 43,209
Accrued restructuring costs, current portion -- 8,256
Customer deposits 24,460 22,735
Deferred revenue 11,634 15,874
----------- -----------
Total current liabilities 155,673 236,244
----------- -----------
Long-term obligations 1,779,491 1,815,137
Accrued restructuring costs, non-current portion -- 18,765
Minority interest -- 1,517
Commitments and contingencies -- --
Shareowners' deficit:
Common Stock - $.01 par, authorized 250,000,000 shares; issued
and outstanding 102,659,915 shares at December 31, 1997
and 103,640,554 shares at December 31, 1998 1,027 1,036
Paid-in capital 124,908 132,950
Accumulated other comprehensive income 908 2,378
Accumulated deficit (464,774) (626,783)
----------- -----------
Total shareowners' deficit (337,931) (490,419)
----------- -----------
$ 1,597,233 $ 1,581,244
=========== ===========
</TABLE>
See accompanying notes
26
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net loss $(104,320) $(156,947) $(162,009)
Adjustments to reconcile net loss
to cash provided by operating activities:
Restructuring charge -- -- 74,000
Extraordinary loss -- 15,544 --
Depreciation 191,471 258,798 252,234
Amortization 21,969 30,644 29,025
Provision for doubtful accounts 14,033 18,343 20,516
Amortization of debt issuance costs 5,261 8,418 4,430
Minority interest (41) (56) (2,003)
Non-recurring charges 22,500 12,600 --
Other 923 1,276 --
Changes in operating assets and liabilities:
Accounts receivable (32,787) (21,542) (35,081)
Inventories (8,728) (1,302) 18,349
Prepaid expenses and other assets (3,377) (6,016) 9,133
Accounts payable (9,919) (18,397) 51,626
Accrued expenses and accrued interest 7,548 4,286 16,203
Accrued restructuring costs -- -- (1,979)
Customer deposits and deferred revenue 5,849 4,854 2,515
--------- --------- ---------
Net cash provided by operating activities 110,382 150,503 276,959
--------- --------- ---------
Investing activities:
Capital expenditures (437,388) (328,365) (297,041)
Payments for spectrum licenses (109,236) (92,856) (13,065)
Business acquisitions and joint venture investments (9,352) (7,253) (7,322)
Deposits for purchase of subscriber devices -- (13,493) --
Restricted cash invested in money market instruments (27,039) (6,422) --
Other, net (18,107) (11,540) 2,984
--------- --------- ---------
Net cash used in investing activities (601,122) (459,929) (314,444)
--------- --------- ---------
Financing activities:
Borrowings of long-term obligations 223,438 558,317 305,587
Repayments of long-term obligations (414,250) (39,000) (275,555)
Proceeds from exercise of stock options 2,825 87 7,606
Redemption of $200 million senior subordinated notes -- (211,750) --
Proceeds from Senior Notes offerings 500,000 -- --
Debt issuance costs on Senior Notes offerings (11,250) -- --
Debt issuance costs on credit agreements (3,766) -- --
Other, net (662) 919 --
--------- --------- ---------
Net cash provided by financing activities 296,335 308,573 37,638
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (194,405) (853) 153
Cash and cash equivalents at beginning of year 198,182 3,777 2,924
--------- --------- ---------
Cash and cash equivalents at end of year $ 3,777 $ 2,924 $ 3,077
========= ========= =========
</TABLE>
See accompanying notes
27
<PAGE> 28
CONSOLIDATED STATEMENTS OF SHAREOWNERS' DEFICIT
Year ended December 31, 1996, 1997, and 1998
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid-in Comprehensive Accumulated Shareowners'
Stock Capital Income Deficit Deficit
---------- --------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $ 1,022 $ 121,701 $ -- $ (203,507) $ (80,784)
Net loss -- -- -- (104,320) (104,320)
Foreign currency translation adjustments -- -- 104 -- 104
-------------
Total comprehensive loss (104,216)
Issuance of 375,270 shares of
Common Stock pursuant to
stock option plans 4 2,821 -- -- 2,825
---------- --------- --------------- ------------- -------------
Balance, December 31, 1996 1,026 124,522 104 (307,827) (182,175)
Net loss -- -- -- (156,947) (156,947)
Foreign currency translation adjustments -- -- 804 -- 804
-------------
Total comprehensive loss (156,143)
Issuance of 38,838 shares of
Common Stock pursuant to stock
option and compensation plans 1 386 -- -- 387
---------- --------- --------------- ------------- -------------
Balance, December 31, 1997 1,027 124,908 908 (464,774) (337,931)
Net loss -- -- -- (162,009) (162,009)
Foreign currency translation adjustments -- -- 1,470 -- 1,470
-------------
Total comprehensive loss (160,539)
Issuance of 980,639 shares of
Common Stock pursuant to stock
option and compensation plans 9 8,042 -- -- 8,051
---------- --------- --------------- ------------- -------------
Balance, December 31, 1998 $ 1,036 $ 132,950 $ 2,378 $ (626,783) $ (490,419)
========== ========= =============== ============= =============
</TABLE>
See accompanying notes
28
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Paging Network, Inc. (the Company) is a provider of wireless messaging and
information delivery services. The Company provides service in all 50 states,
the District of Columbia, the U.S. Virgin Islands, Puerto Rico, Canada, and
Spain, including service in all of the largest 100 markets (in population) in
the United States, and owns a minority interest in a wireless messaging company
in Brazil. The consolidated financial statements include the accounts of all of
its wholly and majority-owned subsidiaries. Effective January 1, 1998, the
Company began consolidating the results of its Spanish subsidiary, which had
previously been accounted for under the equity method of accounting. All
intercompany transactions have been eliminated.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Inventories - Inventories consist of subscriber devices which are held
specifically for resale. Inventories are stated at the lower of cost or market,
with cost determined on a first-in, first-out basis.
Property, equipment, and leasehold improvements - Property, equipment,
and leasehold improvements are stated at cost, less accumulated depreciation.
Expenditures for maintenance are charged to expense as incurred. Upon retirement
of units of equipment, the costs of units retired and the related accumulated
depreciation amounts are removed from the accounts. Depreciation is computed
using the straight-line method based on the following estimated useful lives:
<TABLE>
<S> <C>
Machinery and equipment 3 to 7 years(1)
Subscriber devices 3 years(2)
Furniture and fixtures 7 years(1)
Leasehold improvements 5 years(1)(3)
Building and building improvements 20 years
</TABLE>
(1) Certain assets written down as a result of the Company's restructuring
described in Note 2 are being depreciated to a common retirement date of
November 30, 1999.
(2) Effective January 1, 1997, the Company changed the estimated useful life of
subscriber devices from 4 years to 3 years, with estimated residual value
ranging up to $20 (see Note 3).
(3) Or term of lease if shorter.
The Company reserves for subscriber devices which it estimates to be
non-recoverable.
Other non-current assets - Other non-current assets are stated at cost,
less accumulated amortization. Amortization is computed using the straight-line
method based upon the following estimated useful lives:
<TABLE>
<S> <C>
Licenses and frequencies 40 years
Goodwill 20 years
Other intangible assets 18 months to 3 years
Other non-current assets 10 years to 12 years
</TABLE>
29
<PAGE> 30
Deferred revenues and customer deposits - Deferred revenues represent
billing to customers in advance for services not yet performed and are
recognized as revenue in the month the service is provided. Deposits are
received from some customers at the time a service agreement is signed and are
recognized as a liability of the Company until such time as the deposits are
applied, generally against the customer's final bill.
Revenue recognition - Services, rent and maintenance revenues are
recognized in the month the related services are performed. Product sales are
recognized upon delivery of product to the customer.
Employee stock options - The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for its employee stock option
plans. Under APB 25, because the exercise price of the Company's employee stock
options has historically equalled the market price of the underlying stock on
the date of grant, no compensation expense has been recognized.
Advertising costs - The Company expenses the costs of advertising as
incurred. Advertising expense for the years ended December 31, 1996, 1997, and
1998, was $12.5 million, $21.9 million, and $19.1 million, respectively.
Capitalization of internally developed software - In March 1998, the
Accounting Standards Executive Committee of the American Institute of Certified
Public Accountants issued Statement of Position 98-1, "Accounting for the Costs
of Computer Software Developed For or Obtained for Internal Use" (SOP 98-1).
SOP 98-1 requires the capitalization of certain costs of developing or acquiring
computer software for internal use. The Company adopted the provisions of SOP
98-1 effective January 1, 1999; however, the adoption is not expected to have a
material impact on the Company's results of operations or financial position as
the Company's current policy for accounting for the costs of developing or
acquiring computer software for internal use is generally consistent with the
provisions of SOP 98-1.
Comprehensive income (loss) - As of January 1, 1998, the Company
adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130), which establishes new rules for the reporting
and display of comprehensive income (loss) and its components. SFAS 130 requires
certain items, which prior to adoption were reported separately in shareowners'
deficit, to be included in other comprehensive income (loss). Other
comprehensive income as of December 31, 1996, 1997, and 1998, consists solely of
foreign currency translation adjustments. The adoption of SFAS 130 had no impact
on the Company's net loss or shareowners' deficit.
Reclassifications - Certain 1996 and 1997 amounts have been
reclassified to conform with the 1998 presentation.
2. RESTRUCTURING CHARGE
On February 8, 1998, the Company's Board of Directors approved a
restructuring of the Company's domestic operations (the Restructuring). As part
of the Restructuring, the Company is reorganizing its operations to expand its
sales organization, eliminate local and redundant administrative operations, and
consolidate certain key support functions. The Company expects to eliminate
approximately 1,600 positions, net of positions added, through the consolidation
of redundant administrative operations and certain key support functions located
in offices throughout the country into centralized facilities (the Centers of
Excellence). As a result of the Restructuring, the Company recorded a charge of
$74.0 million, or $0.72 per share (basic and diluted), during the quarter ended
March 31, 1998.
30
<PAGE> 31
The components of the charge included (in thousands):
<TABLE>
<S> <C>
Write-down of property and equipment $ 38,900
Lease obligations and terminations 18,900
Severance and related benefits 12,700
Other 3,500
-----------
Total restructuring charge $ 74,000
===========
</TABLE>
The write-down of property and equipment related to a non-cash charge to
reduce the carrying amount of certain machinery and equipment, furniture and
fixtures, and leasehold improvements, that the Company will not continue to
utilize following the Restructuring, to their estimated net realizable value as
of the date such assets are projected to be disposed of or abandoned by the
Company, allowing for the recognition of normal depreciation expense on such
assets through their projected disposal date. The net realizable value of these
assets was determined based on management estimates, which considered such
factors as the nature and age of the assets to be disposed of, the timing of the
assets' disposal, and the method and potential costs of the disposal. Such
estimates are subject to change.
The provision for lease obligations and terminations related primarily to
future lease commitments on local and regional office facilities that will be
closed as part of the Restructuring. The charge represents future lease
obligations, net of projected sublease income, on such leases past the dates the
offices will be closed by the Company, or, for certain leases, the cost of
terminating the leases prior to their scheduled expiration. Projected sublease
income was based on management estimates, which are subject to change. Cash
payments on the leases and lease terminations will occur over the remaining
lease terms, the majority of which expire prior to 2003.
Through the elimination of certain local and regional administrative
operations and the consolidation of certain support functions, the Company
expects to eliminate approximately 1,600 net positions, the majority of which
are non-sales related positions in local and regional offices. As a result of
eliminating these positions, the Company will involuntarily terminate an
estimated 1,950 employees. The majority of the severance and benefits costs to
be paid by the Company will be paid during 1999.
During the fourth quarter of 1998, the Company identified additional
furniture, fixtures, and equipment that will not be utilized following the
Restructuring, resulting in an additional non-cash charge of $2.6 million. This
charge was offset by reductions in the provisions for lease obligations and
terminations and severance costs as a result of refinements to the Company's
schedule for local and regional office closures. Also as a result of the
refinements to the office closing schedule, the Company adjusted, effective
October 1, 1998, the depreciable lives of certain of the assets written down in
the first quarter of 1998, resulting in a decrease in depreciation expense of
approximately $3.3 million for the fourth quarter of 1998.
The Company's restructuring activity through December 31, 1998 is as
follows (in thousands):
<TABLE>
<CAPTION>
Utilization of Reserve
Initial Adjustments ------------------------ Remaining
Charge To Charge Cash Non-Cash Reserve
-------- ----------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Fixed assets impairments $ 38,900 $ 2,600 $ -- $ 41,500 $ --
Lease obligation costs 18,900 (1,300) 683 -- 16,917
Severance costs 12,700 (1,300) 1,296 -- 10,104
Other 3,500 -- -- 3,500 --
-------- ----------- ------- -------- ---------
$ 74,000 $ -- $ 1,979 $ 45,000 $ 27,021
======== =========== ======= ======== =========
</TABLE>
31
<PAGE> 32
3. PROPERTY, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
The cost of property, equipment, and leasehold improvements consisted
of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) DECEMBER 31, 1997 1998
---------- ----------
<S> <C> <C>
Machinery and equipment $ 761,208 $ 871,870
Subscriber devices 506,026 497,238
Furniture and fixtures 63,772 59,996
Leasehold improvements 36,704 20,609
Land, buildings, and building improvements 19,850 3,157
---------- ----------
Total cost $1,387,560 $1,452,870
========== ==========
</TABLE>
The Company does not manufacture any of the subscriber devices or
related transmitting and computerized terminal equipment used in the Company's
operations. The Company purchases its subscriber devices from multiple competing
sources. The Company anticipates that subscriber devices will continue to be
available for purchase from multiple sources, consistent with normal
manufacturing and delivery lead times.
Effective January 1, 1997, the Company shortened the depreciable lives
of its subscriber devices from four to three years, and revised the related
residual values. This change increased net loss for the year ended December 31,
1997 by $16.5 million and net loss per share by $0.16.
4. OTHER NON-CURRENT ASSETS
The cost of other non-current assets consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) DECEMBER 31, 1997 1998
-------- --------
<S> <C> <C>
Licenses and frequencies $452,551 $473,211
Goodwill 49,246 50,495
Restricted cash invested in money
market instruments, at fair value 33,461 33,461
Other intangible assets 59,460 13,920
Deposits for purchase of subscriber devices 13,493 --
Other non-current assets 51,450 58,285
-------- --------
Total cost $659,661 $629,372
======== ========
</TABLE>
Licenses and frequencies consist of amounts paid in conjunction with
the purchase of three nationwide narrowband personal communications services
(PCS) frequencies at a Federal Communications Commission (FCC) auction held in
1994, amounts paid in conjunction with the purchase of blocks of two-way 900 MHz
specialized mobile radio (SMR) major trading area based licenses, amounts paid
to purchase exclusive rights to certain of the SMR frequencies from incumbent
operators, and amounts paid to secure other licenses.
At December 31, 1998, the carrying value of the Company's net assets
related to its Spanish subsidiary was $17.7 million, including goodwill of $11.5
million. The Company is currently evaluating certain alternatives with respect
to this subsidiary. It is reasonably possible, depending upon the outcome of
this evaluation and other factors, that the Company's estimate that it will
recover the carrying value of the net assets of its Spanish subsidiary will
change in the near term. As a result, a provision for the impairment of such
assets may be recorded during the year ending December 31, 1999.
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
98-5 "Reporting on the Costs of Start-Up Activities" (SOP 98-5), effective for
years beginning after December 15, 1998. SOP 98-5 requires the expensing of all
start-up costs as incurred as well as the writing off of the remaining
unamortized balance of capitalized start-up costs at the date of adoption of SOP
98-5. The Company adopted the provisions of SOP 98-5 effective January 1, 1999
and recorded a charge of $37.0 million as the cumulative effect of a change in
accounting principle to write-off all unamortized start-up costs as of January
1, 1999.
32
<PAGE> 33
5. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) DECEMBER 31, 1997 1998
------------------------- -------------------------
(carrying (carrying
value) (fair value) value) (fair value)
<S> <C> <C> <C> <C>
Borrowings under Credit Agreement $ 539,000 $ 539,000 $ 565,000 $ 565,000
10% Senior Subordinated Notes due October 15, 2008 500,000 517,900 500,000 477,473
10.125% Senior Subordinated Notes due August 1, 2007 400,000 418,080 400,000 382,964
8.875% Senior Subordinated Notes due February 1, 2006 300,000 295,770 300,000 292,484
Other 40,491 40,491 50,137 50,137
---------- ------------ ---------- ------------
Total long-term obligations $1,779,491 $ 1,811,241 $1,815,137 $ 1,768,058
========== ============ ========== ============
</TABLE>
Under the Company's $1.0 billion domestic revolving credit agreement
(the Credit Agreement), the Company is able to borrow, provided it meets certain
financial covenants, the lesser of $1.0 billion or an amount based primarily
upon the Company's domestic earnings before interest, income taxes,
depreciation, and amortization (EBITDA) for the most recent fiscal quarter. As
of December 31, 1998, the Company had $565.0 million of borrowings outstanding
under the Credit Agreement, and $65.8 million was available for additional
borrowings as of that date based on the Company's domestic EBITDA for the fourth
quarter of 1998. The availability of additional borrowings in periods subsequent
to December 31, 1998 is based upon the Company's domestic EBITDA for such future
periods. The Company's maximum borrowings under the Credit Agreement are
permanently reduced beginning on June 30, 2001, by the following amounts: 2001 -
$150.0 million; 2002 - $200.0 million; 2003 - $250.0 million; and 2004 - $400.0
million. The Company's Credit Agreement expires on December 31, 2004.
Under the Credit Agreement, the Company may designate all or a portion
of outstanding borrowings to be either a Base Rate Loan or a loan based on the
London Interbank Offered Rate (LIBOR). As of December 31, 1998, the Company had
designated $552.0 million of borrowings as LIBOR loans, which bear interest at a
rate equal to LIBOR plus a spread of 1.50%, and $13.0 million of borrowings as a
Base Rate Loan, which bears interest at a rate equal to the prime rate plus a
spread of 0.50%, based on the Company's total leverage ratio as defined. The
interest rates for the $552.0 million of LIBOR loans as of December 31, 1998
ranged from 6.47% to 6.81%. The interest rate for the $13.0 million Base Rate
Loan as of December 31, 1998 was 8.25%.
The Credit Agreement prohibits the Company from paying cash dividends
or other cash distributions to shareowners. The Credit Agreement also prohibits
the Company from paying more than a total of $2.0 million in connection with the
purchase of Common Stock owned by employees whose employment with the Company is
terminated. The Credit Agreement contains other covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur
indebtedness, engage in transactions with affiliates, dispose of assets, and
engage in mergers, consolidations, and other acquisitions. Amounts owing under
the Credit Agreement are secured by a security interest in substantially all of
the Company's assets, the assets of the Company's subsidiaries, and the capital
stock of the subsidiaries of the Company.
The two credit agreements of the Company's Canadian subsidiaries
provide for total borrowings of approximately $70 million. As of December 31,
1998, approximately $45.1 million of borrowings were outstanding under the
credit facilities. Such borrowings were collateralized by $33.5 million of
restricted cash included in other non-current assets. Additional borrowings are
available under these facilities, provided such borrowings are either
collaterized or certain financial conditions are met. As of December 31, 1998,
the Company's Canadian subsidiaries are in compliance with all financial
covenants of their separate credit agreements; however, the Company has entered
into negotiations with its lenders to modify certain covenants that the Company
believes may not be satisfied during the second and third quarters of 1999.
Although the Company anticipates that these negotiations will be successful and
will not result in a material change in borrowing capacity or interest expense,
no assurance can be made that such result will be attained. Maximum borrowings
that may be outstanding under the credit facilities are permanently reduced
beginning on March 31, 2001, by the following amounts: 2001 - $7 million; 2002 -
$21 million; 2003 - $21 million; and 2004 - $21 million. Both credit agreements
expire on December 31, 2004.
33
<PAGE> 34
The 8.875% Senior Subordinated Notes (8.875% Notes), the 10.125%
Senior Subordinated Notes (10.125% Notes), and the 10% Senior Subordinated
Notes (10% Notes) are redeemable on or after February 1, 1999; August 1, 2000;
and October 15, 2001; respectively, at the option of the Company, in whole or
in part from time to time, at certain prices declining annually to 100 percent
of the principal amount on or after February 1, 2002; August 1, 2003; and
October 15, 2004; respectively, plus accrued interest. The 8.875% Notes, the
10.125% Notes, and the 10% Notes are subordinated in right of payment to all
senior debt, and contain various covenants that, among other things, limit the
ability of the Company and its subsidiaries to incur indebtedness, pay
dividends, engage in transactions with affiliates, sell assets, and engage in
mergers, consolidations, and other acquisitions. The fair values of the 8.875%
Notes, the 10.125% Notes, and the 10% Notes were based on quoted market prices
and discounted cash flow analyses.
On May 14, 1997, the Company redeemed all $200.0 million of its
outstanding 11.75% Senior Subordinated Notes (11.75% Notes), utilizing funds
borrowed under the Company's Credit Agreement. The Company recorded an
extraordinary loss of $15.5 million in the second quarter of 1997 on the early
retirement of the 11.75% Notes. The extraordinary loss was comprised of the
redemption premium of $11.8 million and the write-off of unamortized issuance
costs of $3.7 million.
6. INCOME TAXES
For the years ended December 31, 1996, 1997, and 1998, the Company had
no provision or benefit for income taxes because the deferred benefit from the
operating losses was offset by an increase in the valuation allowance of $36.9
million, $56.4 million, and $57.6 million, respectively. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) DECEMBER 31, 1997 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 167,330 $ 197,983
Deferred revenue 4,394 5,982
Bad debt reserve 2,561 3,768
Other tax credit carryforwards 691 679
Other 6,445 28,482
--------- ---------
Total deferred tax assets 181,421 236,894
Valuation allowance (143,897) (201,496)
--------- ---------
Net deferred tax assets 37,524 35,398
Deferred tax liabilities:
Depreciation (29,232) (23,450)
Amortization (8,292) (11,948)
--------- ---------
Total deferred tax liabilities (37,524) (35,398)
--------- ---------
$ -- $ --
========= =========
</TABLE>
As of December 31, 1998, the Company has net operating loss
carryforwards of approximately $508 million that expire in years 1999 through
2018. Of such amounts, $5.0 million expire in 1999 and $5.1 million expire in
2001. Loss before income taxes attributable to the Company's foreign operations
was $13.1 million, $13.9 million, and $11.8 million for the years ended
December 31, 1996, 1997, and 1998.
7. STOCK OPTIONS
The 1982 Incentive Stock Option Plan, as amended (1982 Plan), for
officers and key employees of the Company provides for the granting of stock
options intended to qualify as Incentive Stock Options (ISOs) to purchase Common
Stock at not less than 100% of the fair market value on the date the option is
granted, as determined by the Board of Directors. No further options may be
granted under the 1982 Plan. As of December 31, 1998, options for 297,111 shares
were exercisable under the 1982 Plan. All options outstanding and exercisable
under the 1982 Plan are fully vested.
34
<PAGE> 35
Options granted were exercisable immediately, or in installments as the
Board of Directors determined at the time it granted such options, and have a
duration of ten years from the date of grant. Any stock issued is subject to
repurchase at the option of the Company, which occurs at the exercise price for
the unvested portion of the shares issued and at fair market value, as defined
or allowed in the Stock Option Agreement, for the vested portion. Such options
vest ratably over a five-year period from the date they first become
exercisable. However, in the event of a change in ownership control of the
Company, all options vest immediately.
