<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1997.
REGISTRATION NO. 333-21231
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
METROCALL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4812 54-1215634
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
6677 RICHMOND HIGHWAY
ALEXANDRIA, VIRGINIA 22306
(703) 660-6677
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
WILLIAM L. COLLINS, III
CHIEF EXECUTIVE OFFICER
METROCALL, INC.
6677 RICHMOND HIGHWAY
ALEXANDRIA, VIRGINIA 22306
(703) 660-6677
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
With a copy to:
<TABLE>
<S> <C>
GEORGE P. STAMAS, ESQ. MARTIN H. NEIDELL, ESQ.
WILMER, CUTLER & PICKERING STROOCK & STROOCK & LAVAN LLP
2445 M STREET, N.W. 180 MAIDEN LANE
WASHINGTON, D.C. 20037 NEW YORK, NEW YORK 10038
(202) 663-6000 (212) 806-5836
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
==============================================================================================================================
PROPOSED
MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE(4)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 per share.................... (2) (2) $19,981,998 $6,056
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock Equivalent Convertible Preferred Stock........ (3) (3) (3) (3)
- ------------------------------------------------------------------------------------------------------------------------------
Series B Junior Convertible Preferred Stock, par value
$0.01 per share.......................................... 1,500 $10,000 $15,000,000 $4,546
==============================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c), based upon the purchase price under the
Acquisition Agreement (as defined herein), which requires the issuance of
shares of Metrocall Common Stock with a value of $15 million plus 830,333
shares, valued solely for the purpose of calculating the registration fee at
the average of the high and low prices per share of Metrocall common stock,
par value $.01 per share, on January 31, 1997, as reported on the Nasdaq
Stock Market's National Market.
(2) Pursuant to Rule 457(o), the registration fee is calculated on the basis of
the maximum aggregate offering price of all the shares of Metrocall Common
Stock being registered as set forth in footnote 1.
(3) No separate consideration is being received for the Common Stock Equivalent
Preferred Stock.
(4) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
[LETTERHEAD OF PAGE AMERICA GROUP, INC.]
, 1997
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Special Meeting") of Page America Group, Inc. ("Page America") to be held at
a.m., local time, on , 1997 at . I hope that
you will be present or represented by proxy at this important meeting.
At the Special Meeting, you will be asked to approve the Amended and
Restated Asset Purchase Agreement dated as of January 30, 1997, as amended (the
"Acquisition Agreement") providing for the acquisition (the "Acquisition") by
Metrocall, Inc. ("Metrocall") of substantially all of the assets and assumption
of certain of the liabilities of Page America in consideration for (A) $25
million in cash, (B) 1,500 shares of Series B Junior Convertible Preferred Stock
of Metrocall having a value upon liquidation or redemption of $15 million, (C)
762,960 shares of Common Stock of Metrocall, and (D) shares of Common Stock of
Metrocall or other equity securities valued at $15 million, subject to
adjustment based on changes in Page America's Working Capital Deficit (as
defined in the Proxy Statement/Prospectus) and decreases in service revenue
below specified thresholds. Under the Acquisition Agreement, Metrocall will
retain the option to substitute cash at closing for all or a portion of the
equity securities that are part of the consideration. In addition, at the
Special Meeting you will be asked to approve a plan of complete liquidation and
dissolution providing for the liquidation of Page America and the dissolution of
Page America as a corporate entity subsequent to consummation of the Acquisition
Agreement.
Consummation of the Acquisition Agreement is subject to satisfaction of
certain conditions, including the approval and adoption of the Acquisition
Agreement by the shareholders of Page America. The Acquisition Agreement and
related matters are described in detail in the accompanying Proxy
Statement/Prospectus. A copy of the Acquisition Agreement is attached as
Appendix A to the accompanying Proxy Statement/Prospectus.
The Board of Directors of Page America has determined that the Acquisition
is fair to, and in the best interests of, Page America and its shareholders and
has approved the Acquisition Agreement. The Board unanimously recommends that
you vote FOR the approval of the Acquisition Agreement. Daniels & Associates,
L.P., Page America's financial advisor in connection with the Acquisition, has
rendered a written opinion to the Board of Directors of Page America to the
effect that the Acquisition is fair, from a financial point of view, to Page
America. A copy of this opinion is attached as Appendix D to the Proxy
Statement/Prospectus.
The accompanying Notice of Special Meeting and Proxy Statement/Prospectus
describe the Acquisition in greater detail and provide specific information
concerning the Special Meeting. Please read these materials carefully.
It is important that you be represented at the Special Meeting, even if you
are not able to attend in person. The affirmative vote of the holders of at
least two-thirds of the outstanding voting power of Page America is required to
approve and adopt the Acquisition Agreement. Consequently, a failure to vote or
abstentions will have the same effect as a vote against the Acquisition
Agreement. Moreover, brokers cannot vote at the Special Meeting without
instructions from shareholders. Shareholders whose shares are held in brokerage
accounts are urged to instruct their brokers to vote their shares in favor of
the Acquisition. Certain shareholders of Page America who own approximately 48%
of the outstanding voting power of Page America have agreed to vote such shares
in favor of the Acquisition.
Please mark, sign and date your proxy card and return it promptly in the
enclosed, postage-paid envelope even if you plan to attend the Special Meeting
in person. This will not prevent you from voting in person at the Special
Meeting, but will assure that your vote is counted if you are unable to attend.
On behalf of the Board of Directors, we urge you to vote FOR approval of the
Acquisition Agreement.
Sincerely,
DAVID A. BARRY
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
PAGE AMERICA GROUP, INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1997
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders (the
"Special Meeting") of Page America Group, Inc., a New York corporation ("Page
America"), will be held on , 1997, at a.m., local time, at
, New York, New York , for the following purposes:
1. To consider and act upon a proposal to approve (i) the Amended and
Restated Asset Purchase Agreement dated as of January 30, 1997, as amended
and as the same may be further amended from time to time (the "Acquisition
Agreement") providing for the acquisition (the "Acquisition") by Metrocall,
Inc. ("Metrocall") of substantially all of the assets and assumption of
certain of the liabilities of Page America in consideration for (A) $25
million in cash, (B) 1,500 shares of Series B Junior Convertible Preferred
Stock of Metrocall ("Series B Preferred Stock") having a value upon
liquidation or redemption of $15 million, (C) 762,960 shares of Common
Stock of Metrocall, and (D) shares of Common Stock of Metrocall or other
equity securities valued at $15 million, subject to adjustment based on
changes in Page America's Working Capital Deficit (as defined in the Proxy
Statement/Prospectus) and decreases in service revenue below specified
thresholds and (ii) the Plan of Complete Liquidation and Dissolution (the
"Plan of Liquidation"), providing for the liquidation of Page America and
the dissolution of Page America as a corporate entity subsequent to the
Acquisition. Under the Acquisition Agreement, Metrocall will retain the
option to substitute cash at closing for all or a portion of the equity
securities that are part of the consideration.
2. To transact such other business as may properly come before the
Special Meeting and any adjournment or postponement thereof.
Copies of the Acquisition Agreement and the Plan of Liquidation are
included as Appendix A and Appendix B, respectively, to the accompanying Proxy
Statement/Prospectus.
The affirmative vote of the holders of at least two-thirds of the votes
entitled to be voted at the Special Meeting is required to approve the
Acquisition Agreement and the Plan of Liquidation. Holders of record of
outstanding shares of Page America's Common Stock, $.10 par value per share
("Page America Common Stock"), and Series One Convertible Preferred Stock, $.01
par value per share ("Series One Preferred Stock"), as of the close of business
on , 1997 (the "Record Date") will be entitled to vote together
as a single class at the Special Meeting, with the holders of Page America
Common Stock entitled to one vote per share and the Series One Preferred Stock
entitled to 22.22 votes per share (the number of shares of Page America Common
Stock into which it is convertible). At such date, there were outstanding and
entitled to vote shares of Page America Common Stock and 286,361
shares of Series One Preferred Stock.
Certain shareholders of Page America, who in the aggregate beneficially
owned approximately 6,097,125 shares of Page America Common Stock and 198,496
shares of Series One Preferred Stock as of the Record Date, or approximately 48%
of the voting rights as of the Record Date, have entered into an agreement to
vote all of their shares of Page America Common Stock and Series One Preferred
Stock for the approval of the Acquisition Agreement.
