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PURSUANT TO RULE 424, SUBSECTION (b)(3)
REGISTRATION NO. 33-81606
PROSPECTUS SUPPLEMENT
METROCALL, INC.
400,000 SHARES COMMON STOCK
This Prospectus Supplement supplements the Prospectus dated July
29, 1994 (the "Prospectus"), relating to the offering of up to 400,000 shares
of common stock, $.01 par value per share ("Common Stock") of Metrocall, Inc.
("Metrocall" or the "Company") by certain stockholders of the Company (the
"Selling Stockholders"). This Prospectus Supplement updates information
relating to the Company in the Prospectus contained in the sections titled "The
Company," "Investment Considerations," "Selling Stockholders" and "Plan of
Distribution," and adds information regarding the capital stock of the Company.
The Company will not receive any of the proceeds from the sale of the
shares being sold by the Selling Stockholders. The Company has agreed to bear
the expenses incurred in connection with the preparation of this Prospectus
Supplement.
The Company's Common Stock is traded on the Nasdaq National Market
("NNM") under the symbol "MCLL" On May 16, 1997, the last reported sale price
of the Common Stock was $4 3/4 per share, as reported by the NNM.
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THE SECURITIES TO BE SOLD PURSUANT TO THE PROSPECTUS, AS SUPPLEMENTED BY
THIS PROSPECTUS SUPPLEMENT, HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus Supplement is May 20, 1997.
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THE COMPANY
Metrocall had 2,227,564 pagers in service at March 31, 1997, and is
the fifth largest paging company in the United States, providing local,
regional and nationwide paging and other wireless messaging services.
Metrocall currently operates regional and nationwide paging networks throughout
the United States and has historically concentrated its selling efforts in five
operating regions: (i) the Northeast (Massachusetts through Delaware); (ii) the
Mid-Atlantic (Maryland and the Washington, D.C. metropolitan area); (iii) the
Southeast (including Virginia, the Carolinas, Georgia, Florida, Alabama,
Louisiana, Mississippi and Tennessee); (iv) the Southwest (primarily Texas);
and (v) the West (California, Nevada and Arizona). Through the Metrocall
Nationwide Wireless Network, Metrocall provides paging services in all 50
states and approximately 1,000 U.S. cities which include the top 100 Standard
Metropolitan Statistical Areas. Metrocall has an agreement to acquire the
assets of Page America Group, Inc. ("Page America"), which has an estimated
220,000 subscribers. On a combined basis (pro forma for acquisition of the
Page America assets), Metrocall would service a total subscriber base
consisting of approximately 2.3 million units in service. Metrocall was
organized as a Delaware corporation in October 1982.
Metrocall Common Stock is traded on the Nasdaq National Market under
the symbol "MCLL." Metrocall's principal executive offices are located at 6677
Richmond Highway, Alexandria, Virginia 22306 and its telephone number is (703)
660-6677.
RISK FACTORS
In evaluating an investment in the Common Stock, prospective
purchasers should carefully consider the following factors as well as the other
matters discussed in the Prospectus and this Prospectus Supplement.
SUBSTANTIAL INDEBTEDNESS OF METROCALL
At March 31, 1997, Metrocall had outstanding approximately $340
million in indebtedness consisting of bank loans, senior subordinated notes,
mortgage indebtedness and capital leases, and expects to incur additional
indebtedness in connection with the pending acquisition of Page America (the
"Page America Acquisition"). Metrocall has a credit facility (the "Metrocall
Credit Facility") in the principal amount of $350 million (of which $179.9
million was drawn as of March 31, 1997 and is included in the incurred
indebtedness described above) subject to the limitations described below, and
intends to use funds available under this facility to fund the cash portion of
the Page America purchase price, estimated to be $25.0 million plus transaction
fees and expenses. Metrocall also has issued and outstanding $39.9 million
stated value of the Series A Convertible Preferred Stock ("Series A Preferred
Stock"), the terms of which will require Metrocall to pay dividends, in cash or
additional shares of Series A Preferred Stock, at the rate of 14% per year.
Metrocall is required to redeem all outstanding shares of Series A Preferred
Stock (including dividend shares) in November 2008 unless the holders have
previously converted such shares to Common Stock. As part of the consideration
for the Page America Acquisition, Metrocall agreed to issue 1,500 shares of
Series B Preferred Stock. Each share of Series B Preferred Stock will have a
stated value of $10,000 per share. The Series B Preferred Stock will carry a
dividend of 14% of the stated value per share, payable semiannually in cash or
in additional shares of Series B Preferred Stock, at Metrocall's option. The
Series B Preferred Stock must be redeemed on the twelfth anniversary of the
issuance for an amount equal to the stated value, plus accrued and unpaid
dividends. Metrocall also expects to incur additional indebtedness (in the
form of draws on the Metrocall Credit Facility or otherwise) to meet working
capital needs or for other purposes. However, the ability to incur additional
indebtedness (including draws on the Metrocall Credit Facility) is subject to
certain limitations in the agreements relating to existing indebtedness and the
terms of the Series A Preferred Stock. As a result of these limitations, as of
March 31, 1997 Metrocall was able to incur approximately $46.5 million of
additional indebtedness based on its pro forma operating results through
December 31, 1996 (without giving effect to the Page America Acquisition).