The 1991 Stock Option Plan (1991 Plan) for officers and key employees
of the Company provides for the granting of ISOs and non-statutory options to
purchase Common Stock at not less than 100% of the fair market value on the date
the options are granted. The 1991 Plan is administered by the Compensation and
Management Development Committee of the Board of Directors (the Committee).
Approximately 4.7 million shares remained available for grant under the 1991
Plan as of December 31, 1998. A total of 2,645,400 shares were vested and
exercisable under the 1991 Plan as of December 31, 1998. Options granted under
the 1991 Plan are non-transferable except by the laws of descent and
distribution and are exercisable upon vesting, which occurs in installments, as
the Board of Directors or the Committee may determine at the time it grants such
options.
On May 21, 1998, the Company's shareowners approved an amendment to its
1991 Plan to broaden the group of employees eligible to receive stock options
under such plan to include all employees of the Company and its subsidiaries. On
May 22, 1998, the Company granted approximately 2.1 million of options under the
1991 Plan to approximately 2,700 employees at an exercise price of $13.94 per
share, which represented the market price of the Company's Common Stock at the
date of grant. Grants of stock options to eligible new employees are made
following the completion of three months of service.
The Amended and Restated 1992 Directors Compensation Plan (Directors'
Plan), for non-employee Directors of the Company, provides for the granting of
non-statutory options to purchase Common Stock at not less than 100% of the fair
market value on the date the options are granted. The Directors' Plan is
administered by the Committee. The total number of shares of Common Stock with
respect to which options may be granted under the Directors' Plan may not exceed
750,000. Approximately 165,000 shares remain available for grant under the
Directors' Plan as of December 31, 1998. A total of 261,000 shares were vested
and exercisable as of December 31, 1998. Options granted under the Directors'
Plan are non-transferable except by the laws of descent and distribution and are
exercisable upon vesting, which occurs in installments, as the Board of
Directors or the Committee may determine at the time it grants such options.
With respect to the 1991 Plan and the Directors' Plan, notwithstanding
the above, ten business days before a merger or a change in the ownership
control of the Company or a sale of substantially all the assets of the Company,
all options issued vest immediately and become exercisable in full; upon a
merger or a change in ownership control of the Company or the sale of
substantially all the assets of the Company, all options issued under the 1991
Plan and Directors' Plan which have not been exercised terminate.
On June 12, 1997, the Company offered an election to its employees with
options granted during 1995 and 1996 under the 1991 Plan to cancel such options
and accept a lesser number of new options at a lower exercise price, with the
vesting dates being restarted with the new grant dates. As a result of the
election by certain of its employees, the Company canceled 2.9 million of
options with exercise prices ranging from $13.69 to $26.50 and granted
approximately 1.1 million of options to the same optionees with an exercise
price of $8.25 per share.
35
<PAGE> 36
Information concerning options as of December 31, 1996, 1997, and 1998 is
as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Outstanding at January 1 4,664,735 5,968,605 5,687,335
Granted 2,307,100 3,435,873 5,066,000
Canceled (627,960) (3,705,609) (1,241,982)
Exercised (375,270) (11,534) (931,785)
------------ ------------ ------------
Outstanding at December 31 5,968,605 5,687,335 8,579,568
============ ============ ============
Exercisable at December 31 1,920,085 2,450,795 3,253,511
============ ============ ============
Option price range-options outstanding $2.67-$26.50 $2.67-$25.50 $2.67-$25.50
Option price range-options exercised $2.73-$14.38 $2.73-$ 9.25 $2.67-$14.38
</TABLE>
Weighted-average exercise prices are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Outstanding at January 1 $ 12.22 $ 15.90 $ 9.47
Granted 22.33 9.54 12.59
Canceled 17.19 19.89 12.79
Exercised 7.53 7.49 8.16
Outstanding at December 31 15.90 9.47 10.98
Exercisable at December 31 9.65 9.12 9.85
</TABLE>
Certain information is being presented based on a range of exercise
prices as of December 31, 1998, as follows:
<TABLE>
<CAPTION>
$2.67-$8.69 $9.06-$13.38 $13.63-$25.50
----------- ------------ -------------
<S> <C> <C> <C>
Number of shares outstanding 2,946,560 2,877,468 2,755,540
Weighted-average exercise price $ 7.18 $ 11.97 $ 14.00
Weighted-average remaining
contractual life 7.06 8.28 9.11
Number of shares exercisable 1,622,223 960,468 670,820
Weighted-average exercise
price of shares exercisable $ 7.02 $ 11.69 $ 14.07
</TABLE>
The Company adopted the pro forma disclosure provisions of the
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123) in 1996. As required by SFAS 123, pro forma information
regarding net loss and net loss per share has been determined as if the Company
had accounted for employee stock options and stock-based awards granted
subsequent to December 31, 1994 under the fair value method provided for under
SFAS 123. The weighted-average fair value of stock options granted during 1996,
1997, and 1998 was $13.58, $5.98, and $7.21, respectively. The fair value for
the stock options granted to officers and key employees of the Company after
January 1, 1995 was estimated at the date of the grant using the Black-Scholes
option pricing model with the following assumptions: risk-free interest ranging
from 5.54% to 6.83% for 1996, ranging from 5.46% to 6.89% for 1997, and ranging
from 4.09% to 5.72% for 1998; a dividend yield of 0%; volatility factors of the
expected market price of the Company's Common Stock ranging from 53.2% to 54.4%
for 1996, ranging from 54.4% to 57.6% for 1997, and ranging from 56.8% to 60.0%
for 1998; and a weighted average expected life of each option ranging from 5.5
years to 6.7 years for 1996, 1997, and 1998.
36
<PAGE> 37
For purposes of the pro forma disclosures, the estimated fair market
value of the options and stock-based awards is amortized to expense over the
vesting period. The Company's pro forma information is as follows (in thousands,
except for net loss per common share information):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C> <C>
Net loss As reported $(104,320) $(156,947) $(162,009)
Pro forma $(110,533) $(172,884) $(179,834)
Net loss per common share As reported $ (1.02) $ (1.53) $ (1.57)
(basic and diluted) Pro forma $ (1.08) $ (1.68) $ (1.74)
</TABLE>
Because SFAS 123 is applicable only to options and stock-based awards
granted subsequent to December 31, 1994, its pro forma effect will not be fully
reflected until 2001.
8. COMMITMENTS
The Company has operating leases for office and transmitting sites with
lease terms ranging from a month to approximately ten years. There are no
significant renewal or purchase options. Total rent expense for 1996, 1997, and
1998 was approximately $60.7 million, $69.5 million, and $80.5 million,
respectively.
The following is a schedule by year of future minimum rental payments
required under operating leases that have remaining noncancelable lease terms in
excess of one year as of December 31, 1998.
YEAR ENDING DECEMBER 31: (IN THOUSANDS)
<TABLE>
<S> <C>
1999 $ 24,225
2000 18,680
2001 13,004
2002 8,019
2003 3,671
Later years 4,941
----------
Total minimum payments required $ 72,540
==========
</TABLE>
As part of the Company's Restructuring, certain leases will be
terminated prior to their scheduled expiration, generally upon the payment of a
termination fee, and certain office space and facilities will be subleased
through the expiration of the related leases, generally for amounts less than
the Company's lease commitments for such space. The aforementioned leases are
included in the table above based on the term of the lease without consideration
of any potential sublease income.
9. CONTINGENCIES
The Company is involved in various lawsuits arising in the normal
course of business. In management's opinion, the ultimate outcome of these
lawsuits will not have a material adverse effect on the Company's business,
financial position, or results of operations.
37
<PAGE> 38
10. COMMON STOCK AND NET LOSS PER SHARE
Net loss per share amounts are computed based on the weighted average
number of common shares outstanding. The number of shares used to compute per
share amounts for the years ended December 31, 1996, 1997, and 1998, was 102.5
million, 102.6 million, and 103.4 million, respectively. The average number of
options to purchase shares of the Company's Common Stock during the years ended
December 31, 1996, 1997, and 1998, were 5.6 million, 6.0 million, and 7.8
million, respectively, at exercise prices ranging from $2.67 per share to $25.50
per share. These stock options were not included in the computation of diluted
earnings per share because the effect of assuming their exercise would have been
antidilutive.
The Company has 275.0 million of authorized shares, of which 250.0
million are Common Stock and 25.0 million are preferred stock. As of December
31, 1998, approximately 15.8 million shares of Common Stock were reserved for
the issuance of shares under the Company's stock option and other plans. As of
December 31, 1998, there were no preferred shares issued or outstanding.
On May 23, 1996, the Company's shareowners approved an employee stock
purchase plan of up to 2.0 million shares of the Company's Common Stock. Under
the employee stock purchase plan, an employee may elect to purchase shares of
the Company's Common Stock at the end of a predetermined period at a price equal
to 85% of the fair market value of the Company's Common Stock at the beginning
or end of such period, whichever is lower. The Company implemented two-year
employee stock purchase plans on January 1, 1997 and 1998, and a one-year plan
on January 1, 1999.
11. NON-RECURRING CHARGES
During the year ended December 31, 1997, the Company recorded a
provision of $12.6 million to write-down certain subscriber devices to their net
realizable value. During the year ended December 31, 1996, the Company recorded
a provision of $22.5 million to write-off certain subscriber devices deemed to
be unrecoverable that had been distributed through a national marketing
affiliate to customers who later discontinued service.
12. STATEMENT OF CASH FLOWS INFORMATION
Cash and cash equivalents include highly liquid debt instruments with
an original maturity of three months or less. As of December 31, 1998, cash
equivalents also include investments in money market instruments, which are
carried at fair market value. Cash payments made for interest for the years
ended December 31, 1996, 1997, and 1998 were approximately $115.5 million,
$143.5 million, and $136.2 million, respectively, net of $15.9 million and
$21.9 million, respectively, of interest capitalized during the years ended
December 31, 1997 and 1998. During the year ended December 31, 1998, the Company
utilized $13.5 million of deposits made in 1997 for the purchase of subscriber
devices. There were no significant federal or state income taxes paid or
refunded for the years ended December 31, 1996, 1997, and 1998.
13. EMPLOYEE BENEFIT PLANS
The Company has adopted a plan to provide retirement benefits under the
provisions of Section 401(k) of the Internal Revenue Code (the Code) for all
employees who have completed a specified term of service. Effective January 1,
1996, Company contributions equal 50% of employee contributions up to a maximum
of 6% of the employee's compensation. Employees may elect to contribute up to
15% of their compensation on a pre-tax basis, not to exceed the maximum amount
allowed as determined by the Code. The Company's contributions aggregated
approximately $1.9 million in 1996, $2.2 million in 1997, and $2.8 million in
1998.
38
<PAGE> 39
14. STOCK PURCHASE RIGHTS
In September 1994, the Board of Directors of the Company adopted a
Stock Purchase Rights Plan and declared a distribution of one common share
purchase right for each outstanding share of the Company's Common Stock. As of
September 28, 1994, certificates representing shares of the Company's Common
Stock also represent ownership of one common share purchase right. In January
1999, the Board of Directors of the Company amended the Rights Plan to eliminate
certain provisions held to be unenforceable under Delaware law.
Generally, the rights will become exercisable only if a person or group
(i) acquires 20% or more of the Company's Common Stock or (ii) announces a
tender offer that would result in ownership of 20% or more of the Company's
Common Stock or (iii) is declared to be an "Adverse Person" by the Board of
Directors. Adverse Person includes any person or group who owns at least 10% of
the Company's Common Stock and attempts an action that would adversely impact
the Company.
Once a person or group has acquired 20% or more of the outstanding
Common Stock of the Company, each right may entitle its holder (other than the
20% person or group) to purchase, at an exercise price of $150, shares of Common
Stock of the Company (or of any company that acquires the Company) at a price
equal to 50% of their current market price. Under certain circumstances, the
Board of Directors may exchange the rights for Common Stock (or equivalent
securities) on a one-for-one basis.
Until declaration of an Adverse Person, or ten (10) days after public
announcement that any person or group has acquired 20% or more of the Common
Stock of the Company, the rights are redeemable at the option of the Board of
Directors. Thereafter, they may be redeemed by the Board of Directors in
connection with certain acquisitions not involving any acquiring person or
Adverse Person or in certain circumstances following a disposition of shares by
the acquiring person or Adverse Person. The redemption price is $0.01 per right.
The rights will expire on September 27, 2004, unless redeemed prior to that
date.
15. SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131). The Company has adopted
SFAS 131 in its 1998 annual financial statements. SFAS 131 requires that a
public company report annual and interim financial and descriptive information
about its reportable operating segments pursuant to criteria that differ from
current accounting practice. Operating segments, as defined, are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance.
The Company has determined that it has two reportable segments, core
operations and advanced messaging operations. The Company's basis for the
segments relates to the types of products and services each segment provides.
The core operating segment includes the traditional display and alphanumeric
services, which are basic one-way services, and 1 1/2-way paging services. The
advanced messaging operating segment includes the new two-way wireless messaging
services, advanced wireless integration products, consumer content, VoiceNow
service, Iridium WorldPage, and other future advanced messaging products.
39
<PAGE> 40
The following table presents certain information related to the Company's
business segments as of December 31, 1996, 1997, and 1998 or for the years ended
December 31, 1996, 1997, and 1998.
<TABLE>
<CAPTION>
(IN THOUSANDS) 1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net Revenues (1):
Core(2) $ 705,840 $ 839,217 $ 966,204
Advanced Messaging -- 272 2,151
---------- ---------- ----------
$ 705,840 $ 839,489 $ 968,355
========== ========== ==========
Depreciation and amortization:
Core(2) $ 213,440 $ 276,590 $ 266,319
Advanced Messaging -- 12,852 14,940
---------- ---------- ----------
$ 213,440 $ 289,442 $ 281,259
========== ========== ==========
Operating income (loss):
Core(2) $ 20,897 (3) $ 31,399 (4) $ 17,406 (5)
Advanced Messaging -- (23,891) (39,726)(6)
---------- ---------- ----------
$ 20,897 $ 7,508 $ (22,320)
========== ========== ==========
Adjusted EBITDA(7):
Core(2) $ 256,837 $ 320,589 $ 357,725
Advanced Messaging -- (11,039) (24,786)
----------- ---------- ----------
$ 256,837 $ 309,550 $ 332,939
=========== ========== ==========
Capital expenditures:
Core(2) $ 390,685 $ 224,459 $ 199,610
Advanced Messaging 46,703 103,906 97,431
----------- ---------- ----------
$ 437,388 $ 328,365 $ 297,041
=========== ========== ==========
Net interest expense(8):
Core(2) $ 96,365 $ 90,458 $ 74,729
Advanced Messaging 27,970 57,233 66,963
----------- ---------- ----------
$ 124,335 $ 147,691 $ 141,692
=========== ========== ==========
Free Cash Flow(9):
Core(2) $ (230,213) $ 5,672 $ 83,386
Advanced Messaging (74,673) (172,178) (189,180)
----------- ---------- ----------
$ (304,886) $ (166,506) $ (105,794)
=========== ========== ==========
Total assets:
Core(2) $ 1,077,772 $1,045,761 $ 932,889
Advanced Messaging 361,841 551,472 648,355
----------- ---------- ----------
$ 1,439,613 $1,597,233 $1,581,244
=========== ========== ==========
</TABLE>
(1) Net Revenues are revenues from services, rent, and maintenance plus product
sales less the cost of products sold.
(2) The international operations of the Company currently consist entirely of
core services and accordingly are included in the Company's core business
segment.
(3) Operating income for the core business segment for 1996 includes a $22.5
million non-recurring charge related to the write-off of certain subscriber
devices deemed to be unrecoverable that had been distributed through a
national marketing affiliate to customers who later discontinued service.
See Note 11.
(4) Operating income for the core business segment for 1997 includes a $12.6
million non-recurring charge to write-down certain subscriber devices to
their net realizable value. See Note 11.
(5) Operating income for the core business segment for 1998 includes a
restructuring charge of $74.0 million. See Note 2.
(6) Operating loss for the advanced messaging business segment for 1998 includes
a provision of $4.1 million to write-off a deposit determined to be
non-recoverable.
(7) Adjusted EBITDA is earnings before interest, income taxes, depreciation,
amortization, minority interest, equity in loss of an unconsolidated
subsidiary, restructuring charge, non-recurring charges, and extraordinary
loss.
(8) Net interest expense is interest expense less interest income.
(9) Free Cash Flow is Adjusted EBITDA less capital expenditures (excluding
payments for spectrum licenses) and debt service.
Adjusted EBITDA and Free Cash Flow are not measures defined in generally
accepted accounting principles and should not be considered in isolation or as a
substitute for measures of performance in accordance with generally accepted
accounting principles.
40
<PAGE> 41
16. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial information for the two years ended December 31, 1998
is summarized below.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1997
Services, rent and maintenance
revenues $ 188,880 $ 199,584 $ 210,611 $ 219,386
Product sales 36,368 33,666 35,753 36,728
--------- --------- --------- ---------
Total revenues 225,248 233,250 246,364 256,114
Cost of products sold (31,357) (28,805) (30,341) (30,984)
--------- --------- --------- ---------
193,891 204,445 216,023 225,130
Operating income (loss) (188) 6,120 8,263 (6,687)(1)
Loss before extraordinary item (37,314) (31,963) (29,401) (42,725)(1)
Extraordinary loss -- (15,544) -- --
Net loss (37,314) (47,507) (29,401) (42,725)(1)
Net loss per share (basic and diluted):
Loss before extraordinary item (0.36) (0.31) (0.29) (0.42)(1)
Extraordinary loss -- (0.15) -- --
Net loss per share (0.36) (0.46) (0.29) (0.42)(1)
1998
Services, rent and maintenance
revenues $ 229,861 $ 235,172 $ 239,689 $ 240,802
Product sales 25,889 29,329 25,382 19,903
--------- --------- --------- ---------
Total revenues 255,750 264,501 265,071 260,705
Cost of products sold (21,103) (23,161) (18,276) (15,132)
--------- --------- --------- ---------
234,647 241,340 246,795 245,573
Operating income (loss) (56,605)(2) 19,803 17,998 (3,516)(3)
Net loss (92,372)(2) (15,619) (16,428) (37,590)(3)
Net loss per share (basic and diluted) (0.90)(2) (0.15) (0.16) (0.36)(3)
</TABLE>
(1) Operating loss for the fourth quarter of 1997 includes a $12.6 million
non-recurring charge related to the write-down of certain subscriber devices
to their net realizable value. See Note 11.
(2) Operating loss for the first quarter of 1998 includes a restructuring charge
of $74.0 million. See Note 2.
(3) Operating loss for the fourth quarter of 1998 includes a provision of $4.1
million to write-off a deposit determined to be non-recoverable during the
fourth quarter of 1998.
41
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
---------------------
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Registrant's definitive proxy
statement for the Annual Meeting of Shareowners on May 19, 1999, pages 3 through
6 under the caption "Proposal No. 1 - Election of Three Directors."
Information regarding the executive officers is included in Part I
under the caption "Executive Officers of the Company".
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, is incorporated herein by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Shareowners on
May 19, 1999, page 13, under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Registrant's definitive proxy
statement for the Annual Meeting of Shareowners on May 19, 1999, pages 6
through 12, under the captions "Proposal No. 1 - Election of Three Directors -
Compensation of Directors" and "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Registrant's definitive proxy
statement for the Annual Meeting of Shareowners on May 19, 1999, pages 2 through
5, under the captions "Beneficial Ownership of Common Stock" and "Proposal No.
1 - Election of Three Directors."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Registrant's definitive proxy
statement for the Annual Meeting of Shareowners on May 19, 1999, page 11, under
the caption "Contracts Relating to Employment."
42
<PAGE> 43
----------------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are filed
as part of this report.
2. Financial Statements Schedules.
The schedule listed in the accompanying index to financial
statements and financial statement schedules is filed as part of
this report.
3. Exhibits.
The exhibits listed in the accompanying index to exhibits are
filed as part of this annual report.
(b) Reports on Form 8-K.
None.
43
<PAGE> 44
PAGING NETWORK, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
[ITEM 14 (a)]
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors 24
Consolidated Balance Sheets as of December 31, 1998 and 1997 26
For each of the three years in the period ended December 31, 1998:
Consolidated Statements of Operations 25
Consolidated Statements of Cash Flows 27
Consolidated Statements of Shareowners' Deficit 28
Notes to Consolidated Financial Statements 29
Consolidated financial statement schedule for each of the
three years in the period ended December 31, 1998:
II - Valuation and qualifying accounts 45
Report of Independent Auditors 46
</TABLE>
All other schedules have been omitted since the required information is
not present or is not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements, including the notes thereto.
44
<PAGE> 45
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1996, 1997, AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS
BEGINNING COSTS AND AND OTHER BALANCE AT
OF PERIOD EXPENSES ADJUSTMENTS END OF PERIOD
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1996 $ 4,704 $ 14,033 $ 13,743 $ 4,994
1997 4,994 18,343 16,667 6,670
1998 6,670 20,516 16,923 10,263
Reserve for unrecoverable subscriber
devices:
1996 $ 1,345 $ 756 $ (319) $ 2,420
1997 2,420 4,184 4,064 2,540
1998 2,540 5,193 3,411 4,322
Valuation allowance on
deferred tax assets:
1996 $ 50,642 $ 36,890 $ -- $ 87,532
1997 87,532 56,365 -- 143,897
1998 143,897 57,599 -- 201,496
Accrued restructuring costs:
1996 $ -- $ -- $ -- $ --
1997 -- -- -- --
1998 -- 29,000 1,979 27,021
</TABLE>
45
<PAGE> 46
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareowners
Paging Network, Inc.
We have audited the consolidated financial statements of Paging Network, Inc.
as of December 31, 1998 and 1997, and for each of the three years in the
period ended December 31, 1998, and have issued our report thereon dated
February 15, 1999. Our audits also included Schedule II - Valuation and
Qualifying Accounts. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
February 15, 1999
46
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PAGING NETWORK, INC.
Date: March 22, 1999 By: /s/ John P. Frazee, Jr.
-------------------------------------
John P. Frazee, Jr.
Chairman of the Board of Directors,
President and Chief Executive
Officer (Principal Executive Officer)
Date: March 22, 1999 By: /s/ Mark A. Knickrehm
-------------------------------------
Mark A. Knickrehm
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
47
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the dates indicated.
PAGING NETWORK, INC.
Date: March 22, 1999 By: /s/ John P. Frazee, Jr.
------------------------------------
John P. Frazee, Jr.,
Chairman of the Board of Directors,
President, Chief Executive
Officer, and Director
Date: March 22, 1999 By: /s/ Richard C. Alberding
-------------------------------------
Richard C. Alberding, Director
Date: March 22, 1999 By: /s/ Hermann Buerger
-------------------------------------
Hermann Buerger, Director
Date: March 22, 1999 By: /s/ Jeffrey M. Cunningham
------------------------------------
Jeffrey M. Cunningham, Director
Date: March 22, 1999 By: /s/ John S. Llewellyn, Jr.
-------------------------------------
John S. Llewellyn, Jr., Director
Date: March 22, 1999 By: /s/ Lee M. Mitchell
-------------------------------------
Lee M. Mitchell, Director
Date: March 22, 1999 By: /s/ Carl D. Thoma
-------------------------------------
Carl D. Thoma, Director
Date: March 22, 1999 By: /s/ Roy A. Wilkens
-------------------------------------
Roy A. Wilkens, Director
48
<PAGE> 49
PAGING NETWORK, INC.