THE BOARD OF DIRECTORS OF PAGE AMERICA HAS UNANIMOUSLY APPROVED THE TERMS
OF THE PROPOSED ACQUISITION AGREEMENT, THE PLAN OF LIQUIDATION AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT PAGE AMERICA'S
SHAREHOLDERS VOTE TO APPROVE THE ACQUISITION AGREEMENT, THE PLAN OF LIQUIDATION
AND THE TRANSACTIONS CONTEMPLATED THEREBY.
If the Acquisition is consummated, holders of Page America Common Stock and
Series One Preferred Stock who do not vote in favor of the Acquisition Agreement
and who perfect their statutory appraisal rights under Section 623 of the New
York Business Corporation Law (the "NYBCL") will have the right to seek
<PAGE> 4
appraisal of their shares. See "Dissenters' Rights of Page America Shareholders"
in the accompanying Proxy Statement/Prospectus for a statement of the rights of
such shareholders and a description of the procedures required to be followed by
shareholders to obtain appraisal of their shares. A copy of Section 623 of the
NYBCL is attached as Appendix C to the accompanying Proxy Statement/Prospectus.
Only shareholders of record of Page America Common Stock and Series One
Preferred Stock at the close of business on , 1997, the record date
for the Special Meeting, will be entitled to notice of, and to vote at, the
Special Meeting and at any adjournment or postponement thereof.
By order of the Board of Directors
MARTIN H. NEIDELL
Secretary
New York, New York
, 1997
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, WHETHER OR
NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. THE
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING.
YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY SIGNING AND
RETURNING A LATER DATED PROXY WITH RESPECT TO THE SAME SHARES, BY FILING WITH
THE SECRETARY OF PAGE AMERICA A WRITTEN REVOCATION BEARING A LATER DATE, OR BY
ATTENDING AND VOTING AT THE SPECIAL MEETING.
<PAGE> 5
PAGE AMERICA GROUP, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON , 1997
METROCALL, INC.
PROSPECTUS
REGARDING THE ISSUANCE OF
UP TO 4,762,960 SHARES OF METROCALL COMMON STOCK, $.01 PAR VALUE PER SHARE
OR SHARES OF METROCALL COMMON STOCK EQUIVALENT CONVERTIBLE PREFERRED STOCK
AND 1,500 SHARES OF METROCALL SERIES B JUNIOR CONVERTIBLE
PREFERRED STOCK, $0.01 PAR VALUE PER SHARE
This Proxy Statement/Prospectus of Page America Group, Inc., a New York
corporation ("Page America"), is being furnished to holders of Page America's
Common Stock, $.10 par value per share ("Page America Common Stock") and Series
One Convertible Preferred Stock, $.01 par value per share (the "Series One
Preferred Stock"), in connection with the solicitation of proxies by Page
America's Board of Directors (the "Page America Board") for use at the Special
Meeting of Shareholders of Page America (the "Special Meeting") to be held on
, 1997, at , New York, New York , at a.m.,
local time, and any adjournment or postponement thereof.
The shareholders of Page America will be asked to consider and vote upon
approval of (i) the Amended and Restated Asset Purchase Agreement dated as of
January 30, 1997, as amended and as the same may be further amended from time to
time (the "Acquisition Agreement") providing for the acquisition (the
"Acquisition") by Metrocall, Inc., a Delaware corporation ("Metrocall"), of
substantially all of the assets and assumption of certain of the liabilities of
Page America in consideration for (A) $25 million in cash, (B) 1,500 shares of
Series B Junior Convertible Preferred Stock of Metrocall ("Series B Preferred
Stock") having a value upon liquidation or redemption ("Stated Value") of $15
million, (C) 762,960 shares of Common Stock, $.01 par value per share, of
Metrocall ("Metrocall Common Stock,") and (D) shares of Common Stock of
Metrocall or other equity securities having a Share Value (as defined below)
equal to $15 million, subject to adjustment based on changes in Page America's
Working Capital Deficit (as defined in this Proxy Statement/Prospectus) and
decreases in service revenue below specified thresholds and (ii) the Plan of
Complete Liquidation and Dissolution (the "Plan of Liquidation"), providing for
the liquidation of Page America and the dissolution of Page America as a
corporate entity subsequent to the Acquisition. Under the Acquisition Agreement,
Metrocall will retain the option to substitute cash at closing for all or a
portion of the equity securities that are part of the consideration.
The number of shares of Metrocall Common Stock to be issued pursuant to
paragraph D above shall be equal to $15 million, as adjusted, divided by the
average of the last sales price per share of Metrocall Common Stock on the
Nasdaq Stock Market (the "NNM") for the 10 trading days ending immediately prior
to the Closing Date (the "Share Value"). In the event that at the Closing Date
the number of shares of Metrocall Common Stock authorized under its Certificate
of Incorporation and unissued and not reserved for other purposes ("Available
Shares") is less than the number of shares of Metrocall Common Stock to be
issued to Page America pursuant to the Acquisition, then Metrocall shall issue
that number of fractional shares of a series of preferred stock ("Common Stock
Equivalents") equal to the excess of the number of shares to be issued over the
Available Shares. The Common Stock Equivalents will have voting, dividend,
liquidation and other rights equivalent to the Metrocall Common Stock. Metrocall
has agreed to seek to cause its Certificate of Incorporation to be amended to
increase its authorized capital stock to 60 million shares, and holders
representing 37.5% of the outstanding Metrocall Common Stock have agreed to vote
in favor of this amendment. If such proposal is approved, any Common Stock
Equivalents would automatically be converted on a one-for-one basis into
Metrocall Common Stock. If such proposal is not approved by June 1, 1997, any
Common Stock Equivalents would be converted into Series B Preferred Stock having
a Stated Value equal to the number of Common Stock Equivalents multiplied by the
Share Value. In the event the total number of shares of Metrocall Common Stock
or Common Stock Equivalents to be issued pursuant to paragraph D exceeds
4,000,000 shares, Metrocall will issue an aggregate of 4,000,000 shares and will
issue an additional number of shares of Series B Preferred Stock having a Stated
Value equal to the difference between $15 million, as adjusted, and the Share
Value of 4,000,000 shares of Metrocall Common Stock or Common Stock Equivalents.
See "Description of Metrocall Capital Stock -- Series B Preferred Stock" and
"-- Common Stock Equivalents."
Copies of the Acquisition Agreement and the Plan of Liquidation are included
as Appendix A and Appendix B, respectively, to this Proxy Statement/Prospectus.
The Proxy Statement/Prospectus also constitutes a prospectus of Metrocall
with respect to shares of Metrocall Common Stock, shares of Metrocall Common
Stock Equivalent Convertible Preferred Stock ("Common Stock Equivalents") and
shares of Series B Preferred Stock to be issued to Page America pursuant to the
Acquisition Agreement, shares of Metrocall Common Stock to be issued upon
conversion of the Common Stock Equivalents and the resale of Metrocall Common
Stock by affiliates of Page America.
Metrocall Common Stock is listed for trading on the NNM under the trading
symbol "MCLL." On April 9, 1997, the last reported sale price of a share of
Metrocall Common Stock on the NNM was $4 5/8.
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 14 FOR INFORMATION THAT SHOULD BE
CONSIDERED REGARDING THE SECURITIES OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE ACQUISITION AND THE PLAN OF LIQUIDATION CONSTITUTE MATTERS OF GREAT
IMPORTANCE TO PAGE AMERICA'S SHAREHOLDERS. ACCORDINGLY, PAGE AMERICA
SHAREHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE
INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS.
------------------------
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to the holders of Page America Common Stock and Series One
Preferred Stock on or about , 1997.
The date of this Proxy Statement/Prospectus is , 1997.