This substantial indebtedness, along with the net losses and working capital
deficits sustained by Metrocall in recent periods, will have consequences for
Metrocall, including the following: (i) the ability of Metrocall to obtain
additional financing for working capital, capital expenditures, debt service
requirements or other purposes may be impaired; (ii) a substantial portion of
Metrocall's cash flow from operations will be required to be dedicated to the
payment of Metrocall's interest expense; (iii) indebtedness under the
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Metrocall Credit Facility bears interest at floating rates, which will cause
Metrocall to be vulnerable to increases in interest rates; (iv) Metrocall may
be more highly leveraged than companies with which it competes, which may place
it at a competitive disadvantage; and (v) Metrocall may be more vulnerable in
the event of a downturn in its business or in general economic conditions. See
"History of Net Losses." Moreover, the ability of Metrocall to meet its debt
service and other obligations (including compliance with financial covenants)
will be dependent upon the future performance of Metrocall and its cash flows
from operations, which will be subject to financial, business and other
factors, certain of which are beyond its control, such as prevailing economic
conditions. No assurance can be given that, in the event Metrocall were to
require additional financing, such additional financing would be available on
terms permitted by agreements relating to existing indebtedness or otherwise
satisfactory to Metrocall.
CHALLENGES OF BUSINESS INTEGRATION
Acquisitions Metrocall has recently completed will require integration
of each company's development, administrative, finance, sales and marketing
organizations, as well as the integration of each company's communication
technologies and the coordination of their sales efforts. Further, each
company's customers will need to be reassured that their paging services will
continue uninterrupted. The diversion of management attention and any
difficulties encountered in the transition process could have an adverse impact
on the revenue and operating results of Metrocall. Additionally, attempts to
achieve economies of scale through cost cutting and lay-offs of existing
personnel may, at least in the short term, have an adverse impact upon
Metrocall.
Metrocall believes that a key benefit to be realized from its
acquisitions will be the integration of paging service coverage, which will
allow Metrocall to provide paging services in new markets. There can be no
assurance, however, that Metrocall will be able to integrate such paging
service coverage successfully. If Metrocall is not successful in integrating
such paging service coverage, the business of Metrocall will be adversely
affected.
No assurance can be given that additional suitable acquisitions can be
identified, financed and purchased on acceptable terms, or that future
acquisitions, if completed, will be successful. Metrocall also intends to
continue to pursue internal growth through expansion of its paging operations.
Metrocall's continued internal growth will depend, in part, upon its ability to
attract and retain skilled employees, and the ability of Metrocall's officers
and key employees to manage successfully rapid growth and to implement
appropriate management information systems and controls. If Metrocall were
unable to attract and retain skilled employees, manage successfully rapid
growth and/or implement appropriate systems and controls, Metrocall's
operations could be adversely affected.
The paging industry has recently undergone significant consolidation
as various participants sought to accomplish growth similar to that of
Metrocall. Metrocall is not currently engaged in any negotiations with respect
to a business combination involving the acquisition of Metrocall and intends to
continue to pursue its own business strategy. Unsolicited proposals to acquire
Metrocall could cause a distraction of management of Metrocall and impede
Metrocall's ability to accomplish its strategic goals and objectives and could
cause significant volatility in the price of the Metrocall Common Stock.
POSSIBLE IMPACT OF COMPETITION AND TECHNOLOGICAL CHANGE
Metrocall faces competition from other paging companies in all markets
in which it operates. The wireless communications industry is a highly
competitive industry, with price being the primary means of differentiation
among providers of numeric messaging services (which account for the
substantial majority of Metrocall's current revenues). Companies in the
industry also compete on the basis of coverage area, enhanced services,
transmission quality, system reliability and customer service. Certain of
Metrocall's competitors, which include regional and national paging companies,
possess greater financial, technical, marketing and other resources than
Metrocall. In addition, other entities offering wireless two-way
communications technology, including cellular telephone and specialized mobile
radio services, also compete with the paging services Metrocall provides.
There can be no assurance that additional competitors will not enter markets
served by Metrocall or that Metrocall will be able to compete successfully. In
this regard, certain long distance carriers have announced their intention to
market paging services jointly with other telecommunications services.