INDEX TO EXHIBITS
[ITEM 14 (a)]
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant, as
amended (1)
3.3 By-laws of the Registrant, as amended (11)
4.1 Articles Sixth, Seventh, Eighth, Twelfth, and Thirteenth of
the Restated Certificate of Incorporation of the Registrant,
as amended (1)
4.2 Articles II, III, and VII and Section 1 of Article VIII of the
Registrant's Bylaws, as amended (11)
4.3 Form of Indenture (2)
4.4 Shareholder Rights Agreement (3)
4.5 First Amendment to the Shareholder Rights Agreement (11)
9 None
10.1 1982 Incentive Stock Option Plan, as amended and restated (1)
10.2 Form of Stock Option Agreement executed by recipients of
options granted under the 1982 Incentive Stock Option Plan (1)
10.3 Form of Management Agreement executed by recipients of options
granted under the 1982 Incentive Stock Option Plan (1)
10.4 Form of Vesting Agreement executed by recipients of options
granted under the 1982 Incentive Stock Option Plan (1)
10.5 Form of Indemnification Agreement executed by recipients of
options granted under the 1991 Stock Option Plan (1)
10.6 Form of First Amendment to Vesting Agreement executed by
recipients of options granted under the 1982 Incentive Stock
Option Plan (1)
10.7 Form of First Amendment to Management Agreement executed by
recipients of options granted under the 1982 Incentive Stock
Option Plan (1)
10.8 Amended and Restated Credit Agreement dated as of May 2, 1995
among the Registrant, NationsBank of Texas, N.A., Toronto
Dominion (Texas), Inc., The First National Bank of Boston, and
certain other lenders (4)
10.9 Amendment No. 1 dated as of December 12, 1995 to the Amended
and Restated Credit Agreement dated as of May 2, 1995 among
the Registrant, NationsBank of Texas, N.A., Toronto Dominion
(Texas), Inc., The First National Bank of Boston, and certain
other lenders (5)
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.10 Second Amended and Restated Credit Agreement dated as of June 5, 1996,
among the Registrant, NationsBank of Texas, N.A., Toronto Dominion
(Texas), Inc., The First National Bank of Boston, Chase Securities Inc.,
and certain other lenders (6)
10.11 Loan Agreement dated as of June 5, 1996 among Paging Network of Canada
Inc., The Toronto-Dominion Bank, and such other financial institutions
as become banks (6)
10.12 Loan Agreement dated as of June 5, 1996 among Madison Telecommunications
Holdings, Inc., The Toronto-Dominion Bank, and such other financial
institutions as become banks (6)
10.13 1997 Restricted Stock Plan, as approved by shareowners on May 22, 1997
(7)
10.14 Employment Agreement dated as of August 4, 1997 among the Registrant and
John P. Frazee, Jr. (8)
10.15 First Amendment dated April 18, 1997 to the Loan Agreement dated as of
June 5, 1996 among Paging Network of Canada Inc., The Toronto-Dominion
Bank, and such other financial institutions as become banks (9)
10.16 First Amendment dated April 18, 1997 to the Loan Agreement dated as of
June 5, 1996 among Madison Telecommunications Holdings, Inc., The
Toronto-Dominion Bank, and such other financial institutions as become
banks (9)
10.17 1992 Director Compensation Plan, as amended and restated on April 22,
1998 (10)
10.18 Amended and Restated 1991 Stock Option Plan, as approved by shareowners
on May 21, 1998 (10)
10.19 Letter dated May 26, 1998 regarding Second Amendments effective
March 31, 1998 to the Loan Agreements dated as of June 5, 1996: (1)
among Paging Network of Canada Inc., The Toronto-Dominion Bank, and
such other financial institutions as become banks (2) among Madison
Telecommunications Holdings, Inc., The Toronto-Dominion Bank, and
such other financial institutions as become banks (10)
10.20 Forms of Stock Option Agreement executed by recipients of options
granted under the 1991 Stock Option Plan (11)
10.21 Employee Stock Purchase Plan, as amended on December 16, 1998 (11)
10.22 Severance Pay Plan dated as of January 20, 1999 (11)
10.23 Form of Stock Option Agreement executed by recipients of options granted
under the 1992 Director Compensation Plan (11)
12 Ratio of Earnings to Fixed Charges for the years ended
December 31, 1994, 1995, 1996, 1997, and 1998 (11)
21 List of the Registrant's Subsidiaries (11)
23 Consent of Independent Auditors (11)
27 Financial Data Schedule (11)
</TABLE>
<PAGE> 51
- --------------------------------------------------------------------------------
(1) Previously filed as an exhibit to Registration Statement
No. 33-42253 on Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to Registration Statement
No. 33-46803 on Form S-1 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Registrant's Report on
Form 8-K on September 15, 1994.
(4) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1995.
(5) Previously filed as an exhibit to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995.
(6) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1996.
(7) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1997.
(8) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1997.
(9) Previously filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.
(10) Previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1998.
(11) Filed herewith.
<PAGE> 1
EXHIBIT 3.3
BY - LAWS
(Amended and Restated
December 16, 1998)
OF
PAGING NETWORK, INC.
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
in the State of Delaware shall be at 1209 Orange Street, Wilmington, Delaware.
The name of the Corporation's registered agent at such address shall be The
Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. An annual meeting of the stockholders
shall be held for the purpose of electing Directors and conducting such other
business as may come before the meeting. The date, time and place of the annual
meeting shall be determined by resolution of the Board of Directors. The Board
of Directors may postpone a previously scheduled annual meeting of stockholders
by providing public notice of such postponement prior to such previously
scheduled meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof. Special meetings of the stockholders may be called only by the
Chairman of the Board or the President, and shall be called within 10 days
after receipt of the written request of the Board of Directors, pursuant to a
resolution approved by a majority of the Whole Board (as defined below). Any
such resolution shall be sent to the Chairman of the Board or the President and
the Secretary of the Corporation and shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting is limited to the
purpose stated in the notice. For the purposes of these By-Laws, the term
"Whole Board" is defined as the total number of Directors which the Corporation
would have if there were no vacancies.
1
<PAGE> 2
Section 3. Notice. Written or printed notice of every annual or
special meeting of the stockholders, stating the place, date, time, and, in the
case of special meetings, the purpose of purposes, of such meeting, shall be
given to each stockholder entitled to vote at such meeting not less than ten,
nor more than sixty days before the date of the meeting. All such notices shall
be delivered, either personally or by mail, by or at the direction of the
Chairman of the Board or the President or the Board of Directors, and if
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his or her address as it
appears on the records of the Corporation, with postage prepaid. When a meeting
is adjourned to another place, date or time, written notice need not be given
of the adjourned meeting if the place, date and time thereof are announced at
the meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least ten days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, specifying the address of and the
number of shares registered in the name of each stockholder.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders except as
otherwise provided by statute or by the Certificate of Incorporation. If a
quorum is not present, the holders of the shares present in person or
represented by proxy at the meeting, and entitled to vote thereat, shall have
the power, by the affirmative vote of the holders of a majority of such shares,
to adjourn the meeting to another time and/or place, without notice other than
announcement at the meeting at which the adjournment was taken, until a quorum
shall be present or represented.
Section 6. Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors including
matters included pursuant to Rule 14a-8 of the Securities and Exchange
Commission; (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (c) otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be otherwise properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Senior Vice President, General Counsel and Assistant Secretary of the
Corporation. To be timely, a stockholder's notice must be addressed to the
Senior Vice President, General Counsel and Assistant Secretary of the
Corporation and received at the principal executive offices of the Corporation,
not more than 120 days and not less than 80 days prior to the first anniversary
of the
2
<PAGE> 3
preceding year's annual meeting; provided, however, that in the event that the
date of the meeting is more than 30 days before or after such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business of the fifteenth day following the date on which notice of
the date of the annual meeting was mailed or public disclosure was made,
whichever first occurs.
A stockholder's notice to the Senior Vice President, General Counsel
and Assistant Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business and of any beneficial owner on behalf of which the stockholder is
acting; (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and by any such beneficial owner; and (d)
any material interest of the stockholder and of any such beneficial owner in
such business. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 6 of Article II.
The presiding officer of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with this Section 6 of Article II, and
if the presiding officer should so determine, the presiding officer shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Section 7. Inspectors. The Board of Directors shall appoint inspectors
of election to act as judges of the voting and to determine those entitled to
vote at any meeting of stockholders, or any adjournment thereof, in advance of
such meeting, but if the Board of Directors fails to make such appointments or
if an appointee fails to serve, the presiding officer of the meeting of
stockholders may appoint substitute inspectors.
Section 8. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the Corporation
on the record date for the meeting and such votes may be cast either in person
or by written proxy. Every proxy must be duly executed and filed with the
Secretary of the Corporation. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. The vote upon any question
brought before a meeting of the stockholders may be by voice vote, unless
otherwise required by these By-Laws or unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or by proxy at such meeting shall so determine. Every vote taken by
written ballot shall be counted by the inspectors of election. When a quorum is
present at any meeting, the vote of the holders of a majority of the stock
which has voting power present in person or represented by proxy and which has
actually voted shall decide any question properly brought before such meeting,
except the election or
3
<PAGE> 4
removal of Directors or as otherwise provided in these By-Laws, the Certificate
of Incorporation or a Preferred Stock Designation or by applicable law. With
respect to any election or questions required to be decided by any class of
stock voting as a class, the vote of the holders of a majority of such class of
stock present in person or by proxy and which actually voted shall decide any
such election or question.
Section 9. Order of Business. Unless otherwise determined by the Board
of Directors prior to the meeting, the presiding officer of the meeting of
stockholders shall determine the order of business and shall have the authority
in his discretion to regulate the conduct of any such meeting, including,
without limitation, by imposing restrictions on the persons (other than
stockholders of the Corporation or their duly appointed proxies) who may attend
any such meeting of stockholders, by ascertaining whether any stockholder or
his proxy may be excluded from any meeting of stockholders based upon any
determination by the presiding officer, in his sole discretion, that any such
person has unduly disrupted or is likely to disrupt the proceedings thereat,
and by determining the circumstances in which any person may make a statement
or ask questions at any meeting of stockholders.
Section 10. Adjournment of Meetings. The Chairman of the Board or the
President of the Corporation shall have the power to adjourn any meeting of
stockholders, whether or not a quorum is present, to another time and/or place,
without notice other than announcement at the meeting at which adjournment was
taken.
ARTICLE III
NOMINATION OF DIRECTOR CANDIDATES
Section 1. Notification of Nominees. Subject to the rights of holders
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, nominations for the election of Directors may be
made by the Board of Directors or a committee appointed by the Board of
Directors or by any stockholder entitled to vote in the election of Directors
generally. However, any stockholder entitled to vote in the election of
Directors generally may nominate one or more persons for election as Directors
at a meeting, so long as the stockholder gives timely notice thereof in writing
to the Senior Vice President, General Counsel and Assistant Secretary of the
Corporation. To be timely, a stockholder's intent to make such nomination or
nominations must be addressed to the Senior Vice President, General Counsel and
Assistant Secretary of the Corporation and received at the principal executive
offices of the Corporation not more than 120 days and not less than 80 days
prior to the first anniversary of the preceding year's annual meeting or the
date of the special meeting; provided, however, that in the event that the date
of the annual meeting is more than 30 days before or after such anniversary
date or the date of the special meeting was not publicly announced by the
Corporation by mail, press release or otherwise more than 90 days prior to the
meeting, notice by the stockholder to be timely must be so received not later
than the close of business on the fifteenth day following the day on which
notice of the date of the annual meeting or special meeting was mailed or
public disclosure was made, whichever first occurs.
4
<PAGE> 5
Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the signed consent of each
nominee to serve as Director of the Corporation if so elected.
Section 2. Substitution of Nominees. If a person is validly designated
as a nominee in accordance with Section 1 of this Article III, and shall
thereafter become unable or unwilling to stand for election to the Board of
Directors, the Board of Directors or the stockholder who proposed such nominee,
as the case may be, may designate a substitute nominee upon delivery, not fewer
than five days prior to the date of the meeting for the election of such
nominee, of a written notice to the Secretary setting forth such information
regarding such substitute nominee as would have been required to be delivered
to the Secretary pursuant to Section 1 of this Article III, had such substitute
nominee been initially proposed as a nominee. Such notice shall include a
signed consent to serve as a Director of the Corporation, if elected, of each
such substitute nominee.
Section 3. Compliance with Procedures. If the presiding officer of the
meeting for the election of Directors determines that a nomination for any
candidate for election as a Director at such meeting was not made in accordance
with the applicable provisions of these By-Laws, such person will not be
eligible for election as a Director and such nomination shall be void;
provided, however, that nothing in these By-Laws shall be deemed to limit any
voting rights upon the occurrence of dividend arrearages provided to holders of
Preferred Stock pursuant to the Preferred Stock Designation for any series of
Preferred Stock.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall
be managed by or under the direction of its Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
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Section 2. Number, Qualification, Election and Terms. Except as
otherwise fixed by, or pursuant to, the provisions of Article FOURTH of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
the number of Directors shall be fixed from time to time by resolution of the
Board of Directors, but shall not be less than three nor more than fifteen
persons. The Directors, other than those who may be elected by the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
number as possible, as determined by the Board of Directors. One class shall
hold office initially for a term expiring at the annual meeting of stockholders
to be held in 1992, another class to hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1993, another class to hold
office initially for a term expiring at the annual meeting of stockholders to
be held in 1994, with the members of each class to hold office until their
successors are elected and qualified. At each succeeding annual meeting of the
stockholders of the Corporation, the successors of the class of directors whose
term expires at that meeting shall be elected by plurality vote by written
ballot to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
Section 3. Removal. Subject to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
any Director may be removed from office by the stockholders in the manner
provided in this Section 3 of Article IV. At any annual meeting of the
stockholders of the Corporation or at any special meeting of the stockholders
of the Corporation, the notice of which shall state that the removal of a
Director or Directors is among the purposes of the meeting, the affirmative
vote of the holders of at least 80 percent of the combined voting power of the
outstanding shares of Voting Stock (as defined below), voting together as a
single class, may remove such Director or Directors. For the purposes of these
By-Laws, "Voting Stock" shall mean the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of Directors.
Section 4. Vacancies and New Directorships. Except as otherwise fixed
by or provided for or pursuant to the provisions of Article FOURTH of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
vacancies and newly created directorships resulting from any increase in the
authorized number of Directors shall be filled solely by the affirmative vote
of a majority of the Directors then in office though less than a quorum, or by
a sole remaining Director, except as may be required by law. Any Director so
chosen shall hold office for the remainder of the full term of the class of
Directors in which the new directorship was created or the vacancy occurred and
until such Director's successor shall have been elected and qualified. No
decrease in the authorized number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
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Section 5. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice immediately after the annual meeting of
the stockholders and at such other time and place as shall from time to time be
determined by the Board of Directors.
Section 6. Special Meetings and Notice. Special meetings of the Board
of Directors may be called by the Chairman of the Board or the President on one
day's written notice to each Director by whom such notice is not waived, given
either personally or by mail, telephone, telegram, telex, facsimile or similar
medium of communication, and shall be called by the President or the Secretary
in like manner and on like notice on the written request of any three
Directors.
Section 7. Resignation. Any Director may resign at any time by giving
written notice of his resignation to the Chairman of the Board or the
Secretary, to be effective upon its acceptance by the Board of Directors or at
the time specified in such notice.
Section 8. Quorum. Subject to Section 4 of this Article IV, at all
meetings of Directors, a majority of the total number of Directors then in
office shall constitute a quorum for the transaction of business. Except for
the designation of committees (as provided in Section 9 of this Article IV),
the vote of a majority of Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present thereat
may adjourn the meeting from time to time to another place, time or date,
without notice other than announcement at the meeting, until a quorum shall be
present.
Section 9. Committees. The Board of Directors may, by resolution
passed by a majority of the Whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation, which
to the extent provided in such resolution shall have and may exercise the
powers of the Board of Directors in the management and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it, except as otherwise limited by statute. The Board
of Directors may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and report
the same to the Directors when required. Each committee of the Board of
Directors may fix its own rules or procedure and shall hold its meetings as
provided by such rules, except as may be otherwise be provided by the
resolution of the Board of Directors designating such committee, and, unless
otherwise prescribed by the Board of Directors, the presence of at least a
majority of the members of such committee shall be necessary to constitute a
quorum.
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Section 10. Compensation. The Directors may be paid for expenses of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated
salary. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of committees designated by the Board of Directors may be allowed like
compensation for attending committee meetings.
Section 11. Rules. The Board of Directors may adopt such special rules
and regulations for the conduct of their meetings and the management of the
affairs of the Corporation as they may deem proper, not inconsistent with law,
the Certificate of Incorporation or these By-Laws.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the Corporation shall be chosen by
the Board of Directors and shall consist of a president, a chairman of the
board, a vice chairman of the board, one or more vice-presidents, a secretary,
a treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the Board of Directors. Any number of offices may be
held by the same person. In its discretion, the Board of Directors may choose
not to fill any office for any period, as it may deem advisable, except the
offices of the president and secretary.
Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be.
Vacancies may be filled or new offices created and filled at any meeting of the
Board of Directors. Each officer shall hold office until the next annual
meeting of the Board of Directors or until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term by a majority vote of the
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed
by the Board of Directors, and no officer shall be prevented from receiving
such compensation by virtue of the fact that he or she is also a director of
the Corporation.
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Section 6. The President and Vice-Presidents. The president shall be
the chief executive officer of the Corporation unless the Board of Directors
shall so designate another officer; shall preside at all meetings of the
stockholders; shall have general and active management of the business of the
Corporation; and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The president shall execute bonds,
mortgages, and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the Board of Directors, shall, in
the absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such
powers as the Board of Directors may, from time to time, determine or these
By-Laws may prescribe.
Section 7. The Chairman of the Board and Vice Chairman. The chairman
of the board and the vice-chairman of the board shall perform such duties and
have such powers as the Board of Directors may, from time to time, determine.
Section 8. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors; perform such other duties as
may be prescribed by the Board of Directors or president, under whose
supervision he or she shall be; shall have custody of the corporate seal of the
Corporation and the secretary, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements; and shall render to
the president and Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of the Corporation. If required by
the Board of Directors, the treasurer shall give the Corporation a bond (which
shall be rendered every six years) in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the Corporation, in case of death,
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resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in the possession or under
the control of the treasurer belonging to the Corporation. The assistant
treasurer, or if there shall be more than one, the assistant treasurers in the
order determined by the Board of Directors, shall in the absence or disability
of the treasurer, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-Laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND OTHERS
Section 1. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he or she is or was an officer of the Corporation,
or is or was serving at the request of the Corporation as director or officer
of another Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or she is or was
an officer of the Corporation, or is or was serving at the request of the
Corporation as director or officer of another Corporation, against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with defense or settlement of such action or suit if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interest of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been
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adjudged to be liable to the Corporation unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. To the extent that an officer of the Corporation or person
serving at the request of the Corporation as a director or officer of another
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article VI
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article
VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the officer or person serving at the request of the Corporation as a director
or officer of another Corporation is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in Sections 1 and 2 of
this Article VI. Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the officer or person serving at the request of the
Corporation as a director or officer of another Corporation to repay such
amount if it shall ultimately be determined that he or she is not entitled to
be indemnified by the Corporation as authorized in this Article VI.
Section 6. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Article VI shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
Section 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was an officer of the Corporation
or is or was serving at the request of the Corporation as a director or officer
of another Corporation against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of this
Article VI.
Section 8. For purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting Corporation, any
constituent Corporation (including any constituent
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of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers so that any person who is or was a director or officer
of such constituent Corporation, or is or was serving at the request of such
constituent Corporation as a director or officer of another Corporation shall
stand in the same position under the provisions of this Article VI with respect
to the resulting or surviving Corporation as he or she would have with respect
to such constituent Corporation if its separate existence had continued.
Section 9. The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be an
officer, employee or person serving at the request of the Corporation as a
director or officer of another Corporation and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Section 10. This Article VI may be amended or repealed only by the
affirmative vote of the holders of a majority of the Voting Stock; provided
that no such amendment or repeal shall adversely affect any right to
indemnification for any act or omission of any person referred to in Section 1
and 2 of this Article VI which occurred or allegedly occurred prior to the
effective date of such amendment or repeal.
Section 11. If in any action, suit or other proceeding or
investigation, a Director of the Corporation is held not liable for monetary
damages because that Director is relieved of personal liability under Article
NINTH of the Certificate of Incorporation or otherwise, the Director shall be
deemed to have met the standards of conduct set forth above and to be entitled
to indemnification as provided above.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation
by, the president or a vice-president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the Corporation,
certifying the number of shares owned by him or her in the Corporation. Where a
certificate is signed (1) by a transfer agent or an assistant transfer agent
other than the Corporation or its employee, or (2) by a registrar, other than
the Corporation or its employee, the signature of any such president,
vice-president, treasurer, assistant treasurer, secretary, or assistant
secretary may be facsimile. In case any officer or officers who have signed, or
whose facsimile signature or signatures have been used on, any such certificate
or certificates shall cease to be such officer or officers of the Corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer or officers of the Corporation.
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Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Fixing a Record Date. The Board of Directors may fix in
advance a date, not more than sixty nor less than ten days preceding the date
of any meeting of stockholders, or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining any consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights with respect to any
such change, conversion, or exchange of capital stock, or to give such consent,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid. If no record date is fixed, the time
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. The time for
determining stockholders for any other purpose shall be at the close of
business on the date on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think in the best interest of the Corporation,
and the Directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 5. Securities Owned By Corporation. Voting securities in any
other Corporation held by the Corporation shall be voted by the president or
any vice president, unless the Board of Directors specifically confers
authority to vote with respect thereto, which may be general or confined to
specific instances, upon some other person or officer. Any person authorized to
vote securities shall have the power to appoint proxies, with general power of
substitution.
ARTICLE IX
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, these
By-Laws may be amended or repealed at any regular meeting of the stockholders
or at any special meeting thereof duly called for that purpose by a majority
vote of the shares represented and entitled to vote at such meeting provided
that in the notice of such special meeting notice of such purpose shall be
given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these By-Laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend or repeal these
By-Laws, or adopt such other By-Laws as in their judgment may be advisable for
the regulation of the conduct of the affairs of the Corporation.
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EXHIBIT 4.2
BY - LAWS
(Amended and Restated
December 16, 1998)
OF
PAGING NETWORK, INC.
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
in the State of Delaware shall be at 1209 Orange Street, Wilmington, Delaware.
The name of the Corporation's registered agent at such address shall be The
Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. An annual meeting of the stockholders
shall be held for the purpose of electing Directors and conducting such other
business as may come before the meeting. The date, time and place of the annual
meeting shall be determined by resolution of the Board of Directors. The Board
of Directors may postpone a previously scheduled annual meeting of stockholders
by providing public notice of such postponement prior to such previously
scheduled meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof. Special meetings of the stockholders may be called only by the
Chairman of the Board or the President, and shall be called within 10 days
after receipt of the written request of the Board of Directors, pursuant to a
resolution approved by a majority of the Whole Board (as defined below). Any
such resolution shall be sent to the Chairman of the Board or the President and
the Secretary of the Corporation and shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting is limited to the
purpose stated in the notice. For the purposes of these By-Laws, the term
"Whole Board" is defined as the total number of Directors which the Corporation
would have if there were no vacancies.