<PAGE> 6
AVAILABLE INFORMATION
Page America and Metrocall are subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports and other information with the
Securities and Exchange Commission (the "Commission"). All such reports and
other information filed with the Commission are available for inspection and
copying at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center,
13th Floor, New York, New York 10048. Such reports and other information filed
with the Commission may also be available at the Commission's site on the World
Wide Web located at http://www.sec.gov. Copies of such documents may also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, such materials and other information concerning Metrocall can be
inspected at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
Metrocall has filed with the Commission, under the Securities Act of 1933,
as amended (the "Securities Act"), a Registration Statement on Form S-4
(together with all amendments, schedules and exhibits thereto, the "Registration
Statement") with respect to Metrocall Common Stock, Common Stock Equivalents and
Series B Preferred Stock issuable in connection with the Acquisition, and with
respect to the resale of Metrocall Common Stock by affiliates of Page America,
and Metrocall Common Stock issuable upon conversion of Common Stock Equivalents.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. The Registration Statement,
including any amendments, schedules and exhibits thereto, is available for
inspection and copying as set forth above. Statements contained in this Proxy
Statement/Prospectus as to the contents of any contract or other document are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
All information contained in this Proxy Statement/Prospectus with respect
to Metrocall has been furnished by Metrocall and all information herein with
respect to Page America has been furnished by Page America.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION
WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY PAGE AMERICA OR METROCALL. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION
OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO OR FROM WHOM, IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES BE DEEMED TO IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF METROCALL OR PAGE AMERICA OR ANY OF THEIR SUBSIDIARIES OR IN THE
INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE
HEREOF.
------------------------
i
<PAGE> 7
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission by Metrocall (File No.
0-21924) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
1. Metrocall's Current Report on Form 8-K filed on September 13, 1996
and amended on October 1, 1996;
2. Metrocall's Annual Report on Form 10-K for the year ended December
31, 1996;
3. Metrocall's Current Report on Form 8-K filed on January 27, 1997;
and
4. Metrocall's Proxy Statement for the Annual Meeting of Shareholders
to be held on May 7, 1997;
All documents and reports subsequently filed by Metrocall pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part hereof from the date of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS RELATED TO METROCALL
BY REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED HEREIN BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, WITHOUT
CHARGE, ON WRITTEN OR ORAL REQUEST DIRECTED TO METROCALL, INC., 6677 RICHMOND
HIGHWAY, ALEXANDRIA, VIRGINIA 22306, ATTENTION: SHIRLEY B. WHITE, ASSISTANT
SECRETARY (TELEPHONE NUMBER: (703)660-6677). IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY , 1997.
ii
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Summary............................................................................ 1
The Parties...................................................................... 1
Page America.................................................................. 1
Metrocall..................................................................... 1
The Special Meeting.............................................................. 2
Risk Factors..................................................................... 2
The Acquisition Agreement........................................................ 2
The Acquisition.................................................................. 3
Escrow of Consideration.......................................................... 4
Page America's Plan of Liquidation............................................... 4
Conditions to the Acquisition.................................................... 5
Closing Date..................................................................... 5
Recommendations of the Page America Board of Directors........................... 5
Reasons for the Acquisition...................................................... 5
Listing.......................................................................... 5
Registration Rights Agreement.................................................... 5
Opinion of Page America's Financial Advisor...................................... 6
Regulatory Approvals............................................................. 6
Dissenters' Rights............................................................... 6
Accounting Treatment............................................................. 6
Certain Federal Income Tax Consequences.......................................... 6
Market Prices and Dividends...................................................... 7
Summary Historical Consolidated Financial Data................................... 9
Summary Unaudited Pro Forma Condensed Combined Financial Data.................... 11
Comparative Unaudited Per Share Data............................................. 13
Risk Factors....................................................................... 14
No Assurance of Distribution to Page America's Shareholders...................... 14
Substantial Indebtedness of Metrocall............................................ 14
Challenges of Business Integration............................................... 15
Possible Impact of Competition and Technological Change.......................... 15
History of Net Losses............................................................ 16
Pending Litigation............................................................... 16
Subscriber Turnover.............................................................. 17
Potential for Change in Regulatory Environment................................... 17
Reliance on Key Personnel........................................................ 17
Conversion and Redemption of Series B Preferred Stock and Common Stock
Equivalents................................................................... 17
No Trading Market for Common Stock Equivalents and Series B Preferred Stock;
Restrictions on Transfer...................................................... 18
Other Rights of the Series B Preferred Stock..................................... 18
No Anticipated Stockholder Distributions......................................... 18
Possible Volatility of Stock Price; Shares Eligible for Future Sale.............. 18
Concentration of Ownership....................................................... 19
Anti-Takeover and Other Provisions............................................... 19
Potential Conflicts of Interest.................................................. 19
Intangible Assets................................................................ 20
</TABLE>
iii
<PAGE> 9
<TABLE>
<CAPTION>
PAGE NO.
----
<S> <C>
Forward-Looking Statements....................................................... 20
The Special Meeting................................................................ 21
General.......................................................................... 21
Purpose of the Special Meeting................................................... 21
Record Date; Vote Required....................................................... 21
Voting and Revocation of Proxies................................................. 21
Solicitation of Proxies.......................................................... 22
The Acquisition.................................................................... 23
General.......................................................................... 23
Background of the Acquisition.................................................... 23
Reasons of the Page America Board of Directors; Factors Considered............... 25
Opinion of Page America's Financial Advisor...................................... 27
Conflicts of Interest............................................................ 29
Accounting Treatment............................................................. 29
Regulatory Approvals............................................................. 29
Antitrust..................................................................... 29
FCC........................................................................... 29
The Acquisition Agreement........................................................ 29
Representations and Warranties................................................ 29
Possible Adjustments in the Stock Consideration............................... 30
Certain Covenants............................................................. 30
Consideration of Other Proposals.............................................. 31
Other Conditions to the Acquisition........................................... 31
Indemnification............................................................... 32
Amendment, Waiver and Termination............................................. 32
Listing.......................................................................... 33
Interest of Management in the Acquisition........................................ 33
Escrow of Consideration.......................................................... 33
Registration Rights Agreements................................................... 34
Stockholders Agreement........................................................... 34
Consequences under Federal Securities Laws....................................... 34
Plan of Liquidation................................................................ 35
General.......................................................................... 35
Assets and Liabilities of Page America after the Acquisition..................... 35
Liabilities................................................................... 36
Assets........................................................................ 36
Implementation of the Plan of Liquidation........................................ 36
Certain Federal Income Tax Consequences.......................................... 39
Federal Income Tax Treatment of Holders of Series One Preferred Stock......... 39
Federal Income Tax Treatment of Holders of Page America Common Stock.......... 39
Dissenters' Rights of Page America Shareholders.................................... 40
Description of Metrocall Capital Stock............................................. 43
Common Stock..................................................................... 43
Series A Preferred Stock......................................................... 44
Series B Preferred Stock......................................................... 46
Common Stock Equivalents......................................................... 46
Warrants......................................................................... 47
Indexed Variable Common Rights ("VCRs").......................................... 47
</TABLE>
iv
<PAGE> 10
<TABLE>
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<S> <C>
Description of Page America Capital Stock.......................................... 47
Common Stock..................................................................... 47
Preferred Stock.................................................................. 48
Series One Preferred Stock.................................................... 48
Comparison of Shareholder Rights................................................... 48
Business of Page America........................................................... 54
General.......................................................................... 54
Sale of California and Florida Operations........................................ 54
Background of the Paging Industry................................................ 55
Business Strategy................................................................ 55
Paging Services.................................................................. 56
Technical Facilities............................................................. 58
Marketing........................................................................ 58
Regulation....................................................................... 59
Competition...................................................................... 61
Employees........................................................................ 61
Properties....................................................................... 61
Legal Proceedings................................................................ 61
Selected Consolidated Historical Financial and Statistical Data of Page
America....................................................................... 62
Management's Discussion and Analysis of Financial Condition and Results of
Operations
of Page America............................................................... 63
Results of Operations......................................................... 63
Year Ended December 31, 1996 Compared with Year Ended December 31, 1995....... 63
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994....... 64
Liquidity and Capital Resources............................................... 65
Inflation and Changing Prices................................................. 66
Directors and Executive Officers of Page America................................. 66
Executive Compensation........................................................... 67
Agreements....................................................................... 67
Stock Option Grants and Exercises................................................ 68
Security Ownership of Certain Beneficial Owners and Management................... 68
Certain Relationships and Related Transactions................................... 70
Management of Metrocall............................................................ 71
Pro Forma Condensed Combined Financial Data........................................ 75
Notes to Unaudited Pro Forma Condensed Combined Financial Statements............... 79
Other Matters...................................................................... 80
Miscellaneous...................................................................... 80
Legal Matters...................................................................... 80
Index to Consolidated Financial Statements......................................... F-1
Appendix A Acquisition Agreement................................................ A-1
Appendix B Plan of Complete Liquidation and Dissolution......................... B-1
Appendix C Sections 623 and 910 of the New York Business Corporation Law........ C-1
Appendix D Opinion of Daniels & Associates, L.P. ............................... D-1
</TABLE>
v
<PAGE> 11
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus and in the documents incorporated herein by
reference. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information and financial statements
contained elsewhere in this Proxy Statement/Prospectus and the Appendices hereto
or incorporated herein by reference. PAGE AMERICA SHAREHOLDERS ARE URGED TO
CAREFULLY REVIEW THE ENTIRE PROXY STATEMENT/PROSPECTUS, INCLUDING THE APPENDICES
HERETO AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, BEFORE VOTING ON THE
MATTERS DISCUSSED HEREIN. Unless the context indicates otherwise, the term "Page
America" as used herein refers to Page America Group, Inc. and its subsidiaries.