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The wireless communications industry is characterized by rapid
technological change. Future technological advances in the wireless
communications industry could create new services or products competitive with
the paging and wireless messaging services provided or to be developed by
Metrocall. Recent and proposed regulatory changes by the FCC are aimed at
encouraging such new services and products.
In particular, in 1994, the FCC began auctioning licenses for new
personal communications services ("PCS"). The FCC's rules also provide for the
private use of PCS spectrum on an unlicensed basis. PCS will involve a network
of small, low-powered transceivers placed throughout a neighborhood, business
complex, community or metropolitan area to provide customers with mobile voice
and data communications. There are two types of PCS, narrowband and broadband.
Narrowband PCS is expected to provide enhanced or advanced paging and messaging
capabilities, such as "acknowledgment paging" or "talk-back" paging. Several
PCS systems are currently operational. Additionally, other existing or
prospective radio services have potential to compete with Metrocall. For
example, the FCC has authorized non-geostationary mobile satellite service
systems in several frequency bands, and has initiated proceedings to consider
making additional licenses in some of those bands available. Licensees of
those satellite services (some of whom have already launched satellites) are
permitted to offer signaling and other mobile services that could compete with
terrestrial paging companies. A recent FCC decision will allow land mobile
licensees in the 220-222 MHz band to offer commercial paging services. The FCC
has also initiated a rule making proceeding proposing to allow Multiple Address
Systems, a fixed microwave service in various 900 MHz frequency bands, to offer
mobile services. Any of these services may compete directly or indirectly with
Metrocall.
Moreover, changes in technology could lower the cost of competitive
services and products to a level where Metrocall's services and products would
become less competitive or to where Metrocall would be required to reduce the
prices of its services and products. There can be no assurance that Metrocall
will be able to develop or introduce new services and products to remain
competitive or that Metrocall will not be adversely affected in the event of
such technological developments.
Technological change also may affect the value of the pagers owned by
Metrocall and leased to its subscribers. If Metrocall's subscribers requested
more technologically advanced pagers, Metrocall could incur additional
inventory costs and capital expenditures if it were required to replace pagers
leased to its subscribers within a short period of time.
HISTORY OF NET LOSSES
Metrocall sustained net losses of $2.4 million, $20.1 million and
$49.1 million for the years ended December 31, 1994, 1995 and 1996,
respectively and $11.7 million for the three months ended March 31, 1997. No
assurance can be given that losses can be reversed in the future. In addition,
at March 31, 1997, Metrocall's accumulated deficit was $110.1 million and
Metrocall had a deficit in working capital of $3.9 million. Metrocall's
business requires substantial funds for capital expenditures and acquisitions
that result in significant depreciation and amortization charges.
Additionally, substantial levels of borrowing, which will result in significant
interest expense, are expected to be outstanding in the foreseeable future.
Accordingly, net losses are expected to continue to be incurred in the future.
There can be no assurance that Metrocall will be able to operate profitably at
any time in the future.
PENDING LITIGATION
In April 1996, Metrocall entered into an agreement to purchase certain
of the assets of Source One Wireless, Inc. ("Source One") and placed $1 million
cash in escrow. On June 26, 1996, Metrocall advised Source One that Source One
had failed to meet certain conditions to completion of the transaction and
terminated the agreement. On September 20, 1996, Source One filed an action in
the Circuit Court of Cook County, Illinois claiming that Metrocall had breached
the agreement and seeking specific performance of the purchase agreement or
unspecified damages in excess of $80 million. Metrocall intends to vigorously
defend the claims in this action and believes it has meritorious defenses to
this action. Metrocall has denied the claim and asserted affirmative defenses
and counterclaims based on misrepresentations and breaches of contract by
Source One. The matter is now in discovery, which is scheduled to be completed
by the end of October 1997; trial is not expected before January 1998.
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SUBSCRIBER TURNOVER
The results of operations of paging service providers, such as
Metrocall, can be significantly affected by subscriber cancellations and by
subscribers who switch their service to other carriers. In order to realize
net growth in subscribers, disconnected subscribers must be replaced and new
subscribers must be added. The sales and marketing costs associated with
attracting new subscribers are substantial relative to the costs of providing
service to existing customers. Because Metrocall's business is characterized
by high fixed costs, disconnections directly and adversely affect Metrocall's
results of operations. An increase in its subscriber cancellation rate may
adversely affect Metrocall's results of operations.
POTENTIAL FOR CHANGE IN REGULATORY ENVIRONMENT
Metrocall's paging operations are subject to regulation by the FCC
and, to a lesser extent by various state regulatory agencies. There can be no
assurance that those agencies will not adopt regulations or take actions that
would have a material adverse effect on the business of Metrocall. Changes in
regulation of Metrocall's paging business or the allocation of radio spectrum
for services that compete with Metrocall's business could adversely affect
Metrocall's results of operations. For example, the FCC is currently engaged
in a rule making proceeding whereby it proposes to issue paging licenses on a
wide-area basis by competitive bidding (i.e., auctions). Although Metrocall
believes that the proposed rule changes may simplify Metrocall's regulatory
compliance burdens, particularly regarding adding or relocating transmitter
sites, those rule changes may also increase Metrocall's costs of obtaining
paging licenses.