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Section 3. Notice. Written or printed notice of every annual or
special meeting of the stockholders, stating the place, date, time, and, in the
case of special meetings, the purpose of purposes, of such meeting, shall be
given to each stockholder entitled to vote at such meeting not less than ten,
nor more than sixty days before the date of the meeting. All such notices shall
be delivered, either personally or by mail, by or at the direction of the
Chairman of the Board or the President or the Board of Directors, and if
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his or her address as it
appears on the records of the Corporation, with postage prepaid. When a meeting
is adjourned to another place, date or time, written notice need not be given
of the adjourned meeting if the place, date and time thereof are announced at
the meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least ten days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, specifying the address of and the
number of shares registered in the name of each stockholder.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders except as
otherwise provided by statute or by the Certificate of Incorporation. If a
quorum is not present, the holders of the shares present in person or
represented by proxy at the meeting, and entitled to vote thereat, shall have
the power, by the affirmative vote of the holders of a majority of such shares,
to adjourn the meeting to another time and/or place, without notice other than
announcement at the meeting at which the adjournment was taken, until a quorum
shall be present or represented.
Section 6. Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors including
matters included pursuant to Rule 14a-8 of the Securities and Exchange
Commission; (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (c) otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be otherwise properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Senior Vice President, General Counsel and Assistant Secretary of the
Corporation. To be timely, a stockholder's notice must be addressed to the
Senior Vice President, General Counsel and Assistant Secretary of the
Corporation and received at the principal executive offices of the Corporation,
not more than 120 days and not less than 80 days prior to the first anniversary
of the
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preceding year's annual meeting; provided, however, that in the event that the
date of the meeting is more than 30 days before or after such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business of the fifteenth day following the date on which notice of
the date of the annual meeting was mailed or public disclosure was made,
whichever first occurs.
A stockholder's notice to the Senior Vice President, General Counsel
and Assistant Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (a) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business and of any beneficial owner on behalf of which the stockholder is
acting; (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and by any such beneficial owner; and (d)
any material interest of the stockholder and of any such beneficial owner in
such business. Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 6 of Article II.
The presiding officer of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with this Section 6 of Article II, and
if the presiding officer should so determine, the presiding officer shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Section 7. Inspectors. The Board of Directors shall appoint inspectors
of election to act as judges of the voting and to determine those entitled to
vote at any meeting of stockholders, or any adjournment thereof, in advance of
such meeting, but if the Board of Directors fails to make such appointments or
if an appointee fails to serve, the presiding officer of the meeting of
stockholders may appoint substitute inspectors.
Section 8. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the Corporation
on the record date for the meeting and such votes may be cast either in person
or by written proxy. Every proxy must be duly executed and filed with the
Secretary of the Corporation. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. The vote upon any question
brought before a meeting of the stockholders may be by voice vote, unless
otherwise required by these By-Laws or unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or by proxy at such meeting shall so determine. Every vote taken by
written ballot shall be counted by the inspectors of election. When a quorum is
present at any meeting, the vote of the holders of a majority of the stock
which has voting power present in person or represented by proxy and which has
actually voted shall decide any question properly brought before such meeting,
except the election or
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removal of Directors or as otherwise provided in these By-Laws, the Certificate
of Incorporation or a Preferred Stock Designation or by applicable law. With
respect to any election or questions required to be decided by any class of
stock voting as a class, the vote of the holders of a majority of such class of
stock present in person or by proxy and which actually voted shall decide any
such election or question.
Section 9. Order of Business. Unless otherwise determined by the Board
of Directors prior to the meeting, the presiding officer of the meeting of
stockholders shall determine the order of business and shall have the authority
in his discretion to regulate the conduct of any such meeting, including,
without limitation, by imposing restrictions on the persons (other than
stockholders of the Corporation or their duly appointed proxies) who may attend
any such meeting of stockholders, by ascertaining whether any stockholder or
his proxy may be excluded from any meeting of stockholders based upon any
determination by the presiding officer, in his sole discretion, that any such
person has unduly disrupted or is likely to disrupt the proceedings thereat,
and by determining the circumstances in which any person may make a statement
or ask questions at any meeting of stockholders.
Section 10. Adjournment of Meetings. The Chairman of the Board or the
President of the Corporation shall have the power to adjourn any meeting of
stockholders, whether or not a quorum is present, to another time and/or place,
without notice other than announcement at the meeting at which adjournment was
taken.
ARTICLE III
NOMINATION OF DIRECTOR CANDIDATES
Section 1. Notification of Nominees. Subject to the rights of holders
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, nominations for the election of Directors may be
made by the Board of Directors or a committee appointed by the Board of
Directors or by any stockholder entitled to vote in the election of Directors
generally. However, any stockholder entitled to vote in the election of
Directors generally may nominate one or more persons for election as Directors
at a meeting, so long as the stockholder gives timely notice thereof in writing
to the Senior Vice President, General Counsel and Assistant Secretary of the
Corporation. To be timely, a stockholder's intent to make such nomination or
nominations must be addressed to the Senior Vice President, General Counsel and
Assistant Secretary of the Corporation and received at the principal executive
offices of the Corporation not more than 120 days and not less than 80 days
prior to the first anniversary of the preceding year's annual meeting or the
date of the special meeting; provided, however, that in the event that the date
of the annual meeting is more than 30 days before or after such anniversary
date or the date of the special meeting was not publicly announced by the
Corporation by mail, press release or otherwise more than 90 days prior to the
meeting, notice by the stockholder to be timely must be so received not later
than the close of business on the fifteenth day following the day on which
notice of the date of the annual meeting or special meeting was mailed or
public disclosure was made, whichever first occurs.
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Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the signed consent of each
nominee to serve as Director of the Corporation if so elected.
Section 2. Substitution of Nominees. If a person is validly designated
as a nominee in accordance with Section 1 of this Article III, and shall
thereafter become unable or unwilling to stand for election to the Board of
Directors, the Board of Directors or the stockholder who proposed such nominee,
as the case may be, may designate a substitute nominee upon delivery, not fewer
than five days prior to the date of the meeting for the election of such
nominee, of a written notice to the Secretary setting forth such information
regarding such substitute nominee as would have been required to be delivered
to the Secretary pursuant to Section 1 of this Article III, had such substitute
nominee been initially proposed as a nominee. Such notice shall include a
signed consent to serve as a Director of the Corporation, if elected, of each
such substitute nominee.
Section 3. Compliance with Procedures. If the presiding officer of the
meeting for the election of Directors determines that a nomination for any
candidate for election as a Director at such meeting was not made in accordance
with the applicable provisions of these By-Laws, such person will not be
eligible for election as a Director and such nomination shall be void;
provided, however, that nothing in these By-Laws shall be deemed to limit any
voting rights upon the occurrence of dividend arrearages provided to holders of
Preferred Stock pursuant to the Preferred Stock Designation for any series of
Preferred Stock.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall
be managed by or under the direction of its Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
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Section 2. Number, Qualification, Election and Terms. Except as
otherwise fixed by, or pursuant to, the provisions of Article FOURTH of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
the number of Directors shall be fixed from time to time by resolution of the
Board of Directors, but shall not be less than three nor more than fifteen
persons. The Directors, other than those who may be elected by the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
number as possible, as determined by the Board of Directors. One class shall
hold office initially for a term expiring at the annual meeting of stockholders
to be held in 1992, another class to hold office initially for a term expiring
at the annual meeting of stockholders to be held in 1993, another class to hold
office initially for a term expiring at the annual meeting of stockholders to
be held in 1994, with the members of each class to hold office until their
successors are elected and qualified. At each succeeding annual meeting of the
stockholders of the Corporation, the successors of the class of directors whose
term expires at that meeting shall be elected by plurality vote by written
ballot to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
Section 3. Removal. Subject to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
any Director may be removed from office by the stockholders in the manner
provided in this Section 3 of Article IV. At any annual meeting of the
stockholders of the Corporation or at any special meeting of the stockholders
of the Corporation, the notice of which shall state that the removal of a
Director or Directors is among the purposes of the meeting, the affirmative
vote of the holders of at least 80 percent of the combined voting power of the
outstanding shares of Voting Stock (as defined below), voting together as a
single class, may remove such Director or Directors. For the purposes of these
By-Laws, "Voting Stock" shall mean the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of Directors.
Section 4. Vacancies and New Directorships. Except as otherwise fixed
by or provided for or pursuant to the provisions of Article FOURTH of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
vacancies and newly created directorships resulting from any increase in the
authorized number of Directors shall be filled solely by the affirmative vote
of a majority of the Directors then in office though less than a quorum, or by
a sole remaining Director, except as may be required by law. Any Director so
chosen shall hold office for the remainder of the full term of the class of
Directors in which the new directorship was created or the vacancy occurred and
until such Director's successor shall have been elected and qualified. No
decrease in the authorized number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
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Section 5. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice immediately after the annual meeting of
the stockholders and at such other time and place as shall from time to time be
determined by the Board of Directors.
Section 6. Special Meetings and Notice. Special meetings of the Board
of Directors may be called by the Chairman of the Board or the President on one
day's written notice to each Director by whom such notice is not waived, given
either personally or by mail, telephone, telegram, telex, facsimile or similar
medium of communication, and shall be called by the President or the Secretary
in like manner and on like notice on the written request of any three
Directors.
Section 7. Resignation. Any Director may resign at any time by giving
written notice of his resignation to the Chairman of the Board or the
Secretary, to be effective upon its acceptance by the Board of Directors or at
the time specified in such notice.
Section 8. Quorum. Subject to Section 4 of this Article IV, at all
meetings of Directors, a majority of the total number of Directors then in
office shall constitute a quorum for the transaction of business. Except for
the designation of committees (as provided in Section 9 of this Article IV),
the vote of a majority of Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present thereat
may adjourn the meeting from time to time to another place, time or date,
without notice other than announcement at the meeting, until a quorum shall be
present.
Section 9. Committees. The Board of Directors may, by resolution
passed by a majority of the Whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation, which
to the extent provided in such resolution shall have and may exercise the
powers of the Board of Directors in the management and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it, except as otherwise limited by statute. The Board
of Directors may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and report
the same to the Directors when required. Each committee of the Board of
Directors may fix its own rules or procedure and shall hold its meetings as
provided by such rules, except as may be otherwise be provided by the
resolution of the Board of Directors designating such committee, and, unless
otherwise prescribed by the Board of Directors, the presence of at least a
majority of the members of such committee shall be necessary to constitute a
quorum.
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Section 10. Compensation. The Directors may be paid for expenses of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated
salary. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of committees designated by the Board of Directors may be allowed like
compensation for attending committee meetings.
Section 11. Rules. The Board of Directors may adopt such special rules
and regulations for the conduct of their meetings and the management of the
affairs of the Corporation as they may deem proper, not inconsistent with law,
the Certificate of Incorporation or these By-Laws.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the Corporation shall be chosen by
the Board of Directors and shall consist of a president, a chairman of the
board, a vice chairman of the board, one or more vice-presidents, a secretary,
a treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the Board of Directors. Any number of offices may be
held by the same person. In its discretion, the Board of Directors may choose
not to fill any office for any period, as it may deem advisable, except the
offices of the president and secretary.
Section 2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be.
Vacancies may be filled or new offices created and filled at any meeting of the
Board of Directors. Each officer shall hold office until the next annual
meeting of the Board of Directors or until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term by a majority vote of the
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed
by the Board of Directors, and no officer shall be prevented from receiving
such compensation by virtue of the fact that he or she is also a director of
the Corporation.
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Section 6. The President and Vice-Presidents. The president shall be
the chief executive officer of the Corporation unless the Board of Directors
shall so designate another officer; shall preside at all meetings of the
stockholders; shall have general and active management of the business of the
Corporation; and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The president shall execute bonds,
mortgages, and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the Board of Directors, shall, in
the absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such
powers as the Board of Directors may, from time to time, determine or these
By-Laws may prescribe.
Section 7. The Chairman of the Board and Vice Chairman. The chairman
of the board and the vice-chairman of the board shall perform such duties and
have such powers as the Board of Directors may, from time to time, determine.
Section 8. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors; perform such other duties as
may be prescribed by the Board of Directors or president, under whose
supervision he or she shall be; shall have custody of the corporate seal of the
Corporation and the secretary, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements; and shall render to
the president and Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of the Corporation. If required by
the Board of Directors, the treasurer shall give the Corporation a bond (which
shall be rendered every six years) in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the Corporation, in case of death,
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resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in the possession or under
the control of the treasurer belonging to the Corporation. The assistant
treasurer, or if there shall be more than one, the assistant treasurers in the
order determined by the Board of Directors, shall in the absence or disability
of the treasurer, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-Laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board of
Directors.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND OTHERS
Section 1. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he or she is or was an officer of the Corporation,
or is or was serving at the request of the Corporation as director or officer
of another Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or she is or was
an officer of the Corporation, or is or was serving at the request of the
Corporation as director or officer of another Corporation, against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with defense or settlement of such action or suit if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interest of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been
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adjudged to be liable to the Corporation unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. To the extent that an officer of the Corporation or person
serving at the request of the Corporation as a director or officer of another
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article VI
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article
VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the officer or person serving at the request of the Corporation as a director
or officer of another Corporation is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in Sections 1 and 2 of
this Article VI. Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the officer or person serving at the request of the
Corporation as a director or officer of another Corporation to repay such
amount if it shall ultimately be determined that he or she is not entitled to
be indemnified by the Corporation as authorized in this Article VI.
Section 6. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Article VI shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
Section 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was an officer of the Corporation
or is or was serving at the request of the Corporation as a director or officer
of another Corporation against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of this
Article VI.
Section 8. For purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting Corporation, any
constituent Corporation (including any constituent
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of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers so that any person who is or was a director or officer
of such constituent Corporation, or is or was serving at the request of such
constituent Corporation as a director or officer of another Corporation shall
stand in the same position under the provisions of this Article VI with respect
to the resulting or surviving Corporation as he or she would have with respect
to such constituent Corporation if its separate existence had continued.
Section 9. The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be an
officer, employee or person serving at the request of the Corporation as a
director or officer of another Corporation and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Section 10. This Article VI may be amended or repealed only by the
affirmative vote of the holders of a majority of the Voting Stock; provided
that no such amendment or repeal shall adversely affect any right to
indemnification for any act or omission of any person referred to in Section 1
and 2 of this Article VI which occurred or allegedly occurred prior to the
effective date of such amendment or repeal.
Section 11. If in any action, suit or other proceeding or
investigation, a Director of the Corporation is held not liable for monetary
damages because that Director is relieved of personal liability under Article
NINTH of the Certificate of Incorporation or otherwise, the Director shall be
deemed to have met the standards of conduct set forth above and to be entitled
to indemnification as provided above.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation
by, the president or a vice-president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the Corporation,
certifying the number of shares owned by him or her in the Corporation. Where a
certificate is signed (1) by a transfer agent or an assistant transfer agent
other than the Corporation or its employee, or (2) by a registrar, other than
the Corporation or its employee, the signature of any such president,
vice-president, treasurer, assistant treasurer, secretary, or assistant
secretary may be facsimile. In case any officer or officers who have signed, or
whose facsimile signature or signatures have been used on, any such certificate
or certificates shall cease to be such officer or officers of the Corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such
officer or officers of the Corporation.
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Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Fixing a Record Date. The Board of Directors may fix in
advance a date, not more than sixty nor less than ten days preceding the date
of any meeting of stockholders, or the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or a date in connection with
obtaining any consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights with respect to any
such change, conversion, or exchange of capital stock, or to give such consent,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid. If no record date is fixed, the time
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. The time for
determining stockholders for any other purpose shall be at the close of
business on the date on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
13
<PAGE> 14
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think in the best interest of the Corporation,
and the Directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 5. Securities Owned By Corporation. Voting securities in any
other Corporation held by the Corporation shall be voted by the president or
any vice president, unless the Board of Directors specifically confers
authority to vote with respect thereto, which may be general or confined to
specific instances, upon some other person or officer. Any person authorized to
vote securities shall have the power to appoint proxies, with general power of
substitution.
ARTICLE IX
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, these
By-Laws may be amended or repealed at any regular meeting of the stockholders
or at any special meeting thereof duly called for that purpose by a majority
vote of the shares represented and entitled to vote at such meeting provided
that in the notice of such special meeting notice of such purpose shall be
given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these By-Laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend or repeal these
By-Laws, or adopt such other By-Laws as in their judgment may be advisable for
the regulation of the conduct of the affairs of the Corporation.
14
<PAGE> 1
EXHIBIT 4.5
Amendment Number 1 to Rights Agreement
Paging Network, Inc., a Delaware corporation (the "Company") and The First
National Bank of Boston, a national banking association (the "Rights Agent"),
entered into the Rights Agreement (the "Rights Agreement") dated as of
September 8, 1994. Pursuant to Section 28 of the Rights Agreement, the Company
and BankBoston, as successor in interest to The First National Bank of Boston
(the "Rights Agent"), and acting at the direction of the Company, hereby agree
that the Rights Agreement shall be amended as follows:
1. Section 1(h) shall be amended so that Section 1(h) reads in its entirety
as follows:
(h) Reserved.
2. Section 2 shall be amended to read in its entirety as follows:
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date also be the holders of the
Common Shares) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such Co-Rights Agents as it may deem necessary or desirable,
upon ten (10) days' prior written notice to the Rights Agent. The Rights
Agent shall have no duty to supervise, and shall in no event be liable for,
the acts or omissions of any such Co-Rights Agent. In the event the Company
appoints one or more Co-Rights Agents, the respective duties of the Rights
Agents and any Co-Rights Agents shall be as the Company shall determine.
3. Section 7(e) shall be amended to read in its entirety as follows:
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or an
Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
or Adverse Person becomes such, or (iii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person
or Adverse Person to holders of equity interests in such Acquiring Person
or Adverse Person or to any Person with whom the Acquiring Person or
Adverse Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which a majority of the
members of the Board of Directors of the Company determine is part of an
oral or written plan, arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 7(e), shall become null and
void without any further action, and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under this
Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) are
complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or Adverse Person or the
Affiliates, Associates or transferees of an Acquiring Person or Adverse
Person hereunder.
4. Section 11(a)(iii) shall be amended to read in its entirety as follows:
(iii) In the event that the number of Common Shares that are
authorized by the Company's Restated Certificate of Incorporation, as
amended, but not outstanding or reserved for issuance for purposes other
than upon exercise of the
<PAGE> 2
Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over the
Purchase Price (such excess, the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for the Adjustment Shares,
upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Shares of the same or a different class or
other equity securities of the Company (including, without limitation,
preferred shares or units of preferred shares that a majority of the
members of the Board of Directors has deemed (based, among other things, on
the dividend and liquidation rights of such preferred shares) to have
substantially the same economic value as Common Shares (such preferred
shares, hereinafter referred to as "common share equivalents"), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by a majority of the members of the
Board of Directors after considering the advice of a competent investment
banking firm selected by the Board of Directors of the Company; provided,
however, if the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the
date on which the Company's right of redemption pursuant to Section 24(b)
expires (the later of (x) and (y) being referred to herein as the "Section
II(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of
the Purchase Price, Common Shares (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. If the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional Common Shares could
be authorized for issuance upon exercise in full of the Rights, the thirty
(30) day period set forth above may be extended to the extent necessary,
but not more than ninety (90) days after the Section 11(a)(ii) Trigger
Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
determines that action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine
the value thereof. The Company shall make a public announcement when the
exercisability of the Rights has been temporarily suspended, and again when
such suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the current market
price (as determined pursuant to Section 11(d) hereof) per Common Share on
the Section 11(a)(ii) Trigger Date and the value of any "common share
equivalent" shall be deemed to have the same value as the Common Shares on
such date.
2
<PAGE> 3
5. Section 19, the first paragraph shall be amended to read in its entirety:
Section 19. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability,
or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against any
claim of liability arising therefrom, directly or indirectly.
6. Section 20(c) shall be amended to read in its entirety as follows:
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
7. Section 24 shall be amended to read in its entirety as follows:
Section 24. Redemption.
(a) The Rights may be redeemed by action of the Board of Directors
pursuant to paragraph (b) of this Section 24 and shall not be redeemed in
any other manner, except as provided in Section 32.
(b) The Board of Directors Of the Company may, at its option, at any
time prior to the earliest of (x) the close of business on the tenth day
following a Shares Acquisition Date, (y) the declaration by the Board of
Directors that any Person is an Adverse Person or (z) 5:00 p.m., E.S.T., on
the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, appropriate
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). The redemption of the Rights by the
Board of Directors may be made effective at such time on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.
(c) In addition to the right of redemption reserved in Section 24(b),
the Board of Directors may redeem all but not less than all of the then
outstanding Rights at the Redemption Price following the occurrence of a
Shares Acquisition Date or date of declaration that an Adverse Person is
such but prior to any event described in Section 11(a)(ii)(A) or (C) or in
Section 13(a), at its option, upon the affirmative vote or written consent
of not less than two-thirds of the members of the Board of Directors, (i)
if (A) an Acquiring Person or Adverse Person shall have transferred or
otherwise disposed of a number of Common Shares in one transaction or
series of transactions, not directly or indirectly involving the Company or
any of its Subsidiaries, which did not result in the occurrence of a
Triggering Event or the Company (with the approval of at least two-thirds
of the members of the Board of Directors) shall have issued additional
equity securities in either instance such that such Person is thereafter a
Beneficial Owner of less than 10% of the outstanding Common Shares, and (B)
there is no other Acquiring Person or Adverse Person immediately following
the occurrence of the event described in clause (A), or (ii) in connection
with any Section 13 Event in which all holders of Common Shares are treated
alike and not involving (other than as a holder of Common Shares being
treated like all other such holders) an Acquiring Person, an Adverse Person
or an Affiliate or Associate of an Acquiring Person or Adverse Person or
any other Person in which such Acquiring Person, Adverse Person, Affiliate
or Associate has any interest, or any other Person acting directly or
indirectly on behalf of or in association with any Acquiring Person,
Adverse Person, Affiliate or Associate. Any redemption of the rights by the
Board of Directors may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.
3
<PAGE> 4
(d) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (b) of
this Section 24, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price. The
Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give or any defect in, any such notice shall
not affect the validity of such redemption. Within 10 days after such
action ordering the redemption of the Rights pursuant to paragraph (b) the
Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice
which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption
Price will be made. The Company may, at its option, pay the Redemption
Price in cash, Common Shares (based on the current per share market price
of the Common Shares as of the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not
be exercisable after the first occurrence of a Section 11 (a)(ii) Event
until such time as the Company's right of redemption under Section 24(b)
has expired.
8. Section 25 shall be amended to read in its entirety as follows:
Section 25. Exchange.
(a) The Board of Directors of the Company may, at its option upon the
affirmative vote or written consent of not less than two-thirds of the
directors, at any time after the occurrence of a Section 11 (a)(ii) Event,
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions
of Section 7(e) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors of the
Company shall not be empowered to effect such exchange at any time after
any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 25 and without any further action and without any notice, the
right to exercise such
4
<PAGE> 5
Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section
7(a) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 25, the
Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to
the registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Common
Share. For the purposes of this paragraph (e), the current market value of
a whole Common Share shall be the closing price of a Common Share (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 25.
9. Section 27 shall be amended to read in its entirety as follows:
Section 27. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Rights Agent) as follows:
Paging Network, Inc.
14911 Quorum Drive
Dallas, Texas 75240
Attention: President
Subject to the provisions of Section 22 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
BankBoston, N.A.
c/o EquiServe Limited Partners
150 Royall Street
Canton, MA 02021
Attention: Client Administrator
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate or
certificate representing Common Shares shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Company.