THE PARTIES
Page America
Page America provides paging, messaging and information products and
services through networks which it owns and operates as a radio common carrier
("RCC") under licenses from the Federal Communications Commission (the "FCC").
As of December 31, 1996, Page America provided paging services to approximately
205,000 pagers in geographic areas encompassing a total population of 34 million
people.
Page America's strategy is to concentrate its operations in major
metropolitan markets in which it may achieve both critical mass and a
substantial market share position. Page America targets specific user segments
and, through its broad distribution capabilities, markets and delivers its
comprehensive package of paging and value-added messaging services to each
particular segment. Page America has secured licenses for multiple channels in
each of its markets and has developed networks which can support significant
future growth in paging units as well as value-added messaging and information
services. Page America emphasizes customer ownership of pagers, as compared to
leasing of pagers, which significantly reduces Page America's capital costs. At
March 1, 1997, approximately 75 percent of Page America's units in service were
owned by customers or resellers.
Page America was incorporated in 1976 under the laws of the State of New
York. Page America's principal executive offices are located at 125 State
Street, Hackensack, New Jersey 07601, and its telephone number is (201)
342-6676.
Metrocall
Metrocall had 2,142,351 pagers in service at December 31, 1996, 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 can provide paging services in all 50 states and
approximately 1,000 U.S. cities which include the top 100 Standard Metropolitan
Statistical Areas ("SMSAs").
On November 15, 1996, Metrocall completed the acquisition (the "A+ Network
Merger") of A+ Network, Inc. ("A+ Network"), adding approximately 660,000
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. Unless the context otherwise requires, all
references to Metrocall shall mean Metrocall prior to the consummation of the
Acquisition.
1
<PAGE> 12
THE SPECIAL MEETING
The Special Meeting will be held on , 1997, at a.m., local
time, at , New York, New York . At the Special
Meeting, Page America shareholders will be asked to consider and act upon a
proposal to approve the Acquisition Agreement and the Plan of Liquidation. The
affirmative vote of the holders of at least two-thirds of the votes entitled to
be cast at the Special Meeting is required to approve the Acquisition Agreement
and the Plan of Liquidation.
Holders of record of Page America Common Stock and Series One Preferred
Stock as of the close of business on , 1997 (the "Record Date") will
be entitled to vote together as a single class at the Special Meeting, with the
holders of Page America Common Stock entitled to one vote per share and the
holders of Series One Preferred Stock entitled to 22.22 votes per share (the
number of shares of Page America Common Stock into which it is convertible). At
such date, there were outstanding and entitled to vote shares of Page
America Common Stock and 286,361 shares of Series One Preferred Stock. Certain
shareholders of Page America, who in the aggregate beneficially owned
approximately 6,097,125 shares of Page America Common Stock and 198,496 shares
of Series One Preferred Stock as of the Record Date, or approximately 48% of the
voting rights as of the Record Date, have entered into an agreement (the
"Stockholders Agreement") to vote all of their shares of Page America Common
Stock and Series One Preferred Stock for the approval of the Acquisition
Agreement. See "The Acquisition -- The Stockholders Agreement." As of the Record
Date, directors and executive officers of Page America as a group beneficially
owned shares of Page America Common Stock and shares of Series
One Preferred Stock (including shares of Page America Common Stock and
shares of Series One Preferred Stock subject to the Stockholders
Agreement), or approximately % of the voting rights as of the Record Date.
All of such persons have advised Page America that they intend to vote "for" the
Acquisition Agreement and the Plan of Liquidation. PAGE AMERICA'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ACQUISITION AGREEMENT AND THE PLAN OF LIQUIDATION.
The presence, either in person or by proxy, of persons entitled to cast a
majority of the total votes entitled to be voted is necessary to constitute a
quorum for the transaction of business at the Special Meeting. However, as at
least two-thirds of the votes entitled to be cast at the Special Meeting are
required to approve the Acquisition Agreement and the Plan of Liquidation, at
least this number of votes must be present. A shareholder giving a proxy may
revoke it at any time before it is voted by filing with the Secretary of Page
America written notice of revocation or by appearing at the meeting and voting
in person. A prior proxy is automatically revoked by a shareholder delivering a
valid proxy to the Secretary of Page America bearing a later date. Shares
represented by all valid proxies will be voted in accordance with the
instructions contained in the proxies. In the absence of instructions, shares
represented by valid proxies will be voted in favor of approving the Acquisition
Agreement and the Plan of Liquidation.
Shares that are not present in person or by proxy and abstentions will
effectively be a vote against the Acquisition Agreement and the Plan of
Liquidation.
RISK FACTORS
Shareholders should carefully consider certain risk factors in evaluating
the Acquisition and the Plan of Liquidation. See "Risk Factors."
THE ACQUISITION AGREEMENT
The Acquisition Agreement sets forth the principal terms on which the
Acquisition will be consummated and the rights of Page America to receive the
Consideration (as defined below). The Acquisition Agreement contains
representations, warranties, covenants and agreements of the parties, and
provides specific conditions to the consummation of the Acquisition and terms
under which the Acquisition may be terminated or abandoned. See "The
Acquisition -- The Acquisition Agreement."
The Acquisition Agreement also requires Metrocall and Page America to enter
into registration rights agreements with respect to the Metrocall Common Stock
to be issued to Page America and an escrow
2
<PAGE> 13
agreement with respect to $4 million (the "Escrowed Consideration") of the
Metrocall Common Stock or Common Stock Equivalents to be issued to Page America.
See "The Acquisition -- Escrow of Consideration."
The Acquisition Agreement may be terminated (i) by mutual consent of
Metrocall and Page America; (ii) by either Metrocall or Page America if any
court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Acquisition
(including FCC denial of required license assignments) and such order, decree,
ruling or other action shall have become final and nonappealable; (iii) by
either Metrocall or Page America if there has been a failure to comply with
conditions precedent of the other party (other than by reason of the material
breach by such terminating party of any of its representations, warranties,
covenants or agreements set forth in the Acquisition Agreement), and such
noncompliance shall not have either been cured within five days after receipt of
written notice from the terminating party or the waiver by the terminating party
of such conditions; (iv) by either Metrocall or Page America if there has been a
breach of any of Page America's representations, warranties or covenants, which
breach shall, in Metrocall's good faith estimation, cost $500,000 or more to
cure, and Page America is unable or unwilling to cure the same, or such breach
is not capable of being cured; (v) by Metrocall if there is a loss or damage to
any of Page America's assets resulting from fire, theft or other casualty which
is so substantial as to prevent the normal operation of any material portion of
Page America's business or the replacement or restoration of the lost or damaged
material asset within 30 days after the occurrence of the event resulting in the
loss or damage; (vi) by Page America if Page America receives a proposal from a
third party that is financially superior to the transactions contemplated by the
Acquisition Agreement and is reasonably capable of being financed (as determined
in each case in good faith by the Page America Board after consultation with
Page America's financial advisors) and Page America and Metrocall do not agree
to make adjustments to the Acquisition Agreement so as to enable Metrocall to
match or better the proposal; and (vii) by either Metrocall or Page America if
the Acquisition has not occurred on or before July 1, 1997. See "The
Acquisition -- The Acquisition Agreement -- Amendment, Waiver and Termination."