RELIANCE ON KEY PERSONNEL
Metrocall is dependent on the efforts and abilities of a number of its
current key management, sales, support and technical personnel, including
William L. Collins, III, Steven D. Jacoby and Vincent D. Kelly. The success of
Metrocall will depend to a large extent on its ability to retain and continue
to attract key employees. The loss of certain of these employees or
Metrocall's inability to retain or attract key employees in the future could
have an adverse effect on Metrocall's operations. Metrocall has employment
contracts with each of the individuals named above.
NO ANTICIPATED STOCKHOLDER DISTRIBUTIONS
It is not anticipated that Metrocall will pay cash dividends in the
foreseeable future. Certain covenants of the Metrocall Credit Facility limit
the payment of cash dividends on preferred stock, and the Metrocall Credit
Facility and the terms of the Series A Preferred Stock prohibit the payment of
cash dividends on common stock. See "Description of Capital Stock."
POSSIBLE VOLATILITY OF STOCK PRICE; SHARES ELIGIBLE FOR FUTURE SALE
The market price of Metrocall Common Stock is subject to fluctuation.
Since the Metrocall Common Stock became publicly traded in July 1993, the
closing price has ranged from a low of $3.75 per share to a high of $29 per
share. On March 31, 1997, the closing price of Metrocall Common Stock was
$4.125, which was less than the book value per share on March 31, 1997 of
approximately $6.23. The market price of Metrocall Common Stock may be
volatile due to, among other things, technological innovations affecting the
paging industry, Metrocall's acquisition strategy and the shares being
registered pursuant to this and other registration statements. Metrocall
currently has filed registration statements with respect to approximately 16.17
million shares of Metrocall Common Stock held by certain stockholders of
Metrocall. In addition, Metrocall is obligated to register the shares of
Metrocall Common Stock acquired by certain affiliates of A+ Network, Inc. in
the merger with A+ Network. Furthermore, in connection with that merger,
Metrocall also issued indexed variable common rights ("VCRs") which, in certain
circumstances, could require Metrocall to issue additional shares of Metrocall
Common Stock. There can be no assurance that any action taken by holders of
these shares or other stockholders would not have an adverse effect on the
market price of the Metrocall Common Stock.
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CONCENTRATION OF OWNERSHIP
Metrocall's executive officers, directors and their affiliates
together beneficially own 36.8% of the outstanding shares of Metrocall Common
Stock. As a result, such persons, if they act together, may have the ability
to substantially influence Metrocall's direction and to determine the outcome
of corporate actions requiring stockholder approval. In addition, the three
holders of Metrocall's Series A Preferred Stock have the right to appoint a
total of two members of Metrocall's Board of Directors, both of which had been
selected as of April 1997. This concentration of ownership may have the effect
of delaying or preventing a change of control of Metrocall.
ANTI-TAKEOVER AND OTHER PROVISIONS
Metrocall's Amended and Restated Certificate of Incorporation, as
amended (the "Metrocall Certificate") and Metrocall's Fifth Amended and
Restated By-laws (the "Metrocall Bylaws") include provisions that could operate
to delay, defer or prevent a change of control in the event of certain
transactions such as a tender offer, merger, or sale or transfer of
substantially all of Metrocall's assets. These provisions are expected to
discourage certain types of coercive takeover practices and inadequate takeover
bids and to encourage persons seeking to acquire control of Metrocall first to
negotiate with the Board of Directors of Metrocall. In addition, the Metrocall
Credit Facility, an indenture relating to notes issued by Metrocall and the
terms of the Series A Preferred Stock each include certain covenants limiting
the ability of Metrocall to engage in certain mergers and consolidations or
transactions involving a change of control of Metrocall.
The Metrocall Certificate authorizes the Board of Directors, when
considering a tender offer, merger or acquisition proposal, to take into
account factors in addition to potential economic benefits to stockholders. In
addition, the Metrocall Certificate generally prohibits Metrocall from
purchasing any shares of Metrocall's stock from any person, entity or group
that beneficially owns five percent or more of Metrocall's stock at a price
exceeding the average closing price for the 20 business days prior to the
purchase date, unless a majority of Metrocall's disinterested stockholders
approve the transaction, or as may be necessary to protect Metrocall's
regulatory licenses.