10. Section 28 shall be amended to read in its entirety as follows:
Section 28. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 28, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend
any provision of this Agreement without the approval of any holders of
certificates representing Common Shares. From and after the Distribution
Date and subject to the penultimate sentence of this Section 28, the
Company and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder, or (iv) to change or supplement the
5
<PAGE> 6
provisions hereunder in any manner that the Company may deem necessary or
desirable and that shall not adversely affect the interest of the holders
of Rights Certificates (other than an Acquiring Person, an Adverse Person
or any Affiliate or Associate of an Acquiring Person or Adverse Person);
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to
when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person, an
Adverse Person or any Affiliate or Associate of an Acquiring Person or
Adverse Person). Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 28, the Rights
Agent shall execute such supplement or amendment unless the Rights Agent
shall have determined in good faith that such supplement or amendment would
adversely affect its interests under this Agreement. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or
amendment shall be made that changes the Redemption Price, the Final
Expiration Date, the Purchase Price or the number of Common Shares for
which a Right is exercisable. Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of
the holders of Common Shares.
11. Section 29 shall be amended to read in its entirety as follows:
Section 29. Determination and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares or
any other securities of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 3d-3(d)(l)(i) of the
General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement. The Board of Directors of the Company shall have
the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights, to
declare that a Person is an Adverse Person or to amend the Agreement). All
such actions, calculations, interpretations and determinations which are
done or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties, and (y) not subject to the Board or any
Director to any liability to the holders of the Rights Certificates.
6
<PAGE> 7
12. Other than as set forth herein, all other provisions of the Rights
Agreements shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number 1
to the Rights Agreement to be executed as of this 16th day of March, 1999.
PAGING NETWORK, INC.
By: /s/ RUTH WILLIAMS
----------------------------------------
Its: Sr. Vice President and General Council
--------------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ CAROL MULVEY-EORI
----------------------------------------
Its:
---------------------------------------
7
<PAGE> 1
EXHIBIT 10.20
1999 GRANT
PAGING NETWORK, INC.
NONQUALIFIED AND INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into by and between PAGING NETWORK, INC., a
Delaware corporation (hereinafter the "Company") and _______________________
(hereinafter the "Optionee"), who is an employee of the Company or one of its
subsidiaries or affiliates.
WHEREAS, the Company adopted the Paging Network, Inc. 1991 Stock Option
Plan, as subsequently amended and restated (the "Plan"), in order, among other
things, to grant nonqualified stock options and incentive stock options to
certain employees of the Company (or any subsidiary or affiliate of the Company)
to purchase common stock of the Company so as to give them a proprietary
interest in the Company's success and to attract, retain and motivate employees
of experience and ability; and
WHEREAS, the Optionee renders important services to the Company or a
subsidiary or affiliate of the Company, and the Company desires to grant a
nonqualified and incentive stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the option
to purchase from the Company upon the terms and conditions hereinafter
set forth ________________ shares of the $.01 par value Common Stock of
the Company (the "Common Stock") at a purchase price per share of
$_________. The date of grant of this option is _________________,
which is hereinafter referred to as the "Option Date."
2. TERM OF OPTION; EXERCISABILITY. The option will become vested and
exercisable in accordance with the vesting schedule set forth below, so
long as the Optionee continues to perform services for the Company or
any subsidiary or affiliate of the Company.
<PAGE> 2
NUMBER OF TOTAL OPTION SHARES DATE VESTED
----------------------------- -----------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
To the extent vested, the option will be immediately exercisable in
full or in part and will remain exercisable until it expires on the
tenth (10th) anniversary of the Option Date, unless the option is
sooner terminated as hereinafter provided; provided, however, that if
the grant of this option is made possible only by the adoption of this
Plan or any amendment thereof that is subject to shareholder approval,
the option will not be exercisable before such approval is obtained and
the option will be null and void if such approval is not obtained
within the time prescribed therefor.
3. ALTERNATIVE VESTING SCHEDULE; CLIFF VESTING.
(a) Notwithstanding the immediately preceding vesting schedule,
the option will vest sooner if certain stock price targets are
achieved, as follows:
$15 50% total option shares granted vest
$20 75% total option shares granted vest
$25 100% total option shares granted vest
By way of example, a colleague is granted an option to
purchase 10,000 shares at $6 per share on February 1, 1999 and
on December 1, 1999 the stock price hits $15. On February 1,
1999, 20% of the option would have vested (2,000 shares) in
accordance with the original vesting schedule described in
paragraph 2 above. On December 1, 1999, an additional 30% of
the option would vest (3,000 shares), so that a total of 50%
of the grant (5,000 shares) is immediately exercisable. On
February 1, 2000, the first anniversary of the original grant,
no further vesting occurs because the 20% scheduled to vest
has vested early and is included within the 50%. If the stock
price continues to rise and reaches $20 per share some months
later on May 1, 2000, then an additional 25% of the option
(2,500 shares) would vest, for a total of 75% vested (7,500
shares.)
(b) Accelerated vesting will occur on the next business day after
the first day when PageNet's closing share price on NASDAQ
equals the price targets described in 3(a) above.
2
<PAGE> 3
4. OTHER CONDITIONS AND LIMITATIONS.
(a) The Company will furnish upon request of the Optionee such
publicly available financial and other information concerning
the Company and its business and prospects as may be
reasonably requested by the Optionee in connection with the
exercise of this option.
(b) The option will not be transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and
the option will be exercisable during the Optionee's lifetime
only by the Optionee (or the Optionee's guardian or legal
representative).
5. EXERCISE OF OPTION. Written notice of the exercise of the option or any
installment thereof will be given to the Company's Treasurer (or any
other officer of the Company who is designated by the Company to accept
such notices on its behalf), specifying the number of shares for which
it is exercised. Payment will be made in full at the time the option is
exercised. Payment will be made either by (i) cashier's or certified
check, (ii) if permitted by the Compensation and Management Development
Committee of the Board of Directors (the "Committee"), by delivery and
assignment to the Company of shares of common Stock having a value
equal to at the option price, or (iii) by a combination of (i) and
(ii). The value of the Common Stock for such purpose will be its fair
market value as of the date the option is exercised, as determined in
accordance with procedures to be established by the Committee.
6. WITHHOLDING. The Optionee hereby agrees that the exercise of the option
or any installment thereof will not be effective, and no shares will
become transferable to the Optionee, until the Optionee makes
appropriate arrangements with the Company for such tax withholding as
may be required of the Company under federal, state or local law on
account of such exercise.
7. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS;
OTHER EVENTS. Appropriate adjustments will be made in the number, kind,
and option price of shares covered by this option, to the extent it is
outstanding, to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the
capital structure of the Company after the Option Date. The option will
become immediately exercisable in full, to the extent not then
exercised, upon the occurrence of certain events which constitute a
"change in control" as defined in, and in accordance with the terms of,
the Plan.
8. TERMINATION OF OPTION. In the event that the Optionee ceases for any
reason to be an employee of the Company or any subsidiary or affiliate
of the Company at any time prior to exercise of this option in full,
this option will terminate in accordance with the following provisions:
3
<PAGE> 4
(a) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company for any reason other
than disability or death, he may, at any time prior to the
ninetieth (90) day after he ceased to be an employee, exercise
the option to the extent that the option was exercisable by
him on the date on which he ceased to be an employee;
(b) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company because of disability
within the meaning of Section 22(e) (3) of the Internal
Revenue Code of 1986, as amended, he may, at any time within a
period of one (1) year after he ceases to be an employee,
exercise the option to the extent that the option was
exercisable by him on the date he ceased to be an employee of
the Company or any subsidiary or affiliate of the Company; and
(c) if the Optionee dies at a time when he might have exercised
the option, then his estate, personal representative or
beneficiary to whom it has been transferred by will or the
laws of descent and distribution may at any time within a
period of one (1) year after the Optionee's death exercise the
option to the extent the Optionee might have exercised it at
the time of his death;
provided, however, that this option may not be exercised to any extent
by anyone after the date of expiration of the option under Paragraph 2,
and provided, further, that this option may not be exercised to the
extent not vested under Paragraphs 2 and 3 at any time after the
Optionee ceases to be an employee of the Company or any subsidiary or
affiliate of the Company.
9. CONFIDENTIAL INFORMATION. The Optionee acknowledges that the
information, observations and data obtained by him during the course of
his performance under this Agreement concerning the business or affairs
of the Company and its subsidiaries and affiliates are the property of
the Company. Therefore, the Optionee agrees that he will not disclose
to any unauthorized person or use for his own account any of such
information, observations or data without the Company's express written
consent, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other
than as a result of Optionee's actions. The Optionee agrees to deliver
to Company at the termination of his employment, or at any other time
the Company may request, all memoranda, notes, plans, records, reports,
and other documents (and copies thereof) relating to the business of
the Company and its subsidiaries and affiliates which he may then
possess or have under his control.
10. INVENTIONS AND PATENTS. The Optionee agrees that all inventions,
innovations or improvements in the Company's method of conducting its
business (including new contributions, improvements, idea and
discoveries, whether patentable or not) conceived or made by him during
the employment period belong to the Company. The Optionee will promptly
disclose such inventions, innovations or
4
<PAGE> 5
improvements to the Company and perform all actions reasonably
requested by the Company to establish and confirm such ownership.
11. OTHER BUSINESSES. During the employment period, the Optionee agrees
that he will not, except with the express written consent of the
Company, become engaged in, render services for, or permit his name to
be used in connection with any business other than the business of the
Company and its subsidiaries and affiliates.
12. MISCELLANEOUS. The Optionee will not have any rights as a stockholder
or any claim to dividends with respect to the shares subject to the
option until the exercise of the option and the payment in full of the
purchase price for such shares. Nothing herein contained will impose
any obligation on the Company or any subsidiary or affiliate of the
Company or the Optionee with respect to the Optionee's continued
performance of services for the Company or any subsidiary or affiliate
of the Company. Nothing herein contained will impose any obligation
upon the Optionee to exercise the option. A portion of the option
granted hereunder is intended to qualify as an incentive stock option
under Section 422A of the Internal Revenue Code of 1986, as amended;
however, the Company makes no representation as to the tax treatment to
the Optionee upon receipt or exercise of the option or sale or other
disposition of the shares covered by the option.
13. RELATIONSHIP TO THE PLAN. The option contained in this agreement has
been granted pursuant to the Plan and is in all respects subject to the
terms, conditions and definitions of the Plan. The Optionee hereby
accepts this option subject to all the terms and provisions of the Plan
and agrees that all decisions under and interpretations of the Plan by
the Board or the Committee will be final, binding and conclusive upon
the Optionee and his heirs.
14. GOVERNING LAW. This agreement will be subject to and construed in
accordance with the law of the State of Delaware.
IN WITNESS WHEREOF, the Company and the Optionee have executed this agreement in
duplicate as of the Option Date, as specified above.
PAGING NETWORK, INC. OPTIONEE
By
---------------------------- ----------------------------------
Ruth Williams Name
Senior Vice President and
General Counsel
----------------------------------
Street Address
----------------------------------
City, State, Zip Code
5
<PAGE> 6
1999 GRANT
PAGING NETWORK, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into by and between PAGING NETWORK, INC., a
Delaware corporation (hereinafter the "Company") and _______________________
(hereinafter the "Optionee"), who is an employee of the Company or one of its
subsidiaries or affiliates.
WHEREAS, the Company adopted the Paging Network, Inc. 1991 Stock Option
Plan, as subsequently amended and restated (the "Plan"), in order, among other
things, to grant nonqualified stock options and incentive stock options to
certain employees of the Company (or any subsidiary or affiliate of the Company)
to purchase common stock of the Company so as to give them a proprietary
interest in the Company's success and to attract, retain and motivate employees
of experience and ability; and
WHEREAS, the Optionee renders important services to the Company or a
subsidiary or affiliate of the Company, and the Company desires to grant an
incentive stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the option
to purchase from the Company upon the terms and conditions hereinafter
set forth ________________ shares of the $.01 par value Common Stock of
the Company (the "Common Stock") at a purchase price per share of
$_________. The date of grant of this option is _________________,
which is hereinafter referred to as the "Option Date."
2. TERM OF OPTION; EXERCISABILITY. The option will become vested and
exercisable in accordance with the vesting schedule set forth below, so
long as the Optionee continues to perform services for the Company or
any subsidiary or affiliate of the Company.
<PAGE> 7
NUMBER OF TOTAL OPTION SHARES DATE VESTED
----------------------------- -----------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
To the extent vested, the option will be immediately exercisable in
full or in part and will remain exercisable until it expires on the
tenth (10th) anniversary of the Option Date, unless the option is
sooner terminated as hereinafter provided; provided, however, that if
the grant of this option is made possible only by the adoption of this
Plan or any amendment thereof that is subject to shareholder approval,
the option will not be exercisable before such approval is obtained and
the option will be null and void if such approval is not obtained
within the time prescribed therefor.
3. ALTERNATIVE VESTING SCHEDULE; CLIFF VESTING.
(a) Notwithstanding the immediately preceding vesting schedule,
the option will vest sooner if certain stock price targets are
achieved, as follows:
$15 50% total option shares granted vest
$20 75% total option shares granted vest
$25 100% total option shares granted vest
By way of example, a colleague is granted an option to
purchase 10,000 shares at $6 per share on February 1, 1999 and
on December 1, 1999 the stock price hits $15. On February 1,
1999, 20% of the option would have vested (2,000 shares) in
accordance with the original vesting schedule described in
paragraph 2 above. On December 1, 1999, an additional 30% of
the option would vest (3,000 shares), so that a total of 50%
of the grant (5,000 shares) is immediately exercisable. On
February 1, 2000, the first anniversary of the original grant,
no further vesting occurs because the 20% scheduled to vest
has vested early and is included within the 50%. If the stock
price continues to rise and reaches $20 per share some months
later on May 1, 2000, then an additional 25% of the option
(2,500 shares) would vest, for a total of 75% vested (7,500
shares.)
(b) Accelerated vesting will occur on the next business day after
the first day when PageNet's closing share price on NASDAQ
equals the price targets described in 3(a) above.
2
<PAGE> 8
4. OTHER CONDITIONS AND LIMITATIONS.
(a) The Company will furnish upon request of the Optionee such
publicly available financial and other information concerning
the Company and its business and prospects as may be
reasonably requested by the Optionee in connection with the
exercise of this option.
(b) The option will not be transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and
the option will be exercisable during the Optionee's lifetime
only by the Optionee (or the Optionee's guardian or legal
representative).
5. EXERCISE OF OPTION. Written notice of the exercise of the option or any
installment thereof will be given to the Company's Treasurer (or any
other officer of the Company who is designated by the Company to accept
such notices on its behalf), specifying the number of shares for which
it is exercised. Payment will be made in full at the time the option is
exercised. Payment will be made either by (i) cashier's or certified
check, (ii) if permitted by the Compensation and Management Development
Committee of the Board of Directors (the "Committee"), by delivery and
assignment to the Company of shares of common Stock having a value
equal to at the option price, or (iii) by a combination of (i) and
(ii). The value of the Common Stock for such purpose will be its fair
market value as of the date the option is exercised, as determined in
accordance with procedures to be established by the Committee.
6. WITHHOLDING. The Optionee hereby agrees that the exercise of the option
or any installment thereof will not be effective, and no shares will
become transferable to the Optionee, until the Optionee makes
appropriate arrangements with the Company for such tax withholding as
may be required of the Company under federal, state or local law on
account of such exercise.
7. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS;
OTHER EVENTS. Appropriate adjustments will be made in the number, kind,
and option price of shares covered by this option, to the extent it is
outstanding, to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the
capital structure of the Company after the Option Date. The option will
become immediately exercisable in full, to the extent not then
exercised, upon the occurrence of certain events which constitute a
"change in control" as defined in, and in accordance with the terms of,
the Plan.
8. TERMINATION OF OPTION. In the event that the Optionee ceases for any
reason to be an employee of the Company or any subsidiary or affiliate
of the Company at any time prior to exercise of this option in full,
this option will terminate in accordance with the following provisions:
3
<PAGE> 9
(a) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company for any reason other
than disability or death, he may, at any time prior to the
ninetieth (90) day after he ceased to be an employee, exercise
the option to the extent that the option was exercisable by
him on the date on which he ceased to be an employee;
(b) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company because of disability
within the meaning of Section 22(e) (3) of the Internal
Revenue Code of 1986, as amended, he may, at any time within a
period of one (1) year after he ceases to be an employee,
exercise the option to the extent that the option was
exercisable by him on the date he ceased to be an employee of
the Company or any subsidiary or affiliate of the Company; and
(c) if the Optionee dies at a time when he might have exercised
the option, then his estate, personal representative or
beneficiary to whom it has been transferred by will or the
laws of descent and distribution may at any time within a
period of one (1) year after the Optionee's death exercise the
option to the extent the Optionee might have exercised it at
the time of his death;
provided, however, that this option may not be exercised to any extent
by anyone after the date of expiration of the option under Paragraph 2,
and provided, further, that this option may not be exercised to the
extent not vested under Paragraphs 2 and 3 at any time after the
Optionee ceases to be an employee of the Company or any subsidiary or
affiliate of the Company.
9. CONFIDENTIAL INFORMATION. The Optionee acknowledges that the
information, observations and data obtained by him during the course of
his performance under this Agreement concerning the business or affairs
of the Company and its subsidiaries and affiliates are the property of
the Company. Therefore, the Optionee agrees that he will not disclose
to any unauthorized person or use for his own account any of such
information, observations or data without the Company's express written
consent, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other
than as a result of Optionee's actions. The Optionee agrees to deliver
to Company at the termination of his employment, or at any other time
the Company may request, all memoranda, notes, plans, records, reports,
and other documents (and copies thereof) relating to the business of
the Company and its subsidiaries and affiliates which he may then
possess or have under his control.
10. INVENTIONS AND PATENTS. The Optionee agrees that all inventions,
innovations or improvements in the Company's method of conducting its
business (including new contributions, improvements, idea and
discoveries, whether patentable or not) conceived or made by him during
the employment period belong to the Company. The Optionee will promptly
disclose such inventions, innovations or improvements to the Company
and perform all actions reasonably requested by the Company to
establish and confirm such ownership.
4
<PAGE> 10
11. OTHER BUSINESSES. During the employment period, the Optionee agrees
that he will not, except with the express written consent of the
Company, become engaged in, render services for, or permit his name to
be used in connection with any business other than the business of the
Company and its subsidiaries and affiliates.
12. MISCELLANEOUS. The Optionee will not have any rights as a stockholder
or any claim to dividends with respect to the shares subject to the
option until the exercise of the option and the payment in full of the
purchase price for such shares. Nothing herein contained will impose
any obligation on the Company or any subsidiary or affiliate of the
Company or the Optionee with respect to the Optionee's continued
performance of services for the Company or any subsidiary or affiliate
of the Company. Nothing herein contained will impose any obligation
upon the Optionee to exercise the option. The option granted hereunder
is intended to qualify as an incentive stock option under Section 422A
of the Internal Revenue Code of 1986, as amended; however, the Company
makes no representation as to the tax treatment to the Optionee upon
receipt or exercise of the option or sale or other disposition of the
shares covered by the option.
13. RELATIONSHIP TO THE PLAN. The option contained in this agreement has
been granted pursuant to the Plan and is in all respects subject to the
terms, conditions and definitions of the Plan. The Optionee hereby
accepts this option subject to all the terms and provisions of the Plan
and agrees that all decisions under and interpretations of the Plan by
the Board or the Committee will be final, binding and conclusive upon
the Optionee and his heirs.
14. GOVERNING LAW. This agreement will be subject to and construed in
accordance with the law of the State of Delaware.
IN WITNESS WHEREOF, the Company and the Optionee have executed this agreement in
duplicate as of the Option Date, as specified above.
PAGING NETWORK, INC. OPTIONEE
By
---------------------------- ----------------------------------
Ruth Williams Name
Senior Vice President and
General Counsel
----------------------------------
Street Address
----------------------------------
City, State, Zip Code
5
<PAGE> 11
1999 GRANT
PAGING NETWORK, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into by and between PAGING NETWORK, INC., a
Delaware corporation (hereinafter the "Company") and ________________________
(hereinafter the "Optionee"), who is an employee of the Company or one of its
subsidiaries or affiliates.
WHEREAS, the Company adopted the Paging Network, Inc. 1991 Stock Option
Plan, as subsequently amended and restated (the "Plan"), in order, among other
things, to grant nonqualified stock options and incentive stock options to
certain employees of the Company (or any subsidiary or affiliate of the Company)
to purchase common stock of the Company so as to give them a proprietary
interest in the Company's success and to attract, retain and motivate employees
of experience and ability; and
WHEREAS, the Optionee renders important services to the Company or a
subsidiary or affiliate of the Company, and the Company desires to grant an
incentive stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the option
to purchase from the Company upon the terms and conditions hereinafter
set forth __________________ shares of the $.01 par value Common Stock
of the Company (the "Common Stock") at a purchase price per share of
$_________. The date of grant of this option is _____________, which is
hereinafter referred to as the "Option Date."
2. TERM OF OPTION; EXERCISABILITY. The option will become vested and
exercisable in accordance with the vesting schedule set forth below, so
long as the Optionee continues to perform services for the Company or
any subsidiary or affiliate of the Company.
<PAGE> 12
NUMBER OF TOTAL OPTION SHARES DATE VESTED
----------------------------- -----------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
To the extent vested, the option will be immediately exercisable in
full or in part and will remain exercisable until it expires on the
tenth (10th) anniversary of the Option Date, unless the option is
sooner terminated as hereinafter provided; provided, however, that if
the grant of this option is made possible only by the adoption of this
Plan or any amendment thereof that is subject to shareholder approval,
the option will not be exercisable before such approval is obtained and
the option will be null and void if such approval is not obtained
within the time prescribed therefor.
3. OTHER CONDITIONS AND LIMITATIONS.
(a) The Company will furnish upon request of the Optionee such
publicly available financial and other information concerning
the Company and its business and prospects as may be
reasonably requested by the Optionee in connection with the
exercise of this option.
(b) The option will not be transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and
the option will be exercisable during the Optionee's lifetime
only by the Optionee (or the Optionee's guardian or legal
representative).
4. EXERCISE OF OPTION. Written notice of the exercise of the option or any
installment thereof will be given to the Company's Treasurer (or any
other officer of the Company who is designated by the Company to accept
such notices on its behalf), specifying the number of shares for which
it is exercised. Payment will be made in full at the time the option is
exercised. Payment will be made either by (i) cashier's or certified
check, (ii) if permitted by the Compensation and Management Development
Committee of the Board of Directors (the "Committee"), by delivery and
assignment to the Company of shares of common Stock having a value
equal to at the option price, or (iii) by a combination of (i) and
(ii). The value of the Common Stock for such purpose will be its fair
market value as of the date the option is exercised, as determined in
accordance with procedures to be established by the Committee.
5. WITHHOLDING. The Optionee hereby agrees that the exercise of the option
or any installment thereof will not be effective, and no shares will
become transferable to the Optionee, until the Optionee makes
appropriate arrangements with the Company for such tax withholding as
may be required of the Company under federal, state or local law on
account of such exercise.
2
<PAGE> 13
6. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS;
OTHER EVENTS. Appropriate adjustments will be made in the number, kind,
and option price of shares covered by this option, to the extent it is
outstanding, to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the
capital structure of the Company after the Option Date. The option will
become immediately exercisable in full, to the extent not then
exercised, upon the occurrence of certain events which constitute a
"change in control" as defined in, and in accordance with the terms of,
the Plan.