THE ACQUISITION
Shareholders of Page America will vote on the Acquisition Agreement and the
Plan of Liquidation. Upon consummation of the Acquisition (i) Metrocall will
acquire substantially all of the assets and assume certain of the liabilities of
Page America and (ii) Page America will receive (A) $25 million in cash (the
"Cash Consideration"), (B) 1,500 shares of Series B Preferred Stock of Metrocall
having a value upon liquidation or redemption ("Stated Value") of $15 million,
(C) 762,960 shares of Metrocall Common Stock, and (D) shares of Metrocall Common
Stock or other equity securities having a Share Value equal to $15 million,
subject to adjustment based on changes in Page America's Working Capital Deficit
and decreases in service revenue below specified thresholds (the consideration
payable pursuant to paragraphs B, C and D above being collectively referred to
as the "Stock Consideration" and together with the Cash Consideration, the
"Consideration"). None of the Consideration represents payment for goodwill.
Under the Acquisition Agreement, Metrocall will retain the option to substitute
cash at closing for all or a portion of the Stock Consideration. The number of
shares of Metrocall Common Stock to be received by Page America pursuant to
paragraph (D) above shall be equal to $15 million, as adjusted, divided by the
average of the last sales price per share of Metrocall Common Stock on the NNM
for the 10 consecutive trading days ending immediately prior to the Closing Date
(the "Share Value"). Because the Share Value is not determined until immediately
prior to the Closing Date, at the time the Page America shareholders cast their
votes at the Special Meeting, the exact number of shares of Metrocall Common
Stock or Common Stock Equivalents, or the exact value of the Consideration that
Page America will receive in the Acquisition will not have been determined.
In the event that at the Closing Date the number of shares of Metrocall
Common Stock authorized under Metrocall's Amended and Restated Certificate of
Incorporation (as amended from time to time, the "Metrocall Certificate") and
unissued and not reserved for other purposes ("Available Shares") is less than
the number of shares of Metrocall Common Stock to be issued to Page America
pursuant to the Acquisition, then Metrocall shall issue that number of
fractional shares of a series of preferred stock ("Common Stock
3
<PAGE> 14
Equivalents") equal to the excess of the number of shares to be issued over the
Available Shares. The Common Stock Equivalents will have voting, dividend,
liquidation and other rights equivalent to the Metrocall Common Stock. Metrocall
has agreed to seek to cause the Metrocall Certificate to be amended to increase
its authorized capital stock to 60 million shares, and holders representing
37.5% of the outstanding Metrocall Common Stock have agreed to vote in favor of
this amendment. If such proposal is approved, any Common Stock Equivalents would
automatically be converted on a one-for-one basis into Metrocall Common Stock.
If such proposal is not approved by June 1, 1997, any Common Stock Equivalents
would be converted into Series B Preferred Stock having a Stated Value equal to
the number of Common Stock Equivalents multiplied by the Share Value. In the
event the total number of shares of Metrocall Common Stock or Common Stock
Equivalents to be issued pursuant to paragraph D exceeds 4,000,000 shares,
Metrocall will issue an aggregate of 4,000,000 shares and will issue an
additional number of shares of Series B Preferred Stock having a Stated Value
equal to the difference between $15 million, as adjusted, and the Share Value of
4,000,000 shares of Metrocall Common Stock or Common Stock Equivalents. See
"Description of Metrocall Capital Stock -- Series B Preferred Stock" and
"-- Common Stock Equivalents." There is no provision for termination of the
Acquisition Agreement in the event that the Share Value is less than or exceeds
any specified amounts.
ESCROW OF CONSIDERATION
Of the Stock Consideration, Metrocall Common Stock or Common Stock
Equivalents issued to Page America having a Share Value of $4 million will be
held in escrow (the "Escrowed Consideration") until April 1, 1998 in order to
satisfy, at least in part, any indemnification claims made by Metrocall against
Page America pursuant to the provisions of the Acquisition Agreement. See "The
Acquisition -- Escrow of Consideration." Because $4 million of the Stock
Consideration will be held in escrow, on the Closing Date Page America will
receive the Cash Consideration, 1,500 shares of Series B Preferred Stock of
Metrocall, 762,960 shares of Metrocall Common Stock, and shares of Metrocall
Common Stock or Common Stock Equivalents having a Share Value of $11 million,
subject to adjustment.
PAGE AMERICA'S PLAN OF LIQUIDATION
Upon the closing of the Acquisition, the Plan of Liquidation provides that
(i) Page America will continue in existence for the sole purpose of winding up
its affairs, and that it shall not thereafter engage in any business activities
other than activities related to the implementation of the Plan of Liquidation,
(ii) Page America shall take all necessary action to settle and discharge, or
otherwise provide for, all of its remaining liabilities either through the
payment of monies received as the Cash Consideration, the delivery of shares of
Metrocall Common Stock, Common Stock Equivalents or Series B Preferred Stock
received as the Stock Consideration pursuant to the Acquisition Agreement and/or
pursuant to the sale of any or all of such shares and the application of the
proceeds of the sale of such shares to the payment of Page America's remaining
liabilities, (iii) upon the settlement and discharge of, or other provision for,
Page America's liabilities, all of its remaining assets (less any assets
retained as reasonable provisions to meet claims, including unasserted,
contingent, conditional or unmatured liabilities or expenses, and specifically
set aside for such purpose) will be distributed to the holders of Subordinated
Notes and shareholders of Page America and (iv) Page America shall thereafter
dissolve as a corporate entity.
The Cash Consideration, together with other cash available to Page America,
will not be sufficient to satisfy Page America's liabilities. Page America has
reached a preliminary agreement with its bank lenders and holders of
subordinated notes relating to the discharge of its liabilities. The value of
the assets of Page America to be available for distribution to its shareholders
upon liquidation and dissolution cannot be ascertained at this time and will
depend, among other things, on the market value of the shares of Metrocall
Common Stock, Common Stock Equivalents and Series B Preferred Stock received by
Page America pursuant to the Acquisition Agreement. Upon the completion of the
Acquisition, Page America will not conduct any ongoing business operations or
generate any revenues by reason thereof. See "Plan of
Liquidation -- Implementation of the Plan of Liquidation."
4
<PAGE> 15
CONDITIONS TO THE ACQUISITION
The obligations of Metrocall and Page America to effect the Acquisition are
subject to the satisfaction or waiver of certain conditions, including, among
other things (i) approval of the transactions contemplated by the Acquisition
Agreement by the shareholders of Page America, (ii) the representations and
warranties of Metrocall and Page America being true and correct as of the
Closing Date, (iii) the performance by Metrocall and Page America of the terms
of the Acquisition Agreement and (iv) the receipt by Metrocall and Page America
of certain officers certificates and opinions of counsel. See "The
Acquisition -- The Acquisition Agreement."
The consummation of the Acquisition is also subject to certain regulatory
approvals. See "-- Regulatory Approvals" and "The Acquisition -- Regulatory
Approvals."
CLOSING DATE
The Closing Date for the Acquisition will occur on the first day of the
calendar month following the satisfaction or waiver of all the conditions set
forth in the Acquisition Agreement, including the approval by the shareholders
of Page America of the Acquisition Agreement and the Plan of Liquidation.
RECOMMENDATION OF THE PAGE AMERICA BOARD OF DIRECTORS
The Page America Board has unanimously authorized and approved the
Acquisition Agreement and the Plan of Liquidation and has determined that the
terms of the proposed Acquisition are fair to and in the best interests of the
shareholders of Page America. The Page America Board unanimously recommends to
the shareholders of Page America that the shareholders vote for approval of the
Acquisition Agreement and the Plan of Liquidation. See "The
Acquisition -- Background of the Acquisition" and "The Acquisition -- Reasons of
the Page America Board of Directors; Factors Considered."
REASONS FOR THE ACQUISITION
Metrocall's long-term strategy is to continue to expand by providing paging
and other wireless communication services to an increasingly broad base of
subscribers throughout the United States. The Acquisition furthers this strategy
by adding approximately 205,000 subscribers and expanding Metrocall's geographic
coverage in the New York, New Jersey and Chicago markets.
Page America has incurred net losses since its inception in 1976 and
believes that it will continue to incur losses for at least the next several
years. In order to repay amounts due under the Page America Credit Facility and
the Subordinated Notes and to obtain sufficient capital to purchase an adequate
number of pagers to at least maintain its level of business, Page America
explored various opportunities to obtain long-term debt and equity financing or
to sell some or all of its remaining assets. After thorough consideration, Page
America concluded that the Acquisition was in the best interests of Page America
and its shareholders.