Metrocall is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"), as amended ("Section 203"). Under Section
203, a resident domestic corporation may not engage in a business combination
with a person who owns (or within three years prior, did own) 15% or more of
the corporation's outstanding voting stock (an "interested stockholder") for a
period of three years after the date such person became an interested
stockholder, unless (i) prior to such date the board of directors approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction which resulted in such person becoming an interested stockholder,
the interested stockholder owned at least 85% of the corporation's voting stock
outstanding at the time the transaction commenced, or (iii) on or subsequent to
such date the business combination is approved by the board of directors and
authorized by the affirmative vote of holders of at least two-thirds of the
outstanding voting stock which is not owned by the interested stockholder.
INTANGIBLE ASSETS
Intangible assets of Metrocall, net of accumulated amortization, have
increased significantly since March 31, 1996 primarily as a result of
Metrocall's 1996 acquisitions of Parkway, Satellite, Message Network and A+
Network. At March 31, 1997, Metrocall's total assets of approximately $655.6
million included net intangible assets of approximately $449.2 million.
Intangible assets include state certificates and FCC licenses, customer lists,
debt financing costs, goodwill and certain other intangibles. Metrocall will
record, for financial reporting purposes, additional intangible assets in
connection with its acquisition of the assets of Page America in 1997.
Long-lived assets and identifiable intangibles to be held and used are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount should be addressed. Impairment is measured by comparing the
book value to the estimated undiscounted future cash flows expected to result
from use of the assets and their eventual disposition. Metrocall's estimates
of anticipated gross revenues, the remaining estimated lives of tangible and
intangible assets, or both could be reduced significantly in the future due to
changes in technology, regulation, available financing and
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competitive pressures in any of Metrocall's individual markets. As a result,
the carrying amount of long-lived assets and intangible assets including
goodwill could be reduced materially in the future.
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement contains forward- looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Discussions containing such forward-looking statements may be
found in the material set forth under "Risk Factors" as well as within this
Prospectus Supplement generally. In addition, when used in this Prospectus
Supplement, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties. Actual results
in the future could differ materially from those described in the
forward-looking statements as a result of the risk factors set forth above and
the matters set forth in this Prospectus Supplement generally. Metrocall does
not undertake any obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000
shares of Metrocall Common Stock and 1,000,000 shares of preferred stock, par
value $0.01 per share (the "Metrocall Preferred Stock"), of which 810,000
shares have been designated as Series A Preferred Stock and 9,000 shares will
be designated Series B Preferred Stock. As of March 31, 1997, there were
25,050,617 shares of Metrocall Common Stock and 159,600 shares of Series A
Preferred Stock outstanding. In addition, warrants to purchase 2,915,254
shares of Metrocall Common Stock (the "Warrants") were issued and outstanding
on March 31, 1997.
COMMON STOCK
The holders of Metrocall Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders.
Holders of Metrocall Common Stock have no cumulative voting rights and, except
as described below, no preemptive, subscription, redemption, sinking fund or
conversion rights. Subject to preferences that may be applicable to any then
outstanding Metrocall Preferred Stock, holders of Metrocall Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of Metrocall, holders of the Metrocall
Common Stock will be entitled to share ratably in all interests remaining after
payment of liabilities and the liquidation preference of any then outstanding
Metrocall Preferred Stock.
The Metrocall Certificate authorizes its Board of Directors to issue,
from time to time and without further stockholder action, one or more series of
Metrocall Preferred Stock, and to fix the relative rights and preferences of
the shares, including voting powers, dividend rights, liquidation preferences,
redemption rights and conversion privileges. As of the date of this Prospectus
Supplement, the Board of Directors has authorized the Series A Preferred Stock
and the Series B Preferred Stock. Because of its broad discretion with respect
to the creation and issuance of additional shares of Metrocall Preferred Stock
without stockholder approval, Metrocall's Board of Directors could adversely
affect the voting power of the holders of Metrocall Common Stock and, by
issuing shares of Metrocall Preferred Stock with certain voting, conversion
and/or redemption rights, could discourage any attempt to obtain control of
Metrocall.
Under the Communications Act of 1934, as amended (the "Communications
Act"), not more than 20% of Metrocall's capital stock may be owned of record
by other than United States citizens or entities. The Metrocall Certificate
authorizes its Board of Directors to redeem any of Metrocall's outstanding
capital stock to the extent necessary to prevent the loss or secure the
reinstatement of any license or franchise from any governmental agency. Such
stock may be redeemed as the lesser of (i) fair market value or (ii) such
holder's purchase price (if the stock was purchased within one year of such
redemption). Other than redemption where necessary to protect Metrocall's
regulatory licenses, there are no redemption or sinking fund provisions
applicable to the Metrocall Common Stock.