7. TERMINATION OF OPTION. In the event that the Optionee ceases for any
reason to be an employee of the Company or any subsidiary or affiliate
of the Company at any time prior to exercise of this option in full,
this option will terminate in accordance with the following provisions:
(a) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company for any reason other
than disability or death, he may, at any time prior to the
ninetieth (90) day after he ceased to be an employee, exercise
the option to the extent that the option was exercisable by
him on the date on which he ceased to be an employee;
(b) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company because of disability
within the meaning of Section 22(e) (3) of the Internal
Revenue Code of 1986, as amended, he may, at any time within a
period of one (1) year after he ceases to be an employee,
exercise the option to the extent that the option was
exercisable by him on the date he ceased to be an employee of
the Company or any subsidiary or affiliate of the Company; and
(c) if the Optionee dies at a time when he might have exercised
the option, then his estate, personal representative or
beneficiary to whom it has been transferred by will or the
laws of descent and distribution may at any time within a
period of one (1) year after the Optionee's death exercise the
option to the extent the Optionee might have exercised it at
the time of his death;
provided, however, that this option may not be exercised to any extent
by anyone after the date of expiration of the option under Paragraph 2,
and provided, further, that this option may not be exercised to the
extent not vested under Paragraph 2 at any time after the Optionee
ceases to be an employee of the Company or any subsidiary or affiliate
of the Company.
3
<PAGE> 14
8. CONFIDENTIAL INFORMATION. The Optionee acknowledges that the
information, observations and data obtained by him during the course of
his performance under this Agreement concerning the business or affairs
of the Company and its subsidiaries and affiliates are the property of
the Company. Therefore, the Optionee agrees that he will not disclose
to any unauthorized person or use for his own account any of such
information, observations or data without the Company's express written
consent, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other
than as a result of Optionee's actions. The Optionee agrees to deliver
to Company at the termination of his employment, or at any other time
the Company may request, all memoranda, notes, plans, records, reports,
and other documents (and copies thereof) relating to the business of
the Company and its subsidiaries and affiliates which he may then
possess or have under his control.
9. INVENTIONS AND PATENTS. The Optionee agrees that all inventions,
innovations or improvements in the Company's method of conducting its
business (including new contributions, improvements, idea and
discoveries, whether patentable or not) conceived or made by him during
the employment period belong to the Company. The Optionee will promptly
disclose such inventions, innovations or improvements to the Company
and perform all actions reasonably requested by the Company to
establish and confirm such ownership.
10. OTHER BUSINESSES. During the employment period, the Optionee agrees
that he will not, except with the express written consent of the
Company, become engaged in, render services for, or permit his name to
be used in connection with any business other than the business of the
Company and its subsidiaries and affiliates.
11. MISCELLANEOUS. The Optionee will not have any rights as a stockholder
or any claim to dividends with respect to the shares subject to the
option until the exercise of the option and the payment in full of the
purchase price for such shares. Nothing herein contained will impose
any obligation on the Company or any subsidiary or affiliate of the
Company or the Optionee with respect to the Optionee's continued
performance of services for the Company or any subsidiary or affiliate
of the Company. Nothing herein contained will impose any obligation
upon the Optionee to exercise the option. The option granted hereunder
is intended to qualify as an incentive stock option under Section 422A
of the Internal Revenue Code of 1986, as amended; however, the Company
makes no representation as to the tax treatment to the Optionee upon
receipt or exercise of the option or sale or other disposition of the
shares covered by the option.
12. RELATIONSHIP TO THE PLAN. The option contained in this agreement has
been granted pursuant to the Plan and is in all respects subject to the
terms, conditions and definitions of the Plan. The Optionee hereby
accepts this option subject to all the terms and provisions of the Plan
and agrees that all decisions under and
4
<PAGE> 15
interpretations of the Plan by the Board or the Committee will be
final, binding and conclusive upon the Optionee and his heirs.
13. GOVERNING LAW. This agreement will be subject to and construed in
accordance with the law of the State of Delaware.
IN WITNESS WHEREOF, the Company and the Optionee have executed this agreement in
duplicate as of the Option Date, as specified above.
PAGING NETWORK, INC. OPTIONEE
By
---------------------------- ----------------------------------
Ruth Williams Name
Senior Vice President and
General Counsel
----------------------------------
Street Address
----------------------------------
City, State, Zip Code
5
<PAGE> 16
1999 GRANT
PAGING NETWORK, INC.
NONQUALIFIED AND INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into by and between PAGING NETWORK, INC., a
Delaware corporation (hereinafter the "Company") and _______________________
(hereinafter the "Optionee"), who is an employee of the Company or one of its
subsidiaries or affiliates.
WHEREAS, the Company adopted the Paging Network, Inc. 1991 Stock Option
Plan, as subsequently amended and restated (the "Plan"), in order, among other
things, to grant nonqualified stock options and incentive stock options to
certain employees of the Company (or any subsidiary or affiliate of the Company)
to purchase common stock of the Company so as to give them a proprietary
interest in the Company's success and to attract, retain and motivate employees
of experience and ability; and
WHEREAS, the Optionee renders important services to the Company or a
subsidiary or affiliate of the Company, and the Company desires to grant a
nonqualified and incentive stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the option
to purchase from the Company upon the terms and conditions hereinafter
set forth ________________ shares of the $.01 par value Common Stock of
the Company (the "Common Stock") at a purchase price per share of
$_________. The date of grant of this option is _________________,
which is hereinafter referred to as the "Option Date."
2. TERM OF OPTION; EXERCISABILITY. The option will become vested and
exercisable in accordance with the vesting schedule set forth below, so
long as the Optionee continues to perform services for the Company or
any subsidiary or affiliate of the Company.
<PAGE> 17
NUMBER OF TOTAL OPTION SHARES DATE VESTED
----------------------------- -----------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
shares
------- -----------------
To the extent vested, the option will be immediately exercisable in
full or in part and will remain exercisable until it expires on the
tenth (10th) anniversary of the Option Date, unless the option is
sooner terminated as hereinafter provided; provided, however, that if
the grant of this option is made possible only by the adoption of this
Plan or any amendment thereof that is subject to shareholder approval,
the option will not be exercisable before such approval is obtained and
the option will be null and void if such approval is not obtained
within the time prescribed therefor.
3. OTHER CONDITIONS AND LIMITATIONS.
(a) The Company will furnish upon request of the Optionee such
publicly available financial and other information concerning
the Company and its business and prospects as may be
reasonably requested by the Optionee in connection with the
exercise of this option.
(b) The option will not be transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and
the option will be exercisable during the Optionee's lifetime
only by the Optionee (or the Optionee's guardian or legal
representative).
4. EXERCISE OF OPTION. Written notice of the exercise of the option or any
installment thereof will be given to the Company's Treasurer (or any
other officer of the Company who is designated by the Company to accept
such notices on its behalf), specifying the number of shares for which
it is exercised. Payment will be made in full at the time the option is
exercised. Payment will be made either by (i) cashier's or certified
check, (ii) if permitted by the Compensation and Management Development
Committee of the Board of Directors (the "Committee"), by delivery and
assignment to the Company of shares of common Stock having a value
equal to at the option price, or (iii) by a combination of (i) and
(ii). The value of the Common Stock for such purpose will be its fair
market value as of the date the option is exercised, as determined in
accordance with procedures to be established by the Committee.
5. WITHHOLDING. The Optionee hereby agrees that the exercise of the option
or any installment thereof will not be effective, and no shares will
become transferable to the Optionee, until the Optionee makes
appropriate arrangements with the Company for such tax withholding as
may be required of the Company under federal, state or local law on
account of such exercise.
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<PAGE> 18
6. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS;
OTHER EVENTS. Appropriate adjustments will be made in the number, kind,
and option price of shares covered by this option, to the extent it is
outstanding, to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the
capital structure of the Company after the Option Date. The option will
become immediately exercisable in full, to the extent not then
exercised, upon the occurrence of certain events which constitute a
"change in control" as defined in, and in accordance with the terms of,
the Plan.
7. TERMINATION OF OPTION. In the event that the Optionee ceases for any
reason to be an employee of the Company or any subsidiary or affiliate
of the Company at any time prior to exercise of this option in full,
this option will terminate in accordance with the following provisions:
(a) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company for any reason other
than disability or death, he may, at any time prior to the
ninetieth (90) day after he ceased to be an employee, exercise
the option to the extent that the option was exercisable by
him on the date on which he ceased to be an employee;
(b) if the Optionee ceases to be an employee of the Company or any
subsidiary or affiliate of the Company because of disability
within the meaning of Section 22(e) (3) of the Internal
Revenue Code of 1986, as amended, he may, at any time within a
period of one (1) year after he ceases to be an employee,
exercise the option to the extent that the option was
exercisable by him on the date he ceased to be an employee of
the Company or any subsidiary or affiliate of the Company; and
(c) if the Optionee dies at a time when he might have exercised
the option, then his estate, personal representative or
beneficiary to whom it has been transferred by will or the
laws of descent and distribution may at any time within a
period of one (1) year after the Optionee's death exercise the
option to the extent the Optionee might have exercised it at
the time of his death;
provided, however, that this option may not be exercised to any extent
by anyone after the date of expiration of the option under Paragraph 2,
and provided, further, that this option may not be exercised to the
extent not vested under Paragraph 2 at any time after the Optionee
ceases to be an employee of the Company or any subsidiary or affiliate
of the Company.
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<PAGE> 19
8. CONFIDENTIAL INFORMATION. The Optionee acknowledges that the
information, observations and data obtained by him during the course of
his performance under this Agreement concerning the business or affairs
of the Company and its subsidiaries and affiliates are the property of
the Company. Therefore, the Optionee agrees that he will not disclose
to any unauthorized person or use for his own account any of such
information, observations or data without the Company's express written
consent, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other
than as a result of Optionee's actions. The Optionee agrees to deliver
to Company at the termination of his employment, or at any other time
the Company may request, all memoranda, notes, plans, records, reports,
and other documents (and copies thereof) relating to the business of
the Company and its subsidiaries and affiliates which he may then
possess or have under his control.
9. INVENTIONS AND PATENTS. The Optionee agrees that all inventions,
innovations or improvements in the Company's method of conducting its
business (including new contributions, improvements, idea and
discoveries, whether patentable or not) conceived or made by him during
the employment period belong to the Company. The Optionee will promptly
disclose such inventions, innovations or improvements to the Company
and perform all actions reasonably requested by the Company to
establish and confirm such ownership.
10. OTHER BUSINESSES. During the employment period, the Optionee agrees
that he will not, except with the express written consent of the
Company, become engaged in, render services for, or permit his name to
be used in connection with any business other than the business of the
Company and its subsidiaries and affiliates.
11. MISCELLANEOUS. The Optionee will not have any rights as a stockholder
or any claim to dividends with respect to the shares subject to the
option until the exercise of the option and the payment in full of the
purchase price for such shares. Nothing herein contained will impose
any obligation on the Company or any subsidiary or affiliate of the
Company or the Optionee with respect to the Optionee's continued
performance of services for the Company or any subsidiary or affiliate
of the Company. Nothing herein contained will impose any obligation
upon the Optionee to exercise the option. A portion of the option
granted hereunder is intended to qualify as an incentive stock option
under Section 422A of the Internal Revenue Code of 1986, as amended;
however, the Company makes no representation as to the tax treatment to
the Optionee upon receipt or exercise of the option or sale or other
disposition of the shares covered by the option.
12. RELATIONSHIP TO THE PLAN. The option contained in this agreement has
been granted pursuant to the Plan and is in all respects subject to the
terms, conditions and definitions of the Plan. The Optionee hereby
accepts this option subject to all the terms and provisions of the Plan
and agrees that all decisions under and
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<PAGE> 20
interpretations of the Plan by the Board or the Committee will be
final, binding and conclusive upon the Optionee and his heirs.
13. GOVERNING LAW. This agreement will be subject to and construed in
accordance with the law of the State of Delaware.
IN WITNESS WHEREOF, the Company and the Optionee have executed this agreement in
duplicate as of the Option Date, as specified above.
PAGING NETWORK, INC. OPTIONEE
By
---------------------------- ----------------------------------
Ruth Williams Name
Senior Vice President and
General Counsel
----------------------------------
Street Address
----------------------------------
City, State, Zip Code
5
<PAGE> 1
EXHIBIT 10.21
PAGING NETWORK, INC.
EMPLOYEE STOCK
PURCHASE PLAN
Effective as of January 1, 1997
Amended on December 16, 1998
<PAGE> 2
PAGING NETWORK, INC.
EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I Purpose and Effective Date ...............................................................1
Article II Definitions .............................................................................1
Article III Eligibility and Participation ..........................................................5
Article IV Payroll Deductions ......................................................................6
Article V Terms and Conditions of Options ..........................................................8
Article VI Exercise of Option ......................................................................9
Article VII Withdrawal, Termination, Death. ........................................................10
Article VIII Shares Under Option ...................................................................12
Article IX Administration ..........................................................................13
Article X Amendment and Termination of the Plan ....................................................15
Article XI Nontransferability ......................................................................15
Article XII Use of Funds ...........................................................................16
Article XIII Changes in Capitalization, Merger, etc. and Adjustments to Shares .....................16
Article XIV Beneficiaries of Deceased Participants .................................................18
Article XV Registration and Qualification of Shares ................................................19
Article XVI Stockholder Approval ...................................................................19
Article XVII Restrictions On Participants Subject to Short-Swing Profit Rules ......................20
Article XVIII Miscellaneous ........................................................................20
</TABLE>
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<PAGE> 3
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.1 The Paging Network, Inc. Employee Stock Purchase Plan is intended to
encourage employees of Paging Network, Inc. (the "Company") and its
participating subsidiary corporations to acquire an ownership interest
in the Company through the purchase of Shares of common stock of the
Company. It is believed that this Plan will enhance stockholder value
by aligning employee efforts with the financial success of the Company.
It is the intention of the Company to have the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall be
construed so as to extend and limit participation in a manner
consistent with the requirements of Section 423 of such Code.
1.2 The Plan is effective as of January 1, 1997.
ARTICLE II
DEFINITIONS
2.1 "Code" means the Internal Revenue Code of 1986, as amended.
2.2 "Commencement Date" means each January 1st during the Term of the Plan;
provided, however, that the Committee may designate as to any given
January 1st that such date shall not be a Commencement Date and that no
options shall be granted as of such date. The initial Commencement Date
is January 1, 1997.
2.3 "Committee" means the committee provided for in Article IX.
2.4 "Company" means Paging Network, Inc., a Delaware corporation.
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2.5 "Compensation" means all wages, salaries, and fees for professional
services and other amounts received (without regard to whether or not
an amount is paid in cash) during the calendar year for personal
services actually rendered in the course of employment with the
Employer to the extent that the amounts are includable in gross income
(including, but not limited to, commissions paid salesmen, compensation
for services on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits and reimbursements
or other expense allowances under a nonaccountable plan as described in
section 1.62-2(c) of the Treasury Regulations), plus any amounts
contributed by the Employer pursuant to a salary reduction agreement
that are not includable in gross income of the Employee under Section
125 of the Code (regarding contributions to a cafeteria plan), Section
402(a)(8) of the Code (regarding contributions to a 401(k) plan),
Section 402(h) of the Code (regarding contributions to a simplified
employee pension plan), or Section 403(b) of the Code (regarding
contributions to an annuity contract), and less any prizes, awards,
automobile allowances, stock options, relocation expenses or severance
pay.
The term "Compensation" shall not include the following,
(i) Employer contributions to a plan of deferred compensation to
the extent that before the application of the limits under
Section 415 of the Code, the contributions are not includable
in the Employee's gross income for federal income tax purposes
in the taxable year of the Employee in which the contributions
are made;
(ii) Employer contributions under a simplified employee pension
plan described in Section 408(k) of the Code, to the extent
that Such contributions are not considered as compensation for
the taxable year of the Employee in which the contributions
are made;
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<PAGE> 5
(iii) Any distributions from a plan of deferred compensation
(regardless of whether such amounts are includable in gross
income of the Employee for federal income tax purposes in the
taxable year of distribution);
(iv) Amounts realized from the exercise of a nonqualified stock
option;
(v) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option;
(vi) Amounts realized when restricted stock (or property) held by
the Employee either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture; or
(vii) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent
that the premiums are not includable in the gross income of
the Employee) or contributions made by the Employer (whether
or not under a salary reduction arrangement) towards the
purchase of an annuity contract described in Section 403(b) of
the Code (whether or not the contributions are excludable from
the gross income of the Employee).
The compensation limitation of Code Section 401 (a)(17) shall not apply
under the Plan.
2.6 "Corresponding Exercise Date" with regard to Commencement Dates
occurring prior to January 1, 1999, means the second December 31st
following such Commencement Date or, if such date is not a trading day
on the NASDAQ National Market System or other established securities
market on which the Company's stock is traded, the nearest prior
business day on which such trading occurs. The Corresponding Exercise
Date with regard to the Commencement Date occurring on or after January
1, 1999 means the
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<PAGE> 6
December 31st following such Commencement Date or, if such date is not
a trading day on the NASDAQ National Market System or other established
securities market on which the Company's stock is traded, the nearest
prior business day on which such trading occurs.
2.7 "Election Period" means the period commencing on a date determined by
the Committee prior to any Corresponding Exercise Date and ending on
such Corresponding Exercise Date.
2.8 "Eligible Employee" means an Employee of the Employer who is eligible
for participation in the Plan in accordance with Article III.
2.9 "Employee" means any person, including an officer, who is carried on
the Employer's books as an employee for payroll tax purposes, provided
such employee is customarily employed more than five (5) months in a
calendar year and more than twenty (20) hours per week by the Employer.
Any Employee otherwise meeting the foregoing criteria but who is a
member of the Board of Directors of an Employer shall nevertheless be
eligible participate in the Plan.
2.10 "Employer" means the Company and any of its present or future
subsidiaries or affiliated organizations constituting a "subsidiary
corporation" within the meaning of Section 424(e) of the Code and
designated by the Committee as a participating employer as to the
offering beginning as of any particular Commencement Date.
2.11 "Offering Period" means a period from a given Commencement Date to the
Corresponding Exercise Date.
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<PAGE> 7
2.12 "Participant" means an Eligible Employee of the Employer who elects to
participate hereunder.
2.13 "Payroll Period" means each semi-monthly payroll period for which
Eligible Employees are paid through January 31, 1999, and commencing
February 1, 1999, means each bi-weekly payroll period for which
Eligible Employees are paid.
2.14 "Plan" means this Paging Network, Inc. Employee Stock Purchase Plan, as
amended from time to time.
2.15 "Shares" means shares of common stock of Paging Network, Inc., par
value $0.01 per share, subject to adjustments which may be made in
accordance with Article III.
2.16 "Term of the Plan" means the time period from the initial Commencement
Date of January 1, 1997 to the Termination Date of the Plan.
2.17 "Termination Date" means, unless the Plan has been earlier terminated
by the Board of Directors, the final Corresponding, Exercise Date on
which all of the Shares available to the Plan have been purchased by
Participants through the Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Any Employee of the Employer who is employed prior to a given
Commencement Date shall be an Eligible Employee and shall be eligible
to participate in the Plan on such Commencement Date, subject to the
limitations imposed by Section 423 of the Code.
3.2 An Eligible Employee may elect to enroll as of, and become a
Participant on, the first Commencement Date on which such Employee
qualifies as an Eligible Employee or on any subsequent Commencement
Date on which such Employee continues to be an
5
<PAGE> 8
Eligible Employee. To enroll in the Plan, an Eligible Employee shall
complete a payroll deduction authorization on the form provided by the
Committee and file it with the Committee on or before the deadline
established by the Committee.
3.3 A Participant who ceases to be an Eligible Employee, although still
employed by the Employer, thereupon shall be deemed to discontinue
participation in the Plan, and the Participant shall have the rights
provided in Section 7.2.
3.4 Participation in the Plan shall be voluntary.
ARTICLE IV
PAYROLL DEDUCTIONS
4.1 For each Offering Period, payroll deductions for a Participant shall
begin on the first payroll date following the Commencement Date for
which an Eligible Employee returns a timely payroll deduction
authorization and shall end on the Corresponding Exercise Date, unless
sooner terminated by the Participant as provided in Article VII or as
otherwise provided herein.
4.2 Payroll deductions shall be elected by a Participant in full percentage
points not in excess of ten percent (10%) of such Participant's
Compensation for each Payroll Period during the Offering Period.
Payroll deductions may be independently elected by a Participant for
any overlapping Offering Period. For example, a Participant may elect
an eight percent (8%) payroll deduction for the Offering Period
beginning on January 1, 1997 and a ten percent (10%) payroll deduction
for the Offering Period beginning on January 1, 1998. In this case,
Such Participant would have a total of eighteen percent (18%) deducted
from his pay during the period from January 1, 1998 to December 31,
1998 (the period during which the Offering Periods overlap).
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<PAGE> 9
Notwithstanding the foregoing, the Committee may at any time and in its
sole discretion designate a maximum payroll deduction percentage of
less than ten percent (10%) for a given offering period; provided that
if a lesser percentage is designated for a given Offering Period, the
Compensation percentage referred to in Section 5.2 shall be modified to
be equal to the lesser percentage determined under this Section.
4.3 All payroll deductions made for Participants shall be credited to their
accounts under the Plan, Participants may not make any separate cash
payments into such accounts. A separate account will be established for
each Offering, Period.
4.4 A Participant may discontinue participation at any time with respect to
any Offering Period including; either or both of two overlapping
Offering Periods, under the Plan and terminate the payroll deduction
authorization as provided in Section 7.1. All terminations of payroll
deductions shall become effective as soon as practicable after the date
the amended payroll deduction authorization form is received by the
Committee.
4.5 Subject to the limitations described in Section 4.2 and Section 7.1, a
Participant may increase or reduce the amount of the Participant's
payroll deduction by completing an amended payroll deduction
authorization on a payroll deduction authorization form provided by the
Committee and filing it with the Committee. All changes in payroll
deduction amounts shall become effective on the January 1st or July 1st
which next follows the date the amended payroll deduction authorization
form is received by the Committee, provided that if such form is
received immediately prior to a January 1st or a July 1st such that it
is not received in time to permit the payroll deduction change to begin
on the next following January 1st or July 1st, the payroll deduction
change shall begin as soon as practicable after such January 1st or
July 1st.
4.6 Payroll deductions for a Participant shall cease as of the date of the
Participant's termination of employment for any reason and the
Participant shall have the rights provided in Section 7.2.
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<PAGE> 10
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
5.1 Stock options granted pursuant to the Plan shall be evidenced by
agreements in such form as the Committee shall approve, provided that
all Employees shall have the same rights and privileges and provided
further that such options shall comply with and be subject to the terms
and conditions of this Article V and other applicable provisions of the
Plan.
5.2 As of each Commencement Date on which a Participant has an effective
payroll deduction authorization, the Participant shall be granted an
option to purchase a maximum number of Shares equal to (i) ten percent
(10%) multiplied by (ii) the Participant's Compensation for the
Offering Period divided by (iii) 85% of the fair market value of a
Share on the Commencement Date, subject to the limitations of this
Article and Article VIII. The fair market value of a Share shall be
determined as provided in Section 5.4. For purposes of this Section 5.2
only, a Participant's Compensation for the Offering Period shall be
determined based on the Participant's annualized or annual Compensation
for the twelve (12) months preceding the Commencement Date.
5.3 The option price of Shares purchased with payroll deductions on a given
Corresponding Exercise Date shall be equal to eighty-five percent (85%)
of the lower of (i) the fair market value of the Shares as of the
Commencement Date or (ii) the fair market value of the Shares as of the
Corresponding Exercise Date.
5.4 The fair market value of the Shares as of the Commencement Date shall
be equal to the closing price of the Company's common stock on the
Commencement Date or the nearest prior business day on which such
trading occurred, if the Commencement Date is not a trading day on the
NASDAQ National Market System or other established securities market on
which the Company's common stock is traded. The fair market value of
the Shares as of the Corresponding Exercise Date shall be equal to the
closing price of the
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<PAGE> 11
Company's common stock on such date. If the Company's common stock is
not admitted to trading on any of the aforesaid dates for which closing
prices of the Shares are to be determined, then reference shall be made
to the fair market value of the stock on that date, as determined on
such basis as shall be established or specified for this purpose by the
Committee in a manner acceptable under Section 423 of the Code.