LISTING
Metrocall Common Stock trades on the NNM. Metrocall intends to apply to
have the Metrocall Common Stock issued to Page America pursuant to the
Acquisition Agreement included in the Nasdaq Stock Market upon consummation of
the Acquisition. Neither the Common Stock Equivalents nor the Series B Preferred
Stock is expected to trade on the NNM or be listed on any other exchange. See
"The Acquisition -- Listing."
REGISTRATION RIGHTS AGREEMENTS
Page America and certain shareholders of Page America will be granted
certain registration rights with respect to the Metrocall Common Stock issued to
Page America. See "The Acquisition -- Registration Rights Agreements."
5
<PAGE> 16
OPINION OF PAGE AMERICA'S FINANCIAL ADVISOR
Daniels & Associates, L.P. ("Daniels") has rendered its opinion to the Page
America Board dated , 1997 that, as of the date of such opinion
and based upon and subject to certain matters stated therein, the Acquisition is
fair, from a financial point of view, to Page America. See "The Acquisition --
Opinion of Page America's Financial Advisor" and Appendix D.
REGULATORY APPROVALS
The Acquisition is subject to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), which provides that certain
transactions may not be consummated until required information and material have
been furnished to the Antitrust Division of the Department of Justice (the
"DOJ") and the Federal Trade Commission (the "FTC") and certain waiting periods
have expired or been terminated. On September 20, 1996, Metrocall and Page
America each filed the required information and material with the DOJ and the
FTC. The statutory waiting period under the HSR Act terminated on October 27,
1996.
The paging industry is a highly regulated industry. The consummation of the
Acquisition is conditioned upon, among other things, Page America and Metrocall
having obtained the consent and approval of the FCC to the assignment or
transfer of all licenses, permits, franchises and authorizations issued by the
FCC for the construction or operation of Page America's business. Applications
for FCC approval were filed by Page America and Metrocall on May 7, 1996. On
July 5, 1996, the FCC issued Public Notice granting assignment of all of the RCC
licenses used in Page America's business. On August 14, 1996, the grant of
assignment for the RCC licenses from Page America to Metrocall became final. The
parties have received an extension of this grant to May 31, 1997.
See "The Acquisition -- Regulatory Approvals."
DISSENTERS' RIGHTS
Holders of shares of Page America Common Stock or Series One Preferred
Stock who follow the procedures of Section 623 of the New York Business
Corporation Law (the "NYBCL") will have certain dissenters' rights as a result
of the Acquisition to demand payment for the "fair value" of the shares of Page
America Common Stock or Series One Preferred Stock, as applicable (after giving
effect to the Acquisition), if they do not vote for the approval of the
Acquisition Agreement (which approval would include submitting a signed proxy
card without voting instructions), timely object to the Acquisition and the Plan
of Liquidation in writing prior to the Special Meeting, and strictly comply with
certain other requirements. Failure to take any of the steps required on a
timely basis may result in the loss of dissenters' rights. The amount obtainable
upon the valid exercise of dissenters' rights would be determined by judicial
proceedings, the result of which cannot be predicted. Any shareholder
contemplating the exercise of dissenters' rights should carefully review
Sections 623 and 910 of the NYBCL, particularly the procedural steps required to
perfect dissenters' rights. See "Dissenters' Rights of Page America
Shareholders" and Appendix C, "Sections 623 and 910 of the New York Business
Corporation Law."
ACCOUNTING TREATMENT
The Acquisition will be accounted for by Metrocall under the purchase
method of accounting in accordance with Accounting Principles Board Opinion No.
16, "Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on the estimated fair values at the time of acquisition. Income of
Metrocall will not include income (or loss) of Page America prior to the date of
acquisition. See "The Acquisition -- Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
On the receipt of property in the Plan of Liquidation or pursuant to the
exercise of dissenters' rights, holders of Series One Preferred Stock will
recognize dividend income to the extent that the fair market value
6
<PAGE> 17
of the property received does not exceed the accrued and unpaid dividends on the
Series One Preferred Stock. The excess of the fair market value of the property
received in the Plan of Liquidation (or pursuant to the exercise of dissenters'
rights) over any accrued and unpaid dividends, will be treated as a payment in
exchange for the Series One Preferred Stock. A holder of Series One Preferred
Stock will recognize gain or loss on such exchange. See "Plan of
Liquidation -- Certain Federal Income Consequences -- Federal Income Tax
Treatment of Holders of Series One Preferred Stock."
A holder of Page America Common Stock will be treated as exchanging its
Page America Common Stock for any property received in the Plan of Liquidation
or pursuant to the exercise of dissenters' rights. A holder of Page America
Common Stock will recognize gain or loss on such exchange. See "Plan of
Liquidation -- Certain Federal Income Consequences -- Federal Income Tax
Treatment of Holders of Page America Common Stock."
MARKET PRICES AND DIVIDENDS
Metrocall Common Stock is traded on the NNM. Page America Common Stock had
been listed on the AMEX under the symbol "PGG." Due to Page America's inability
to comply with certain financial guidelines of the AMEX for continued listing,
Page America Common Stock was removed from the AMEX listing in May 1996. The
last available price quotation for Page America was April 16, 1996 and,
therefore, current prices quotations for Page America are not available. The
following table sets forth, for the calendar periods indicated, the closing
sales prices of Metrocall on the NNM and of Page America on the AMEX.
<TABLE>
<CAPTION>
METROCALL PAGE AMERICA
COMMON STOCK COMMON STOCK
-------------- --------------------------
1995 HIGH LOW HIGH LOW
---- ---- ----- -----
<S> <C> <C> <C> <C>
First Quarter............................................. $18 $14 1/2 $ 3 3/4 $ 2 1/2
Second Quarter............................................ 18 3/8 17 3 3/8 1/2
Third Quarter............................................. 29 18 1 9/16
Fourth Quarter............................................ 28 1/4 19 1/2 3/4 1/8
1996
First Quarter............................................. $21 1/4 $16 1/2 $ 5/16 $ 3/16
Second Quarter (through April 16, 1996 for Page
America)................................................ 21 3/4 10 3/4 3/16
Third Quarter............................................. 11 6 1/4 NA NA
Fourth Quarter............................................ 7 1/8 3 13/16 NA NA
1997
First Quarter............................................. $ 7 1/2 $ 4 1/8 NA NA
Second Quarter (through April 8, 1997).................... 4 9/16 4 1/4 NA NA
</TABLE>
On April 22, 1996, the last full trading day for Metrocall Common Stock,
and on April 16, 1996, the last full trading day for Page America Common Stock,
prior to the public announcement of the execution of the initial Acquisition
Agreement, the reported closing sale prices of Metrocall Common Stock and of
Page America Common Stock, as reported by the NNM and AMEX, respectively, were
$18.375 and $0.75 per share, respectively. The closing price of Metrocall Common
Stock as reported by the NNM on March 31, 1997 was $4 1/8. Because the market
price of Metrocall Common Stock is subject to fluctuation, the market value of
that portion of the stock consideration consisting of 762,960 shares of
Metrocall Common Stock that Page America will receive in the Acquisition may
increase or decrease prior to completion of the Acquisition. SHAREHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE METROCALL COMMON STOCK.
Shareholders may obtain such a quotation as well as the total number of shares
to be issued to Page America pursuant to the Acquisition as of a certain date by
calling Shirley B. White, Assistant Secretary of Metrocall, at (703) 660-6677.
There were approximately shareholders of record of Page America
Common Stock as of , 1997. This number does not include
beneficial owners holding shares through nominee or "street" names.
7
<PAGE> 18
Page America has never declared or paid cash dividends on its Common Stock
and does not anticipate paying cash dividends to the holders of its Common Stock
in the foreseeable future. The payment of dividends on Common Stock and
Preferred Stock is also restricted pursuant to the provisions of Page America's
Credit Facility. Page America's outstanding series of Series One Preferred Stock
provides that Page America may not declare or pay dividends on its Common Stock
unless all accrued dividends on the Series One Preferred Stock have been paid in
full. Payment of dividends on the Series One Preferred Stock may be made in cash
or in Page America Common Stock registered under the Securities Act. At December
31, 1996, accrued and unpaid dividends on Page America's outstanding Series One
Preferred Stock aggregated $2,863,610.