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The Metrocall Certificate provides that all actions taken by Metrocall
stockholders must be taken at an annual or special meeting of stockholders or
by unanimous written consent. The Metrocall By-laws provide that special
meetings of the stockholders may be called only by a majority of the members of
the Board of Directors, the Chairman or the holders of not less than 35% of the
voting stock of Metrocall. Stockholders are required to comply with certain
advance notice provisions with respect to any nominations of candidates for
election to Metrocall's Board of Directors or other proposals submitted for
stockholder vote. The Metrocall Certificate and the Metrocall By-laws contain
certain provisions requiring the affirmative vote of the holders of at least
two-thirds of the Metrocall Common Stock to amend certain provisions of the
Metrocall Certificate and the Metrocall By-laws.
The Metrocall Certificate provides for the division of the members of
the board of directors elected by holders of Metrocall Common Stock into three
classes of directors serving staggered three-year terms. The authorized number
of directors may be changed only by resolution of the Board of Directors, and
directors may not be removed without cause.
Provisions of the Metrocall Certificate and the Metrocall By-laws
could operate to delay, defer or prevent a change of control in the event of
certain transactions such as a tender offer, merger or sale or transfer of
substantially all of Metrocall's assets. These provisions, as described below,
are expected to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
Metrocall first to negotiate with Metrocall. Metrocall believes that the
benefits of increased protection of Metrocall's potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure Metrocall outweigh the disadvantages of discouraging such proposals
because, among other things, negotiating with respect to such proposals could
result in an improvement of their terms.
Metrocall is subject to the provisions of Section 203. Under Section
203, a resident domestic corporation may not engage in a business combination
with an interested stockholder for a period of three years after the date such
person became an interested stockholder, unless (i) prior to such date the
board of directors approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding for purposes of determining the number of shares outstanding those
shares owned by (x) persons who are directors and officers and (y) employee
stock plans, in certain instances), or (iii) on or subsequent to such date the
business combination is approved by the board of directors and authorized by
the affirmative vote of at least two-thirds of the outstanding voting stock
which is not owned by the interested stockholder. Section 203 defines the term
"business combination" to encompass a wide variety of transactions with or
caused by an interested stockholder in which the interested stockholder
receives or could receive a benefit on other than a pro rata basis with other
stockholders, including certain mergers, consolidations, asset sales, transfers
and other transactions resulting in a beneficial interest to the interested
stockholder. "Interested stockholder" means a person who owns (or within three
years prior, did own) 15% or more of the corporation's outstanding voting
stock, and the affiliates and associates of such person.
The Metrocall Certificate authorizes its Board of Directors, when
considering a tender offer, merger or acquisition proposal, to take into
account factors in addition to potential economic benefits to stockholders,
including, but not limited to, (i) a comparison of the proposed consideration
to be received by the stockholders in relation to the then current market price
of the capital stock, the estimated current value of Metrocall in a freely
negotiated transaction and the estimated future value of Metrocall as an
independent entity, and (ii) the impact of such a transaction on the
subscribers, suppliers and employees of Metrocall, and its effect on the
communities in which Metrocall operates.
The Metrocall Certificate prohibits Metrocall from purchasing any
shares of Metrocall's stock from any person, entity or group that beneficially
owns five percent or more of Metrocall's stock at a price exceeding the average
closing price for the 20 business days prior to the purchase date, unless a
majority of Metrocall's disinterested stockholders approve the transaction, or
as may be necessary to protect Metrocall's regulatory licenses. This
restriction on purchases by Metrocall does not apply to any offer to purchase
shares of a class of Metrocall's stock which is made on the same terms and
conditions to all holders of that class of stock, to any purchase of stock
owned by such a five-percent stockholder occurring more than two years after
such stockholder's last acquisition of Metrocall's stock, to any purchase
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of Metrocall's stock in accordance with the terms of any stock option or
employee benefit plan or to any purchase at prevailing market prices pursuant
to a stock purchase program.
SERIES A PREFERRED STOCK
On November 15, 1996, Metrocall issued 159,600 shares of Series A
Preferred Stock. The following summary of the designations, rights and
preferences of the Series A Preferred Stock sets forth the material terms of
the Series A Preferred Stock, but is not a complete description of its terms.
This summary is qualified in its entirety by reference to the Certificate of
Designation, Number, Powers, Preferences and Relative, Participating, Optional
and Other Rights (the "Series A Certificate of Designation") of the Series A
Preferred Stock which is an exhibit to documents incorporated by reference in
the Prospectus. See "Incorporation of Certain Documents by Reference" in the
Prospectus.