5.5 Notwithstanding any provision of the Plan to the contrary, no Employee
shall be granted an option:
(a) if such Employee, immediately after the option is granted,
owns Shares possessing five percent (5%) or more of the total
combined voting power or value of all classes of Shares of the
Company or a parent or a subsidiary of the Company. For
purposes of determining share ownership the rules of Section
424(d) of the Code shall apply and Shares which the Employee
may purchase under outstanding options shall be treated as
Shares owned by the Employee; or
(b) which, when considered in conjunction with all other options
granted under this Plan (or other stock-based compensation
plans of the Company, or any parent or subsidiary of the
Company, required under Section 423(b)(8) to be aggregated
with the Plan), results in the Employee accruing rights in a
calendar year to acquire Shares having a value in excess of
twenty-five thousand dollars ($25,000) measured at the date of
grant. For this purpose, all determinations of accrual and the
value at which Shares are taken into account shall be made in
accordance with Section 423(b)(8) of the Code.
ARTICLE VI
EXERCISE OF OPTION
6.1 Unless a Participant (or a deceased Participant's beneficiary) gives
written notice to the Committee as provided in Section 6.2 (or Section
7.3), the Participant's option for the
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<PAGE> 12
purchase of Shares will be exercised automatically for the Participant
as of the Corresponding Exercise Date for the purchase of the number of
full Shares which the accumulated payroll deductions in the
Participant's account (established for that Offering Period) at that
time will purchase at the applicable option price, but in no event
shall the number of full Shares be greater than the number of full
Shares which the Participant would have been eligible to purchase under
Section 5.2 or allowed to purchase under Section 8.1. All options
granted on a given Commencement Date that are not exercised on the
Corresponding Exercise Date shall lapse on such Corresponding Exercise
Date and all payroll deductions attributable to these options shall be
distributed to the Participant in cash, without interest or earnings,
as soon as practicable after the Corresponding Exercise Date on which
such options lapse.
6.2 By written notice to the Committee within the Election Period, a
Participant may elect not to exercise the Participant's option and to
withdraw the entire balance (but not less than the contribution
balance) in the Participant's account, without interest or earnings.
6.3 Payroll deductions remaining in a Participant's individual account
representing less than the option price of a single Share as of any
Corresponding Exercise Date, shall be refunded, without interest or
earnings. All other payroll deductions for an Offering Period not
applied to the exercise of an option, as of the Corresponding Exercise
Date for such Period, shall be refunded to the Participant, without
interest or earnings.
6.4 During a Participant's lifetime, no person other than the Participant
shall have the right to elect to exercise the Participant's option.
ARTICLE VII
WITHDRAWAL, TERMINATION, OR DEATH
7.1 During, an Offering Period, a Participant may elect to terminate
payroll deductions, including either or both of two overlapping
Offering Periods, by giving written notice to
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<PAGE> 13
the Committee. In the event a Participant makes such election, the
payroll deductions shall terminate as provided in Section 4.4 and the
Participant's payroll deductions credited to the Participant's accounts
to that date shall be retained in the account and, in accordance with
Section 6.1, automatically exercised on the Corresponding Exercise Date
or, at the Participant's election in accordance with Section 6.2,
distributed in cash to the Participant, without interest or earnings,
as soon as practicable following the Participant's election. If a
Participant elects a cash distribution, such Participant may not
thereafter elect to resume payroll deductions with respect to the same
Offering Period pursuant to Section 4.5. As of any subsequent
Commencement Date, such Eligible Employee may elect to resume payroll
deductions, with respect to a different Offering Period, in accordance
with Article IV.
7.2 Upon termination of the Participant's employment for any reason other
than the death of the Participant during an Offering Period, the
payroll deductions credited to the Participant's account shall be
distributed in cash to the Participant as soon as practicable
following the Participant's termination. The payroll deductions to be
refunded shall be credited with simple interest of four percent (4%)
per annum through the first day of the month corresponding with or
immediately preceding the date of distribution, and this interest
amount shall be distributed after the appropriate payroll tax
deductions, if any, are made.
7.3 In the event of the death of a Participant during an Offering Period, a
deceased Participant's beneficiary or beneficiaries, determined in
accordance with Article XIV, may give notice to the Committee electing
to have the accumulated payroll deductions distributed in cash as soon
as practicable, The payroll deductions to be refunded shall be credited
with simple interest of four percent (4%) per annum through the first
day of the month preceding distribution, and this interest amount shall
be distributed with the payroll deductions. If no election is made to
have accumulated payroll deductions refunded, the beneficiary or
beneficiaries shall be deemed to have elected to exercise, in which
event the accumulated payroll deductions in the account of the
Participant shall be
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<PAGE> 14
used to purchase the number of full Shares which the accumulated
payroll deductions in the account of such deceased Participant will
purchase at the option price specified in Section 5.3, subject to the
limitations of Article V, and to have any remaining payroll deductions
refunded without interest or earnings, promptly following the
Corresponding Exercise Date for the Offering Period for which
deducted.
ARTICLE VIII
SHARES UNDER OPTION
8.1 The Shares to be sold to Participants under the Plan may, at the
election of the Company, be either treasury Shares, Shares originally
issued for such purpose, or Shares purchased on the market. The maximum
number of Shares which shall be made available for sale under the Plan
shall be 2,000,000 Shares, subject to adjustment upon changes in
capitalization of the Company or other events, as provided in Article
XIII. If the total number of Shares for which options are granted or to
be granted on any Commencement Date exceeds the number of Shares then
available under the Plan (after deduction of all Shares for which
options have been exercised or are then outstanding), then, not later
than the Corresponding Exercise Date, the Committee shall make a pro
rata allocation of the Shares remaining available in as nearly a
uniform manner as shall be practicable and as it shall determine to be
equitable taking into account the amount each Participant elected to
defer under Section 3.2. All excess options shall lapse and may not be
exercised at any time. In such event, payroll deductions to be made
shall be reduced accordingly and the Committee shall give written
notice of such reduction to each Participant affected thereby and, if
necessary, excess payroll deductions previously credited to the
Participants' accounts shall be returned to such Participants without
interest or earnings. Notwithstanding the foregoing, if stockholder
approval for the requisite number of additional Shares is obtained
within twelve (12) months of the date that the excess options are
granted, no such adjustments to the number of options previously
granted shall be required.
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8.2 As promptly as practicable after the Corresponding Exercise Date, the
Company shall make the appropriate entries to show the purchase of
shares on behalf of Participants. The Company will retain all the
certificates evidencing ownership of the Shares on behalf of each
Participant until such time as the Participant requests the
certificates, Shares issued pursuant to the Plan shall be subject to
such restrictions and for such period as the Company may designate and
the certificates representing the Shares shall include a legend
reflecting such restrictions.
8.3 The Participant shall have no interest in Shares covered by an option
until such option has been exercised.
ARTICLE IX
ADMINISTRATION
9.1 The Stock Option/Compensation Committee of the Board of Directors of
the Company shall be the Committee responsible for administering the
Plan.
9.2 The Committee shall have the following discretionary powers and duties:
(a) to direct the administration of the Plan in accordance with
the provisions herein set forth;
(b) to adopt rules of procedure and regulations necessary for the
administration of the Plan, provided the rules are not
inconsistent with the terms of the Plan;
(c) to determine all questions with regard to rights of
Participants of the Plan, including, but not limited to rights
of eligibility of an Employee to participate in the Plan;
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<PAGE> 16
(d) to enforce the terms of the Plan and the rules and regulations
it adopts;
(e) to furnish the Employer with information which the Employer
may require for tax or other purposes;
(f) to engage the service of advisors, including consultants and
counsel (who may be consultants or counsel for the Employer)
and agents whom it may deem advisable to assist it with the
performance of its duties;
(g) to receive from the Employer and from Employees such
information as shall be necessary for the proper
administration of the Plan;
(h) to select a secretary, who need not be a member of the
Committee; and
(i) to interpret and construe the Plan, to make findings of fact,
to correct errors, and to supply omissions under the Plan. The
Committee shall use its discretion to interpret the terms and
purpose of the Plan so as to resolve any conflict or
contradiction.
9.3 The Committee may authorize any one of its members, or its secretaries,
to sign on its behalf any notices, directions, applications,
certificates, consents, approvals, waivers, letters, or other
documents.
9.4 The Committee shall administer the Plan in a uniform, nondiscriminatory
manner for the benefit of the Participants.
9.5 The Committee shall maintain, or cause to be maintained, records which
will adequately disclose all required information about the Plan. The
books, forms, and methods of accounting shall be the responsibility of
the Committee.
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<PAGE> 17
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Company may at any time, by written resolution,
amend or terminate the Plan or outstanding options granted under the Plan.
Provided, however, that no amendment (i) which would require sale of Shares in
excess of the number authorized under Article VIII of the Plan or (ii) which
would change the rules regarding eligibility for participation, shall be
effective unless approval of the stockholders of the Company is obtained within
the period beginning twelve (12) months prior to the adoption date of the
amendment and ending on the date which is twelve (12) months after the adoption
date of the amendment. Provided further that, except as provided in Article XIII
or as otherwise expressly provided in the Plan, no amendment or termination of
the Plan shall adversely affect the rights of an optionee under any outstanding
option without the optionee's consent.
ARTICLE XI
NONTRANSFERABILITY
Except as provided in Section 7.3, neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option or
to receive Shares under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the Participant and any such attempted
assignment, transfer, pledge, or other disposition shall be null and void and
without effect, but the Committee may, at its option, treat such act as an
election to withdraw funds in accordance with Article VII. In the event of an
attempted transfer pursuant to a divorce decree affecting the Participant, the
Committee may distribute the existing payroll deductions, to the extent of the
attempted transfer, as soon as practicable following receipt by the Committee of
the divorce decree, without interest or earnings. Except to the extent required
by law, in no event, shall a divorce decree create or recognize any right in the
Participant's former spouse to exercise options under the Plan or to receive
Shares under the Plan.
15
<PAGE> 18
ARTICLE XII
OWNERSHIP AND USE OF FUNDS
All payroll deductions received or held by the Company under this Plan shall be
and remain general corporate assets of the Company and may be used by the
Company for any corporate purposes and any and all amounts earned on such
payroll deductions shall be general corporate assets of the Company. The Company
shall not be obligated to segregate such payroll deductions or to accrue or pay
interest or earnings on such payroll deductions, except as specifically provided
in this Plan.
ARTICLE XIII
CHANGES IN CAPITALIZATION, MERGER, ETC.
AND ADJUSTMENTS TO SHARES
13.1 Except as otherwise determined by the Committee, if the Company is
merged or consolidated into a new surviving company and the holders of
the Company's voting securities (on a fully-diluted basis) immediately
prior to the merger or consolidation own less than a majority of the
ordinary voting power to elect directors of the new surviving company
(on a fully-diluted basis), or if there is a sale of all or
substantially all of the Company's assets or capital stock in any
transaction or series of related transactions, or upon the dissolution
or liquidation of the Company, then the holder of each option then
outstanding under the Plan will be entitled to receive at the
Corresponding Exercise Date, upon the exercise of such option for each
Share as to which such option shall be exercised, as nearly as
reasonably may be determined, the cash, securities and/or property
which a holder of one Share was entitled to receive upon and at the
time of such transaction. For purposes of this Section 13.1 only,
"Corresponding Exercise Date" shall be a date designated by the
Committee which may be a date earlier than the normal Corresponding
Exercise Date. Alternatively, the Company may designate that the
dissolution or liquidation of the Company shall cause each outstanding
option to terminate, provided in such event that immediately prior to
such
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<PAGE> 19
dissolution or liquidation, each Participant shall be repaid the
payroll deductions credited to the Participant's account, without
interest or earnings.
13.2 If, under circumstances not governed by Section 13.1, the outstanding
Shares have increased, decreased, changed into, or been exchanged for a
different number or kind of shares or securities of the Company through
reorganization, merger, recapitalization, reclassification, stock
split, reverse stock split or similar transaction, appropriate and
proportionate adjustments shall be made by the Committee in the number
and/or kind of Shares which are subject to purchase under outstanding
options and on the option exercise price or prices applicable to such
outstanding options. In addition, in any such event, the number and/or
kind of Shares which may be offered under the Plan shall also be
proportionately adjusted. No adjustments shall be made for stock
dividends. For the purposes of this Section 13.1, any distribution of
Shares to stockholders in an amount aggregating twenty percent (20%) or
more of the outstanding shares shall be deemed a stock split and any
distribution of shares aggregating less than twenty percent (20%) of
the outstanding shares shall be deemed a stock dividend,
13.3 In the event of a change in the Shares of the Company as presently
constituted, which is limited to a change of all its authorized Shares
with par value into the same number of Shares with a different par
value or without par value, the Shares resulting from any such change
shall be deemed to be Shares within the meaning of this Plan.
13.4 To the extent that the foregoing adjustments relate to Shares or
securities of the Company, such adjustments shall be made by the
Committee, and its determination in that respect shall be final,
binding, and conclusive, provided that each option granted pursuant to
this Plan shall not be adjusted in a manner that causes the option to
fail to continue to satisfy as an option issued pursuant to an
"employee stock purchase plan" within the meaning of Section 423 of the
Code.
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<PAGE> 20
13.5 Except as herein before expressly provided, the Participant shall have
no right by reason of any subdivision or consolidation of Shares of any
class or the payment of any dividend or any other increase or decrease
in the number of Shares of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spin-off of assets or stock of
another corporation, and any issue by the Company of Shares of any
class, or securities convertible into Shares of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of Shares subject to the option.
13.6 The grant of an option pursuant to this Plan shall not affect in any
way the fight or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or
assets.
ARTICLE XIV
BENEFICIARIES OF DECEASED PARTICIPANTS
A Participant may file a written designation of beneficiary with the Committee.
Such designation of beneficiary may be changed by the Participant at any time by
written notice to the Committee. If upon the death of a Participant there is no
surviving beneficiary duly designated as above provided, the surviving spouse,
or if no such surviving spouse exists, then to the executor or administrator of
the Participant's estate, if an executor or administrator has been appointed,
shall be deemed the deceased Participant's beneficiary under the Plan. If there
is no surviving spouse and no executor or administrator has been appointed (to
the knowledge of the Committee) following the Participant's death, in the
discretion of the Committee, the Committee may determine the beneficiary or
beneficiaries under the Plan as follows; (i) the Participant's beneficiary or
beneficiaries pursuant to his Employer's group term life insurance plan, or if
none, (ii) all or any one or more of the persons comprising the group consisting
of the Participant's lineal descendants, the Participant's ancestors, or the
Participant's heirs at law, and the Committee may pay the entire amount to any
member of such group or apportion such amount
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<PAGE> 21
among any two or more of them in such shares as the Committee, in its sole
discretion, shall determine. Any payment made to any person pursuant to the
power and discretion conferred upon the Committee by the preceding sentence
shall operate as a complete discharge of all obligations under the Plan in
respect of such deceased Participant and shall not be subject to review by
anyone, but shall be final, binding and conclusive on all persons ever
interested hereunder. Neither the Committee nor the Employer shall be liable for
any transfer or attempted transfer of Shares or payroll deductions pursuant to
any will or other testamentary disposition made by such Participant, or because
of the provisions of law concerning intestacy, or otherwise, nor shall the
Committee or the Employer be liable for transferring or distributing any Shares
and/or payroll deductions pursuant to any will. No designated beneficiary or
other person or entity to whom Shares and/or payroll deductions are transferable
or distributable after a Participant's death shall, prior to the death of the
Participant by whom the beneficiary has been designated, acquire any interest in
the Shares or payroll deductions credited to the Participant under the Plan.
ARTICLE XV
REGISTRATION AND QUALIFICATION OF SHARES
The offering of the Shares hereunder shall be subject to the effecting by the
Company of any registration or qualification of the Shares under any federal or
state law or the obtaining of the consent or approval of any governmental
regulatory body which the Company shall determine, in its sole discretion, is
necessary or desirable as a condition to, or in connection with, the offering or
the issue or purchase of the Shares covered thereby. The Company shall make
reasonable efforts to effect such registration or qualification or to obtain
such consent or approval.
ARTICLE XVI
STOCKHOLDER APPROVAL
The Plan is expressly made subject to the approval of the holders of a majority
of the outstanding Shares of the Company (as described by the laws of the State
of Delaware)within the period
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<PAGE> 22
commencing twelve (12) months before the date this Plan is adopted and ending
twelve (12) months after the date the Plan is adopted.
ARTICLE XVII
RESTRICTIONS ON PARTICIPANTS SUBJECT TO SHORT-SWING PROFIT RULES
Notwithstanding, any provision of this Plan to the contrary, those Participants
who are directors, executive officers, and ten percent (10%) or greater
stockholders subject to Section 16 of the Securities Exchange Act of 1934 (the
"1934 Act") must effect transactions in Shares, including without limitation
initial or periodic transactions resulting from an election to participate in
the Plan or change levels of participation with respect to Shares, in accordance
with Section 16 and the rules promulgated thereunder to the extent such rules
are applicable. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee. Moreover, in the event
the Plan does not include a provision required by Rule 16b-3 to be stated
therein, such provision (other than one relating to eligibility requirements or
the price and amount of an option) shall be deemed automatically to be
incorporated by reference into the Plan insofar as Participants subject to
Section 16 of the 1934 Act are concerned.
ARTICLE XVIII
MISCELLANEOUS
18.1 The Plan does not, directly or indirectly, create any absolute right
for the benefit of any Employee or class of Employees to purchase any
Shares under the Plan, or create in any Employee or class of Employees
any right with respect to continuation of employment by the Employer,
and it shall not be deemed to interfere in any way with the Employer's
right to terminate, or otherwise modify, an Employee's employment at
any time.
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<PAGE> 23
18.2 THE LAWS OF THE STATE OF DELAWARE OTHER THAN ITS PRINCIPLES OF
CONFLICTS OF LAWS, SHALL GOVERN ALL MATTERS RELATING TO THIS PLAN
EXCEPT TO THE EXTENT SUPERSEDED BY THE LAWS OF THE UNITED STATES.
18.3 The masculine or feminine enders, where appearing in the Plan, shall be
deemed to include the opposite gender, unless the context clearly
indicates to the contrary.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
21
<PAGE> 1
EXHIBIT 10.22
PAGING NETWORK, INC.
SEVERANCE PAY PLAN
(Effective as of January 20, 1999)
<PAGE> 2
PAGING NETWORK, INC.
SEVERANCE PAY PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1
General .................................................................................................1
1.1 History and Purpose...........................................................1
1.2 Subsidiaries, Affiliates and Employers........................................1
1.3 Plan Administration...........................................................1
1.4 Source of Payments............................................................1
1.5 Notices.......................................................................1
1.6 General and Number............................................................1
1.7 Action by Employers...........................................................2
SECTION 2
Participation............................................................................................2
2.1 Participation.................................................................2
2.2 Cessation of Participation....................................................2
SECTION 3
Change in Control........................................................................................2
SECTION 4
Severance Benefits.......................................................................................4
4.1 Entitlement to Severance Benefits.............................................4
4.2 Cause.........................................................................4
4.3 Disability....................................................................4
4.4 Termination for Good Reason...................................................4
4.5 Severance Benefits............................................................5
4.6 Base Severance Amount.........................................................5
4.7 Bonus Payment for Year of Termination.........................................5
4.8 Reduction for Other Severance Payments........................................6
4.9 Adjustment for Tax Effects....................................................6
4.10 Pooling of Interests Accounting Treatment.....................................6
4.11 Mitigation and Set-Off........................................................7
4.12 Non-Alienation................................................................7
4.13 Withholding...................................................................7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5
Confidentiality and Non-Competition......................................................................7
5.1 Confidentiality and Non-Competition - General.................................7
5.2 Confidential Information......................................................7
5.3 Noncompetition................................................................8
SECTION 6
Enforcement..............................................................................................9
6.1 Arbitration of Disputes.......................................................9
6.2 Reimbursement of Costs and Expenses...........................................9
SECTION 7
Amendment or Termination.................................................................................9
7.1 Amendments and Terminations...................................................9
7.2 Participant Rights...........................................................10
7.3 Successors...................................................................10
</TABLE>
<PAGE> 4
PAGING NETWORK, INC.
SEVERANCE PAY PLAN
(Effective as of January 20, 1999)
SECTION 1
General
1.1 History and Purpose. The Paging Network, Inc. Severance Pay Plan
(the "Plan") was established by Paging Network, Inc. a Delaware corporation (the
"Company"), effective as of January 20, 1999 to promote the long-term financial
interests of the Company and its shareowners by (i) providing the executives of
the Company and its subsidiaries with assurances of fair and equitable treatment
as well as severance benefits consistent with competitive practices in the event
of a Change in Control, as defined below, of the Company and (ii) reducing the
risk of departures and distractions of key executives in a Change in Control
situation which would be detrimental to the Company and its shareowners.
1.2 Subsidiaries, Affiliates and Employers. The term "Subsidiary"
means any corporation of which the Company directly or indirectly owns at least
50% of the combined voting power of all classes of stock entitled to vote. The
Company and each Subsidiary which, with the consent of the company, adopts the
Plan, are referred to below, collectively, as the "Employers" and individually
as an "Employer."
1.3 Plan Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in the Paging Network,
Inc. Severance Pay Plan Committee, the members of which shall be appointed by,
and may be removed by, the Chairman of the Company (the "Committee"). Claims
under this Plan shall be administered in accordance with Section 503 of the
Employee Retirement Income Security Act of 1974, as amended.
1.4 Source of Payments. The obligations of the Employers under the
Plan are solely contractual, and any amount payable under the terms of the Plan
shall be paid from the general assets of the Employers or from one or more
trusts, the assets of which are subject to the claims of the Employers' general
creditors.
1.5 Notices. Any notice or document required to be given under the
Plan shall be considered to be given if delivered or mailed by registered mail,
postage prepaid, if to an Employer, to the General Counsel of the Company at the
Company's principal business address or, if to a Participant, at the last
address of such Participant filed with the Employer.
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<PAGE> 5
1.6 General and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
1.7 Action by Employers. Any action required or permitted to be taken
by any Employer under the Plan shall be by resolution of its Board of Directors
or by writing of a duly authorized officer of the Employer.
SECTION 2
Participation
1.8 Participation. The following individuals shall be Participants in
the Plan:
(1) All full time regular employees of the Employers (as that
classification is used in the normal business practices of the
Company), and
(2) who are employed on the date of the applicable Change in Control.
1.9 Cessation of Participation. An employee shall cease to be a
Participant in, or have any rights under, the Plan as of the date, if any, prior
to a Change in Control on which he ceases to be a member of a class of employees
designated as Participants in accordance with subsection 2.1. All employees of
an Employer other than the Company shall cease to be Participants in, or have
any rights under, the Plan as of the date, if any, on which the Employer ceases
to be a Subsidiary or Affiliate prior to a Change in Control.