Metrocall has not paid any cash dividends on its Common Stock (except for
distributions by Metrocall prior to its initial public offering), and the Board
of Directors of Metrocall currently does not anticipate paying cash dividends in
the foreseeable future on shares of its common stock. Following the Acquisition,
any future payments of dividends will be at the discretion of Metrocall's Board
of Directors and will depend upon the financial condition and capital
requirements of Metrocall as well as other factors that Metrocall's Board of
Directors may deem relevant. In addition, certain covenants in Metrocall's bank
credit agreement and in the terms of Metrocall's Series A Convertible Preferred
Stock ("Series A Preferred Stock") prohibit the payment of dividends by
Metrocall on its Common Stock. Payment of dividends on Metrocall's Series A
Preferred Stock may be made in cash or in additional shares of Series A
Preferred Stock, at Metrocall's option.
8
<PAGE> 19
METROCALL, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT, PER UNIT AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1992 1993 1994(1) 1995 1996(1)
-------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE,
UNIT, AND PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Service, rent and maintenance revenues............................... $ 30,996 $ 33,111 $ 49,716 $ 92,160 $ 124,029
Product sales........................................................ 4,196 4,549 8,139 18,699 25,928
-------- -------- -------- -------- ----------
Total revenues............................................... 35,192 37,660 57,855 110,859 149,957
Net book value of products sold...................................... (3,439) (4,130) (6,962) (15,527) (21,633)
-------- -------- -------- -------- ----------
31,753 33,530 50,893 95,332 128,324
Operating expenses:
Service, rent and maintenance........................................ 8,342 9,559 14,014 27,258 38,347
Selling, general and administrative(2)............................... 12,341 17,879 20,727 42,353 57,226
Depreciation and amortization........................................ 6,594 6,525 13,829 31,504 58,196
-------- -------- -------- -------- ----------
Income (loss) from operations........................................ 4,476 (433) 2,323 (5,783) (25,445)
Interest and other (expense) income.................................. 1,212 77 161 2,011 (607)
Interest expense..................................................... (2,631) (1,331) (3,726) (12,533) (20,424)
-------- -------- -------- -------- ----------
Income (loss) before income tax benefit (provision) and extraordinary
item............................................................... 3,057 (1,687) (1,242) (16,305) (46,476)
Income tax benefit (provision)....................................... (69) (59) 152 595 1,021
-------- -------- -------- -------- ----------
Income (loss) before extraordinary item.............................. 2,988 (1,746) (1,090) (15,710) (45,455)
Extraordinary item(3)................................................ -- (439) (1,309) (4,392) (3,675)
-------- -------- -------- -------- ----------
Net income (loss).................................................. 2,988 (2,185) (2,399) (20,102) (49,130)
Preferred dividends.................................................. -- -- -- -- (780)
-------- -------- -------- -------- ----------
Income (loss) attributable to common stockholders.................. $ 2,988 $ (2,185) $ (2,399) $(20,102) $ (49,910)
======== ======== ======== ======== ==========
Loss per share attributable to common stockholders:
Loss per share before extraordinary item attributable to common
stockholders..................................................... $ (0.14) $ (1.34) $ (2.84)
Extraordinary item, net of income tax benefit...................... (0.16) (0.38) (0.23)
-------- -------- ----------
Loss per share attributable to common stockholders................. $ (0.30) $ (1.72) $ (3.07)
======== ======== ==========
OPERATING AND OTHER DATA:
Units in service (end of period)..................................... 201,397 247,716 755,546 944,013 2,142,351
EBITDA(4)............................................................ $ 11,070 $ 10,923 $ 16,152 $ 27,771 $ 32,751
EBITDA margin(5)..................................................... 34.9% 32.6% 31.7% 29.1% 25.5%
Net cash provided by operating activities............................ $ 8,858 $ 10,929 $ 11,796 $ 15,697 $ 15,608
Net cash provided by (used in) investing activities.................. $ 26,127 $(13,598) $(19,227) $(46,225) $(327,904)
Net cash (used in) provided by financing activities.................. $(34,167) $ 1,983 $ 9,190 $151,329 $ 199,639
ARPU(6).............................................................. $ 13.10 $ 12.29 $ 10.53 $ 9.15 $ 8.01
Average monthly operating expense per unit(7)........................ $ 8.74 $ 8.39 $ 7.36 $ 6.71 $ 6.28
Units in service per employee (end of period)........................ 730 716 1,007 1,047 1,086
Capital expenditures................................................. $ 3,918 $ 13,561 $ 19,091 $ 44,058 $ 62,110
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit)............................................ $ 531 $ (1,603) $ (5,277) $116,009 $ (7,267)
Cash and cash equivalents............................................ 1,700 1,014 2,773 123,574 10,917
Total assets......................................................... 26,180 33,857 200,580 340,614 651,468
Total long-term debt................................................. 31,143 12,102 104,846 154,055 327,792
Total stockholders' equity (deficit)................................. (11,374) 13,729 68,136 155,238 166,298
</TABLE>
- ---------------
(1) 1994 and 1996 include the results of operations of acquired companies from
their respective acquisition dates (see Note 3 to consolidated financial
statements).
(2) Includes the impact of one-time, non-recurring charges for the forgiveness
of certain stockholder notes receivable of approximately $4.8 million in
1993, and for severance and other compensation costs incurred as part of a
management reorganization charge of approximately $2.0 million in 1995.
(3) In 1993, 1994 and 1995 the Company refinanced balances outstanding under its
then existing credit facilities. As a result of this refinancing the Company
recorded extraordinary items of $439,000, $1.3 million and $4.4 million,
respectively, representing charges to expense unamortized deferred financing
costs and other costs, net of any income tax benefits, related to those
credit facilities. In 1996, the Company recorded an extraordinary item for
costs of approximately $3.7 million paid to purchase the A+ Network 11 7/8%
senior subordinated notes outstanding.
(4) EBITDA (earnings before interest, taxes, depreciation and amortization, and
certain one-time charges), while not a measure under generally accepted
accounting principles ("GAAP"), is a standard measure of financial
performance in the paging industry; EBITDA should not be considered in
isolation or as an alternative to net income (loss), income (loss) from
operations, cash flows from operating activities, or any other measure of
performance under GAAP. EBITDA is, however, an approximation of the primary
financial measure by which the Company's covenants are calculated under the
Indenture and its credit facility. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" for discussion of significant capital requirements and
commitments. EBITDA excludes non-recurring charges for the forgiveness of
certain stockholder notes receivable of approximately $4.8 million in 1993,
and approximately $2.0 million incurred as part of a management
reorganization charge in 1995.
(5) EBITDA margin is calculated by dividing (a) EBITDA by (b) the sum of (total
revenues less the net book value of products sold).
(6) ARPU (average monthly paging revenue per unit) is calculated by dividing (a)
service, rent and maintenance revenues for the period by (b) the average
number of units in service for the period. ARPU calculation excludes
revenues derived from non-paging services such as telemessaging, long
distance and cellular telephone.
(7) Average monthly operating expense per unit is calculated by dividing (a)
total recurring operating expenses before depreciation and amortization for
the period by (b) the average number of units in service for the period. For
this calculation, operating expenses exclude non-recurring charges for the
forgiveness of certain stockholder notes receivable of approximately $4.8
million in 1993, and approximately $2.0 million incurred as a part of a
management reorganization charge in 1995.