Each share of Series A Preferred Stock has a stated value of $250 per
share. Each share has a liquidation preference over shares of Metrocall Common
Stock equal to the stated value. The Series A Preferred Stock carries a
dividend of 14% of the stated value per year, payable semi-annually in cash or
in additional shares of Series A Preferred Stock, at Metrocall's option. Upon
the occurrence of a "Triggering Event" and so long as the Triggering Event
continues, the dividend rate increases to 16% per year. "Triggering Events"
include, among other things, (i) Metrocall issuing or incurring indebtedness or
equity securities senior with respect to payment of dividends or distributions
on liquidation or redemption to the Series A Preferred Stock in violation of
limitations set forth in the Series A Certificate of Designation, and (ii)
default on the payment of indebtedness of Metrocall in an amount of $5,000,000
or more.
Holders of Series A Preferred Stock have the right, beginning five
years from the date of issuance, to convert their Series A Preferred Stock
(including shares issued as dividends) into shares of Metrocall Common Stock
based on the market price of Metrocall Common Stock at the time of conversion.
Series A Preferred Stock may, at the option of holders, be converted sooner
upon a change of control of Metrocall, as defined in the Series A Certificate
of Designation. The Series A Preferred Stock must be redeemed on November 15,
2008 for an amount equal to the stated value plus accrued and unpaid dividends.
The Series A Preferred Stock may also be redeemed by Metrocall in
whole or in part (subject to certain minimums) beginning November 15, 1999.
Prior to then, the Series A Preferred Stock may be redeemed by Metrocall in
whole in connection with a sale of the company (as described in the Series A
Certificate of Designation) unless the holders have exercised their rights to
convert to Metrocall Common Stock in connection with the transaction. The
redemption price prior to November 15, 2001, is equal to the stated value of
the shares of Series A Preferred Stock, plus accrued and unpaid dividends and a
redemption premium. The redemption premium to be received by a holder for its
shares would be calculated as the excess, if any, of the amount that would
provide a specified internal rate of return on the holder's purchase price of
$250 per unit for the shares of Series A Preferred Stock and Warrants it
initially acquired, over (i) the stated value of shares received as dividends
in respect of the shares originally issued (including dividends on such
dividends) plus (ii) except for redemption prior to November 15, 1997, the
excess of the then-current market price of Metrocall Common Stock over the
exercise price of the shares of Metrocall Common Stock represented by the
Warrants issued in conjunction with the shares originally issued. The
applicable internal rates of return are 20% for redemptions on and after
November 15, 2000 and before November 15, 2001; 25% for redemptions on and
after November 15, 1999; and 30% for redemptions before November 15, 1999.
After November 15, 2001, the Series A Preferred Stock may be redeemed for the
stated value of $250 per share, without premium. Metrocall may not exercise
its redemption right between November 15, 2001, and January 15, 2002 or with
respect to any shares as to which the holders have delivered a notice of
conversion into Metrocall Common Stock.
Holders of the Series A Preferred Stock have the right to elect two
directors of Metrocall. One such director is to be chosen by one of the
initial three purchasers of the Series A Preferred Stock (or subsequent holders
of a majority of shares initially issued to such purchaser) and the other is to
be chosen by the other two initial purchasers (or subsequent holders of a
majority of shares initially issued to such purchasers). If a Triggering Event
has occurred and is continuing, holders of Series A Preferred Stock shall have
the right to elect an additional number of directors so that such directors
shall constitute no less than 40% of the members of the Board of Directors.
Metrocall also is required to obtain approval of holders of not less than 75%
of the issued and outstanding Series A Preferred Stock before
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undertaking: (i) any changes in the Metrocall Certificate and By-laws that
adversely affect the rights of holders of the Series A Preferred Stock, (ii) a
liquidation, winding up or dissolution of Metrocall or the purchase of shares
of capital stock of Metrocall from holders of over 5% of the issued and
outstanding voting securities of Metrocall, (iii) any payment of dividends on
or redemption of Metrocall Common Stock, or (iv) issuance of any additional
shares of Series A Preferred Stock (except in payment of dividends) or any
shares of capital stock having preferences on liquidation or dividends that are
equal to the Series A Preferred Stock. Metrocall is also required to obtain
approval of holders of not less than a majority of the issued and outstanding
Series A Preferred Stock before undertaking: (i) any acquisition involving
consideration having a value equal to or greater than 50% of the market
capitalization of Metrocall at the time of such acquisition, or (ii) any sale
of Metrocall unless Metrocall redeems the Series A Preferred Stock as described
above.
SERIES B PREFERRED STOCK
In connection with the Page America Acquisition, Metrocall has agreed
to issue to Page America 1,500 shares of Series B Preferred Stock and
additional shares under certain circumstances. The following summary of the
designations, rights and preferences of the Series B Preferred Stock sets forth
the material terms of the Series B Preferred Stock, but is not a complete
description of its terms. This summary is qualified in its entirety by
reference to the Form of the Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other Rights (the "Series
B Certificate of Designation") of the Series B Preferred Stock, which is an
exhibit to documents incorporated by reference in the Prospectus. See
"Incorporation of Certain Documents by Reference" in the Prospectus.