SECTION 3
Change in Control
For purposes of determining the rights of any Participant
under the Plan, the term "Change in Control" means a change in the
beneficial ownership of the Company's voting stock or a change in the
composition of the Company's Board of Directors which occurs as
follows:
(1) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 35% or more
of the combined voting power of the Company's then outstanding
securities (not including in such securities beneficially owned
by such Person any securities acquired directly from the
Company), other than any Person who becomes such a Beneficial
Owner in connection with a transaction described in clause (i) of
paragraph (c) below; or
2
<PAGE> 6
(2) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who
on the date hereof constitute the Board of Directors, and any new
director whose appointment or election by the Board of Directors
or nomination for election by the Company's shareowners was
approved or recommended by at least two-thirds (2/3) of the
directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for
election was previously so approved or recommended (other than a
new director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company); or
(3) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company, at least 65% of the combined voting power of the
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation (either by remaining outstanding or by being
converted into voting securities of the surviving entity or
parent thereof), or (ii) a merger or consolidation effected to
implement a recapitalization of the Company, or similar
transaction, in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the
Company's then outstanding securities (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company); or
(4) the shareowners of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 65% of the combined
voting power of the outstanding securities of which are owned by
shareowners of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
Common Stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
3
<PAGE> 7
ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions.
For purposes of this Section 3.1, (a) "Person" shall mean any person or entity
other than (1) any employee plan established by the Company, (2) the Company or
any of its affiliates (as defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), (3) an underwriter
temporarily holding securities pursuant to an offering of such securities, or
(4) a corporation owned, directly or indirectly, by shareowners of the Company
in substantially the same proportions as their ownership of the Company and (b)
"Beneficial Owner" shall have the meaning set forth in Rule 12d-3 under the
Exchange Act.
SECTION 4
Severance Benefits
1.10 Entitlement to Severance Benefits. Subject to the following
provisions of this Section 4, a Participant shall be entitled to receive
severance benefits determined in accordance with subsection 4.5 if the
Participant's employment with an Employer is terminated during the
12-consecutive-month period immediately following a Change in Control either by
the Participant's Employer for reasons other than Cause (as defined in
subsection 4.2) or Disability (as defined in subsection 4.3) or by the
Participant because of Good Reason (as defined in subsection 4.4).
1.11 Cause. For purposes of this Plan, the term "Cause" means a
Participant willfully engaging in conduct materially injurious to an Employer or
the willful and continual failure by a Participant to substantially perform the
duties assigned to the Participant (other than any failure resulting from the
Participant's incapacity due to physical injury or illness or mental illness),
which failure has not been corrected by the Participant within 30 days after
receipt of a written notice from the Chief Executive Officer or Board of
Directors of the Employer specifying the manner in which the Participant has
failed to perform such duties. No act, or failure to act, by a Participant shall
be deemed "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that such action or omission was in the best interest
of the Employer.
1.12 Disability. For purposes of this Plan, the term "Disability"
means an incapacity, due to physical injury or illness or mental illness,
causing a Participant to be unable to perform the Participant's duties for an
Employer on a full-time basis for a period of at least six consecutive months.
1.13 Termination for Good Reason. For purposes of this Plan, a
termination because of "Good Reason" means a resignation by a Participant
following the occurrence of:
(1) a reduction in the Participant's level of compensation;
4
<PAGE> 8
(2) a significant change in the duties, responsibilities, title or
authorities of the Participant;
(3) the relocation of the Participant's office to a location more
than fifty miles from the location of such office immediately
prior to the Change in Control;
(4) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Plan as
contemplated by subsection 7.3.
1.14 Severance Benefits. If a Participant becomes entitled to
severance benefits in accordance with the provisions of subsection 4.1 the
Participant shall continue to receive medical insurance, disability income
protection, life insurance protection and death benefits, and perquisites for a
period of not less than the 12 consecutive months immediately following the date
of termination of employment, with substantially similar coverage and at no
additional cost to the Participant than as such benefits were provided to such
Participant immediately prior to the Change in Control. Any Participant
described in the first sentence of this subsection 4.5 shall be further entitled
to a lump sum payment in cash no later than ten business days after the date of
termination equal to:
(1) if the Participant holds the position of Senior Vice President or
higher, as of the date of the Change in Control, then two hundred
percent (200%) of the Participant's Base Severance Amount; or
(2) if the Participant holds the position of Director or higher (but
less than Senior Vice President) as of the date of the Change in
Control, one hundred percent (100%) of the Participant's Base
Severance Amount; or
(3) for all other Participants, then fifty percent (50%) of the
Participant's Base Severance Amount, as defined below;
1.15 Base Severance Amount. For purposes of the Plan, the
Participant's Base Severance Amount is equal to the sum of:
(1) the Participants' annual rate of salary or base compensation at
the time of termination, or as of the date of the Change in
Control, if higher; and
(2) the Participant's annual target bonus percentage rate, as used in
subsection 4.7, times the amount in subsection 4.6(a).
5
<PAGE> 9
1.16 Bonus Payment for Year of Termination. If a Participant becomes
entitled to severance benefits in accordance with the provisions of subsection
4.1, and the Participant was otherwise participating in the Company's annual
bonus plan, the Participant shall be entitled to a lump sum payment in cash no
later than ten business days after the date of termination equal to the product
of the Participant's salary, as used in subsection 4.6(a), times the
Participant's target bonus percentage as of the date of termination or if
higher, the date of the Change in Control. In the event the Participant is
employed for less than a full calendar year as of the Participant's date of
termination, the payment due under this subsection 4.7 shall be prorated for the
number days employed during the calendar year of termination divided by 365.
1.17 Reduction for Other Severance Payments. The amount of severance
benefits to which a Participant is otherwise entitled upon a termination of
employment under the foregoing provisions of this Section 4 shall be reduced by
the amount, if any, of any other severance payments actually paid by reason of
such termination to the Participant by an Employer under a plan which provides
severance benefits only or under the terms of an employment contract between the
Participant and the Participant's Employer.
1.18 Adjustment for Tax Effects. If any payments or the value of any
benefits received or to be received by the Participant under this Agreement,
after taking into account all other payments and all other benefits to which the
Participant is entitled in connection with a Change in Control or the
Participant's termination of employment, are subject to an excise tax under
Section 4999 of the Internal Revenue Code of 1986 or any successor provision to
that section, the payments and benefits to which the Participant is entitled
under this Agreement shall be reduced to the extent required to avoid such
excise tax if, and only if, such reduction would result in a larger after-tax
benefit to the Participant, taking into account all applicable local, state,
federal and foreign income and excise taxes. The Participant shall be entitled
to select the order in which payments are to be reduced in accordance with the
preceding sentence. If requested by the Participant, the Company shall provide
complete compensation and tax data on a timely basis to the Participant and to
tax counsel designated by the Participant in order to enable the Participant to
determine the extent to which such payments and benefits may result in an excise
tax, and the Company shall reimburse the Participant for any reasonable fees and
expenses incurred by the Participant for such purpose. If the Participant and
the Company shall disagree as to whether a payment or benefit under this
Agreement will result in an excise tax or whether a reduction in any payment or
benefit will result in a larger after-tax benefit to the Participant, the matter
shall be resolved by an opinion of tax counsel chosen by the Participant. The
Company shall pay the fees and expenses of such tax counsel, and shall make
available such information as may be reasonably requested by such advisor to
prepare the opinion. If, by reason of the adjustments under this paragraph, the
amount payable to the Participant cannot be determined prior to the due date for
such payment, the Company shall pay on the due date the minimum amount which it
in good faith determines to be payable and the Company shall pay the remaining
amount (or the Participant shall repay any excess), with interest at a rate,
compounded semi-annually, equal to 120% of the applicable Federal rate
determined under Section 1274(d)
6
<PAGE> 10
of the Internal Revenue Code of 1986, as soon as such remaining amount is
determined in accordance with this subsection.
1.19 Pooling of Interests Accounting Treatment. Notwithstanding
anything to the contrary in this Plan, if the application of any provision(s) of
this Plan, or of the Plan in its entirety, would preclude the use of pooling of
interests accounting treatment with respect to a transaction for which such
treatment otherwise is available and to be adopted by the Company, this Plan
shall be modified as it applies to such transaction, to the minimum extent
necessary to prevent such impact, including if necessary the invalidation of
such provisions (or the entire Plan, as the case may be). The Board shall, in
its sole and absolute discretion, make all determinations necessary under this
subsection; provided, that determinations regarding the application of the
pooling of interests accounting rules for these purposes shall be made by the
Company with the concurrence of the Company's independent auditors at the time
such determination is to be made.
1.20 Mitigation and Set-Off. No Participant shall be required to
mitigate the amount of any payment provided for in this Plan by seeking other
employment or otherwise. Subject to Section 5, below, the Employers shall not be
entitled to set off against the amounts payable to any Participant under this
Plan any amounts owed to the Employers by the Participant, any amounts earned by
the Participant in other employment after termination of the Participant's
employment with the Employer, or any amount which might have been earned by the
Participant in other employment had he sought such other employment.
1.21 Non-Alienation. Participants shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Plan; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts or by operation
of law. Nothing in this subsection shall limit a Participant's rights or powers
to dispose of the Participant's property by will or limit any rights or powers
which the Participant's executor or administrator would otherwise have.
1.22 Withholding. All payments to a Participant under this Plan will
be subject to all applicable withholding of state and federal taxes.
SECTION 5
Confidentiality and Non-Competition
1.23 Confidentiality and Non-Competition - General. Any benefits
payable under this Plan are conditioned upon and subject to the terms of this
Section 5. To the extent that a Participant violates the provisions of this
Section 5, the Company, or Employer, as the case may be, will have the right to
cease providing any benefit or payment due hereunder in addition to any
7
<PAGE> 11
other remedies available to the Company for such violation including but not
limited to a preliminary injunction, temporary restraining order or other
equivalent relief.
1.24 Confidential Information. The Participant agrees that:
(1) Except as may be required by lawful judicial, governmental or
regulatory authority, the lawful order of a court or agency of
competent jurisdiction, or except to the extent that the
Participant has express authorization from the Company, the
Participant (i) shall keep secret and confidential all
Confidential Information (as defined below), (ii) shall not
disclose the same, either directly or indirectly, to any other
person, and (iii) shall not use it in any way.
(2) For purposes of this Plan, the term "Confidential Information"
means all non-public information concerning the Company and its
affiliates that was acquired by or disclosed to the Participant
during the course of employment with the Employer, or during the
course of consultation with the Employer following the
Participant's date of termination, including, without limitation:
(i) any non-public information regarding the Company's and its
affiliates' customers, services, processes, costs,
operations and methods, whether past, current or planned,
as well as knowledge and data relating to business plans,
marketing and sales information originated, owned,
controlled or possessed by the Company or its affiliates;
and
(ii) information regarding litigation and pending litigation
involving or affecting the Company or its affiliates.
(3) To the extent that the Participant obtains information on behalf
of the Company or any of its affiliates that may be subject to
attorney-client privilege as to the Company's or its affiliates'
attorneys, the Participant shall take reasonable steps to
maintain the confidentiality of such information and to preserve
such privilege.
(4) The Participant agrees that effective with the date of
termination, the Participant will deliver to the Company all
papers, books, manuals, lists, correspondence, documents,
computer programs, computer spreadsheets, data captured on
machine-readable media, and other material containing or relating
to the Confidential Information, together with all copies
thereof, that are in the Participant's possession or control,
other than such materials as shall be necessary to permit the
Participant to prepare the Participant's tax returns.
(5) Nothing in this subsection 5.2 shall be construed so as to
prevent the Participant from using, in connection with his
employment for himself or an employer other
8
<PAGE> 12
than the Company or any of its affiliates, knowledge that was
acquired by Participant during the course of his employment with
the Company and its affiliates, and which is generally known to
persons of his experience in other companies in the same
industry.
1.25 Noncompetition. Each Participant who holds the position of
Director or higher as of the date of a Change of Control, and who becomes
entitled to a Severance Benefit under Subsection 4.5, agrees that, for a period
of one (1) year after termination date, the Participant shall not be employed
by, or otherwise engage or be interested in, any business which is competitive
with any business of the Company or of any of its subsidiaries in which the
Participant was engaged during his employment prior to his termination, but this
restriction shall apply only if such employment or activity is likely to cause,
or causes, serious damage to the Company or any of its subsidiaries.
SECTION 6
Enforcement
1.26 Arbitration of Disputes. All claims arising out of or relating to
this Plan shall be settled by arbitration in the city in which the principal
executive offices of the Participant's Employer are located (disregarding any
transfer of such offices after a Change in Control), by three arbitrators, one
of whom shall be appointed by the Company, one by the Participant and the third
of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the Chief Judge of the United States
Court of Appeals for such location. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
subsection 6.2. The decision of the arbitrators shall be final and binding and
judgment upon the awarded rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
1.27 Reimbursement of Costs and Expenses. In the event that it shall
be necessary or desirable for a Participant to retain legal counsel or incur
other costs and expenses in connection with enforcement of rights under the
Plan, the Employer shall pay (or the Participant shall be entitled to recover
from the Employer, as the case may be) reasonable attorneys' fees and costs and
expenses in connection with enforcement of such rights (including the
enforcement of any arbitration award in court). Payments shall be made to the
Participant at the time such fees, costs and expenses are incurred. If, however,
the arbitrators shall determine that, under the circumstances, payment by the
Employer of all or a part of any such fees, costs and expenses would be unjust,
the Participant shall repay such amounts to the Employer in accordance with the
order of the arbitrators.
9
<PAGE> 13
SECTION 7
Amendment or Termination
1.28 Amendments and Terminations. Subject to the provisions of
subsection 7.2:
(a) The Company's Vice President - Human Resources, or such other
officer of the Company as may from time to time be primarily
responsible for human resource matters, may, with the concurrence
of the Company's Senior Vice President and General Counsel, make
minor or administrative amendments to the Plan;
(b) the Board of Directors of any Employer may terminate or, with the
consent of the Company's Board of Directors, amend the Plan as
applied to it at any time; and
(c) the Company's Board of Directors may terminate the Plan as
applied to it as applied to each Employer at any time.
1.29 Participant Rights. No amendment or termination of the Plan which
would directly or indirectly adversely affect any Participant shall be effective
if adopted after a Change in Control or during the one-year period immediately
preceding a Change in Control.
1.30 Successors. The obligations of each Employer under the Plan shall
be binding upon any assignee or successor in interest thereto. No Employer shall
merge or consolidate with any other corporation, or liquidate or dissolve,
without making suitable arrangements for the payment of any benefits which are
or may become payable under the Plan.
10
<PAGE> 1
EXHIBIT 10.23
PAGING NETWORK, INC.
STOCK OPTION AGREEMENT FOR DIRECTORS
THIS AGREEMENT is entered into by and between Paging Network, Inc., a
Delaware corporation (hereinafter the "Company") and _______________
(hereinafter the "Optionee"), who is a non-employee Director of the Company.
WHEREAS, the Company adopted the Paging Network, Inc. 1992 Stock
Option Plan for Directors, as subsequently amended and restated (the "Plan"),
in order, among other things, to advance the interests of the Company by
providing an opportunity for non-employee Directors of the Company to purchase
shares of $.01 par value common stock (the "Common Stock") of the Company; and
WHEREAS, the Optionee is a Director of the Company, and the Company
desires to grant a stock option to the Optionee;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the option
to purchase from the Company, upon the terms and conditions herein,
45,000 shares of the Common Stock of the Company at a purchase price
per share of $ _____. The date of grant of this option is ________,
which is hereinafter referred to as the "Option Date".
2. TERM OF OPTION; EXERCISABILITY. The option will become vested and
exercisable in accordance with the vesting schedule set forth below,
so long as the optionee continues to be a Director of the Company.
NUMBER OF OPTION SHARES DATE VESTED
----------------------- -----------
9,000
------------------
9,000
------------------
9,000
------------------
9,000
------------------
9,000
------------------
To the extent vested, the option will be immediately exercisable in
full or in part and will remain exercisable until it expires on the
tenth (10th) anniversary of the Option Date, unless the option is
sooner terminated as hereinafter provided; provided, however, that if
the grant of this option is made possible only by the adoption of this
Plan or any amendment thereof that is subject to shareholder approval,
the option will not be exercisable before such approval is obtained
and the option will be null and void if such approval is not obtained
within the time prescribed therefor.
1
<PAGE> 2
3. OTHER CONDITIONS AND LIMITATIONS.
(a) The Company will furnish upon request of the Optionee copies of
such publicly available financial and other information
concerning the Company and its business and prospects as may be
reasonably requested by the Optionee in connection with the
exercise of this option.
(b) The option will not be transferable by the Optionee otherwise
than by will or by the laws of descent and distribution, and
the option will be exercisable during the Optionee's lifetime
only by the Optionee (or the Optionee's guardian or legal
representative).
4. EXERCISE OF OPTION. Written notice of the exercise of the option or
any portion thereof will be given to the Company's Treasurer (or any
other officer of the Company who is designated by the Company to
accept such notices on its behalf), specifying the number of shares
for which it is exercised.
5. WITHHOLDING. The Optionee hereby agrees that the exercise of the
option or any installment thereof will not be effective, and no shares
will become transferable to the Optionee, until the Optionee makes
appropriate arrangements with the Company for such tax withholding as
may be required of the Company under federal, state or local law on
account of such exercise.
6. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATION;
OTHER EVENTS. Appropriate adjustments will be made in the number,
kind, and option price of shares covered by this option, to the extent
it is outstanding, to give effect to any stock dividends, stock
splits, stock combinations, recapitalizations and other similar
changes in the capital structure of the Company after the Option Date.
The option will become immediately exercisable in full, to the extent
not then exercised, upon the occurrence of certain events which
constitute a "change in control" as defined in, and in accordance with
the terms of, the Plan.
7. TERMINATION OF OPTION. In the event that the Optionee ceases for any
reason to be a Director of the Company at any time prior to exercise
of this option in full, this option will terminate in accordance with
the following provisions:
(i) if the optionee ceases to be a Director of the Company for any
reason other than disability or death, he may, at any time
prior to the ninetieth day after he ceased to be a Director,
exercise the option to the extent that the option was
exercisable by him on the date on which he ceased to be a
Director of the Company;
(ii) if the optionee ceases to be a Director of the Company because
of disability within the meaning of Section 22(e) (3) of the
Internal Revenue Code of 1986, as amended, he may, at any time
within a period of one (1) year after such termination,
exercise the option to the extent that the option was
exercisable by him on the date he ceased to be a Director of
the Company; and
2
<PAGE> 3
(iii) if the optionee dies at a time when he might have exercised the
option, then his estate, personal representative or beneficiary
to whom it has been transferred by will or the laws of descent
and distribution may at any time within a period of one (1)
year after the optionee's death exercise the option to the
extent the optionee might have exercised it at the time of his
death;
provided, however, that this option may not be exercised to any extent
by anyone after the date of expiration of the option under Paragraph
2, and provided, further, that this option may not be exercised to the
extent not vested under Paragraph 2 at any time after the optionee
ceases to be a Director of the Company.
8. MISCELLANEOUS. The Optionee will not have any rights as a stockholder
or any claim to dividends with respect to the shares subject to the
option until the exercise of the option and the payment in full of the
purchase price for such shares. Nothing herein contained will impose
any obligation on the Company or any parent or subsidiary of the
Company or the Optionee with respect to the Optionee's continued
performance as a Director of the Company. Nothing herein contained
will impose any obligation upon the Optionee to exercise the option.
9. RELATIONSHIP TO THE PLAN. The option contained in this agreement is
non-qualified and has been granted pursuant to the Plan and is in all
respects subject to the terms, conditions and definitions of the Plan.
The Optionee hereby accepts this option subject to all the terms and
provisions of the Plan and agrees that all decisions under and
interpretations of the Plan by the Board or the Compensation and
Management Development Committee of the Board will be final, binding
and conclusive upon the Optionee and his heirs.
10. GOVERNING LAW. This agreement will be subject to and construed in
accordance with the law of the State of Delaware.
IN WITNESS WHEREOF, the Company and the Optionee have executed this agreement
in duplicate as of the Option Date, as specified above.
PAGING NETWORK, INC. OPTIONEE
By
------------------------ --------------------------------
3
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings:
Loss before extraordinary item $ (17,965) $ (44,201) $(104,320) $(141,403) $(162,009)
Fixed charges, less
interest capitalized 64,007 118,666 148,055 174,311 170,343
--------- --------- --------- --------- ---------
Earnings $ 46,042 $ 74,465 $ 43,735 $ 32,908 $ 8,334
========= ========= ========= ========= =========
Fixed charges:
Interest expense, including
interest capitalized $ 50,694 $ 98,533 $ 122,753 $ 158,888 $ 161,269
Amortization of deferred
financing costs 3,023 4,313 5,261 8,418 4,430
Interest portion of rental
expense 10,290 15,820 20,041 22,931 26,581
--------- --------- --------- --------- ---------
Fixed charges $ 64,007 $ 118,666 $ 148,055 $ 190,237 $ 192,280
========= ========= ========= ========= =========
Ratio of earnings to fixed charges -- -- -- -- --
========= ========= ========= ========= =========
Deficiency of earnings available
to cover fixed charges $ (17,965) $ (44,201) $(104,320) $(157,329) $(183,946)
========= ========= ========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of all subsidiaries of Paging Network, Inc., the
Registrant.
<TABLE>
<CAPTION>
Ownership
Name of Subsidiary Jurisdiction of Incorporation Percentage
------------------ ----------------------------- ----------
<S> <C> <C>
PageNet, Inc. Delaware 100%
Paging Network of America, Inc. Delaware 100%
Paging Network Canadian Holdings, Inc. Delaware 100%
Paging Network of Colorado, Inc. Delaware 100%
Paging Network Finance Corp. Delaware 100%
Paging Network International, Inc. Delaware 100%
Paging Network of Michigan, Inc. Delaware 100%
Paging Network of Northern California, Inc. Delaware 100%
Paging Network of San Francisco, Inc. Delaware 100%
Silverlake Communications, Inc. California 100%
PageNet de Argentina S.A. Argentina 99%
Paging Network do Brasil S.A. Brazil 17.5%
Paging Network of Canada Inc. Canada 100%
PageNet Chile S.A. Chile 100%
Paging Network International N.V. The Netherlands 100%
Paging Network (UK), Limited England 100%
Madison Telecommunications Holdings, Inc. Canada 80%
Madison Telecommunications, Inc. Canada 100%
Compania Europea De Radiobusqueda, S.A. Spain 79.7%
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-45465, Form S-8 No. 33-45690, Form S-8 No. 33-63230, Form S-8
No. 33-76650, Form S-3 No. 33-72456, Form S-3 No. 33-87224, Form S-8 No.
333-18587, Form S-8 No. 333-27603, Form S-8 No. 333-27605, and Form S-8 No.
333-42893) of Paging Network, Inc. and in the related Prospectuses of our
reports dated February 15, 1999, with respect to the consolidated financial
statements and financial statement schedule of Paging Network, Inc. included in
this Annual Report on Form 10-K for the year ended December 31, 1998.
ERNST & YOUNG LLP
Dallas, Texas
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,077
<SECURITIES> 0
<RECEIVABLES> 95,559
<ALLOWANCES> 11,119
<INVENTORY> 6,379
<CURRENT-ASSETS> 108,961
<PP&E> 1,452,870
<DEPRECIATION> 547,599
<TOTAL-ASSETS> 1,581,244
<CURRENT-LIABILITIES> 236,244
<BONDS> 1,815,137
0
0
<COMMON> 1,036
<OTHER-SE> (491,455)
<TOTAL-LIABILITY-AND-EQUITY> 1,581,244
<SALES> 100,503
<TOTAL-REVENUES> 1,046,027
<CGS> 77,672
<TOTAL-COSTS> 990,675
<OTHER-EXPENSES> 139,689
<LOSS-PROVISION> 20,516
<INTEREST-EXPENSE> 143,762
<INCOME-PRETAX> (162,009)
<INCOME-TAX> 0
<INCOME-CONTINUING> (162,009)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (162,009)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