Each share of Series B Preferred Stock has a Stated Value of $10,000
per share. Each share has a liquidation preference equal to its Stated Value,
which is junior to the Series A Preferred Stock but senior to shares of
Metrocall Common Stock. The Series B Preferred Stock carries a dividend of 14%
of the Stated Value per year, payable semiannually in cash or in additional
shares of Series B Preferred Stock, at Metrocall's option.
Beginning on each of September 1, 1997, December 1, 1997, March 1,
1998 and June 1, 1998, the holders of Series B Preferred Stock have the right
to convert up to 25% of the number of Series B Preferred Stock initially issued
(plus shares of Series B Preferred Stock issued as dividends on such shares,
and as dividends on such dividends) into that number of shares of Common Stock
equal to the Stated Value divided by the average of the closing price of the
Metrocall Common Stock for the 10 trading days prior to each conversion date.
The conversion price will be subject to adjustment based on stock splits, stock
dividends, issuance of securities below current market price and other events.
The Series B Preferred Stock must be redeemed on the twelfth
anniversary of the initial issuance for an amount equal to the Stated Value,
plus accrued and unpaid dividends. The Series B Preferred Stock may also be
redeemed by Metrocall in whole or in part at any time for an amount equal to
the Stated Value of the shares to be redeemed plus accrued and unpaid
dividends. If Metrocall elects to redeem Series B Preferred Stock, the holders
thereof will have the right to convert any Series B Preferred Stock which was
then convertible into Metrocall Common Stock within 15 business days after
receipt of notice of redemption.
Metrocall is required to obtain the approval of holders of a majority
of the issued and outstanding Series B Preferred Stock before undertaking: (i)
any changes in the Metrocall Certificate and By-Laws that adversely affect the
rights of the holders of Series B Preferred Stock; and (ii) any changes in the
Series B Certificate of Designation. The Series B Preferred Stock also
contains restrictions on the ability of Metrocall to incur any debt or issue
securities (other than the Series A Preferred Stock) which are senior to the
Series B Preferred Stock.
WARRANTS
In connection with the issuance of the Series A Preferred Stock,
Metrocall issued on November 15, 1996 Warrants to purchase Metrocall Common
Stock. Each Warrant represents the right of the holder to purchase 18.266
shares of Metrocall Common Stock, or an aggregate of 2.915 million shares. The
exercise price per share is $7.40. The Warrants contain certain provisions for
adjustment in the exercise price in the event that, in a private transaction,
Metrocall issues Common Stock for a price that is less than 80% of the
then-current exercise price, or options, warrants,
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or other securities convertible into or exchangeable for Common Stock with an
exercise price which is less than the then-current exercise price of the
Warrants. In addition, the Warrants contain certain customary anti-dilution
provisions requiring adjustment in the exercise price and the number of shares
for which the warrants are exercisable in certain circumstances. The Warrants
expire November 15, 2001. Metrocall has registered under the Securities Act of
1933 the resale of shares that may be obtained upon exercise of the Warrants.
INDEXED VARIABLE COMMON RIGHTS ("VCRS")
In connection with the merger of A+ Network, Inc. into Metrocall,
Metrocall issued approximately 8.1 million indexed variable common rights
("VCRs") to the shareholders of A+ Network. Each VCR represents the right to
receive payment of up to $5 in Metrocall stock or cash, at Metrocall's option,
if the trading price of Metrocall shares at November 15, 1997, is less than a
target price initially set at $21.10. The target price will be indexed
downward, but not above, the initial target price of $21.10, based on changes
in the average trading prices of Arch Communications Group, Inc., MobileMedia
Communications, Inc., and ProNet, Inc. since the announcement of the A+
Network Merger. If changes in the index cause the target price to fall below a
floor price of $16.10 (which is not indexed), the VCR payment will be zero
regardless of the price at which Metrocall shares are trading. As of March 31,
1997, the target price was below $16.10, and no payment on the VCRs would be
made if they had expired on that date. Metrocall has the right to extend the
maturity date of the VCRs for an additional year, in which event the target
price and the amount of the potential VCR payment would increase.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
Vincent D. Kelly, a Selling Stockholder, is no longer subject to the
lockup agreement with the Company referenced in the Prospectus, and none of Mr.
Kelly's shares of Common Stock subject to the Registration Statement of which
the Prospectus is a part are pledged as collateral for personal loans. As of
the date of this Prospectus Supplement, Mr. Kelly owned 95,000 shares of Common
Stock subject to the Registration Statement of which the Prospectus is a part.
After any such sale pursuant to the Prospectus, as supplemented by this
Prospectus Supplement, Mr. Kelly would beneficially own less than 1% of the
issued and outstanding shares of Common Stock.
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