9
<PAGE> 20
PAGE AMERICA GROUP, INC.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1992 1993 1994(4) 1995(2) 1996
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PAGER DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:(1)
Total revenues......................................... $ 32,805 $ 30,257 $ 37,258 $ 29,107 $ 21,984
Operating Expenses:
Cost of service and sales............................ 3,296 4,253 5,709 4,363 3,412
Selling.............................................. 6,544 4,879 6,842 6,066 3,988
General and administrative........................... 8,940 8,688 10,653 8,923 6,270
Technical............................................ 3,455 3,343 4,685 4,262 3,190
Depreciation, amortization and
write-off of intangibles .......................... 9,519 9,793 10,817 8,585 6,173
------- ------- ------- ------- -------
Operating profit (loss)................................ 1,051 (699) (1,448) (3,092) (1,049)
Interest expense....................................... 4,783 4,032 5,102 6,263 6,153
Other expenses......................................... 1,957 1,814 478 3,738 908
Extraordinary gain(5).................................. 7,156 -- -- -- --
Cumulative effect of changes in accounting
principles(7)........................................ (3,960) -- -- -- --
------- ------- ------- ------- -------
Net loss............................................... (2,493) (6,545) (7,028) (13,093) (8,110)
Preferred stock dividend requirements.................. (2,791) (3,268) (3,023)(3) (2,863)(3) (2,864)
------- ------- ------- ------- -------
Net loss applicable to common shares................... $ (5,284) $ (9,813) $(10,051) $(15,956) $(10,974)
======= ======= ======= ======= =======
Net loss per common share(6)........................... $ (1.40) $ (2.55) $ (1.55) $ (2.01) $ (0.88)
======= ======= ======= ======= =======
Weighted average shares outstanding.................... 3,774 3,847 6,464 7,936 12,498
OTHER DATA:
Pagers in service at end of period..................... 228,000 305,000 311,000 221,000 205,000
Capital expenditures, net of book value of pagers sold
(excluding acquisitions)............................. $ 4,296 $ 2,630 $ 5,365 $ 3,300 $ 2,597
Net cash provided by (used in):
Operating activities................................. $ 5,688 $ 8,028 $ 8,602 $ 2,064 $ 2,988
Investing activities................................. $ (8,375) $(20,312) $ (8,881) $ 11,329 $ (2,907)
Financing activities................................. $ 2,779 $ 15,030 $ (1,505) $(13,770) $ (542)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1992(5) 1993(4) 1994(3) 1995(2)(3) 1996(2)
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficiency).......................... $(10,242) $ (2,053) $ (9,541) $(52,444) $ (58,409)
Total assets.......................................... 58,755 75,193 70,229 44,003 39,561
Long-term debt, less current maturities............... 48,269 57,850 56,953 69 37
Series A, A-2 and B Preferred Stock................... 17,063 -- -- -- --
Accumulated deficit................................... (59,365) (68,980) (78,989) (94,945) (105,919)
Shareholders' equity (deficit)........................ (21,402) 9,096 439 (11,222) (20,746)
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) for
the years ended December 31, 1992, 1993, 1994, 1995 and 1996 was $10.6
million, $9.1 million, $9.4 million, $5.5 million, and $5.1 million,
respectively. EBITDA is a standard measure of financial performance in the
paging industry but should not be construed as an alternative to operating
income or cash flows from operating activities as determined in accordance
with generally accepted accounting principles.
(2) In July 1995, Page America sold its California and Florida paging assets.
Concurrently with the sale, Page America amended the Page America Credit
Facility and Subordinated Notes providing, among other things, for
accelerated maturities. Such debt, which was classified as long term at
December 31, 1994, is in default and is classified as a current liability at
December 31, 1995 and 1996. See Note E of Notes to Consolidated Financial
Statements.
(3) In August 1994 and March 1995, Page America issued shares of its Common
Stock as full payment of fiscal year 1994 dividends on Series One Preferred
Stock. On June 30, 1995, in exchange for the waiver of the dividend payment
on Series One Preferred Stock, the accrued dividends were added to the
liquidation value. In June 1996, Page America issued shares of its Common
Stock in payment of accrued dividends at December 31, 1995 on Series One
Convertible Preferred Stock. See Note G of Notes to Consolidated Financial
Statements.
(4) On December 30, 1993, Page America acquired Crico and refinanced its senior
and subordinated debt and redeemable Preferred Stocks.
(5) In June 1992, Page America repurchased its subordinated note payable.
(6) Page America has never paid any cash dividends on its Common Stock.
(7) Effective January 1, 1992, Page America changed its method of depreciation
for pager equipment from the straight line method to the double declining
balance method.
10
<PAGE> 21
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following summary unaudited pro forma condensed combined statement of
operations data of Metrocall for the year ended December 31, 1996 gives effect
to the acquisition of Parkway Paging, Inc. (the "Parkway"), Satellite Paging and
Message Network (the "Satellite"), and A+ Network, Inc. (the "A+ Network") by
Metrocall (each of the acquisitions are referred to herein as "Parkway
Acquisition," the "Satellite Acquisition" and the "A+ Network Acquisition,"
respectively, and collectively, the "Recent Acquisitions") under the heading
"Pro Forma Recent Acquisitions," and also gives effect to the acquisition of
Page America by Metrocall under the heading "Pro Forma Combined Company" in each
case as though the acquisitions occurred on January 1, 1996. The unaudited pro
forma condensed combined balance sheet data under the heading "Pro Forma
Combined Company and Recent Acquisitions" gives effect to the acquisition of
Page America and the Recent Acquisitions as if each of the business combinations
had occurred on December 31, 1996.
This information should be read in conjunction with the Unaudited Pro Forma
Condensed Combined Financial Data and the notes thereto included herein and the
Metrocall Consolidated Financial Statements incorporated by reference herein and
the Page America Consolidated Financial Statements included herewith. The
unaudited pro forma condensed combined financial data do not purport to
represent what Metrocall's results of operations or financial position actually
would have been had such transactions and events occurred on the dates
specified, or to project Metrocall's results of operations or financial position
for any future period or date. The pro forma adjustments are based upon
available information and certain adjustments that management of Metrocall
believes are reasonable. In the opinion of management of Metrocall, all
adjustments have been made that are necessary to present fairly the unaudited
pro forma condensed combined financial data.
11
<PAGE> 22
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND UNITS IN SERVICE)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
HISTORICAL HISTORICAL COMPANY AND
------------ PRO FORMA ------------ RECENT
METROCALL(1) METROCALL(2) PAGE AMERICA ACQUISITIONS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CONDENSED COMBINED STATEMENTS OF OPERATIONS
DATA:
Total revenues............................... $ 149,957 $247,886 $ 21,984 $ 269,870
Total operating expenses..................... 153,769 264,120 21,749 289,187
Loss from operations......................... (25,445) (46,821) (1,049) (51,188)
Interest and other income (expense), net..... (21,031) (30,573) (7,061) (33,481)
Benefit (provision) for income taxes......... 1,021 5,614 -- 5,614
Net loss..................................... $ (45,455) $(71,780) (8,110) (79,055)
Net loss per share........................... $ (2.80) $ (2.86) $ (2.69)
Weighted average common shares outstanding... 16,253 25,113 29,405
OTHER DATA:
Units in service (end of period)............. 2,142,351 2,142,351 205,000 2,347,351
EBITDA(3).................................... $ 32,751 $ 53,471 $ 5,124 $ 58,595
CONDENSED COMBINED BALANCE SHEET DATA
(AS OF DECEMBER 31, 1996):
Working capital (deficit).................... $ (7,267) $ (7,267) $(58,409) $ (10,692)
Total assets................................. 651,468 651,468 39,561 714,143
Long-term obligations, net of current
portion................................... 327,092 327,092 37 352,092
Total stockholders' equity (deficit)(4)...... 166,298 166,298 (20,746) 184,541
</TABLE>
- ---------------
(1) For the year ended December 31, 1996, Metrocall's historical condensed
combined statements of operations data includes the results of operations
of Parkway, Satellite and A+ Network since their respective dates of
acquisition. At December 31, 1996, Metrocall's historical condensed
combined balance sheet and units in service data include the acquisitions
of Parkway, Satellite and A+ Network.
(2) Pro Forma Metrocall gives effect to the acquisitions of Parkway, Satellite
and A+ Network as if the acquisitions had occurred on January 1, 1996.
(3) EBITDA (earnings before interest, taxes, depreciation and amortization),
while not a measure under generally accepted accounting standards ("GAAP"),
is a standard measure of financial performance in the paging industry;
EBITDA should not be considered in isolation or as an alternative to net
income (loss), income (loss) from operations, cash flows from operating
activities, or any other measure of performance under GAAP.
(4) The pro forma stockholders' equity assumes a per share price of $4.25 for
Metrocall Common Stock as of the closing date of the Page America
Acquisition.
12
<PAGE> 23
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth certain historical per share data of
Metrocall and Page America and combined unaudited pro forma per share data after
giving effect to the Acquisition. This information should be read in conjunction
with the Pro Forma Condensed Combined Financial Data and the notes thereto
included herein and with the Metrocall Consolidated Financial Statements
incorporated by reference herein and the Page America Consolidated Financial
Statements included herewith. The unaudited pro forma per share data do not
purport to represent what Metrocall's results of operations or financial
position actually would have been had such transactions and events occurred on
the dates specified, or to project the Metrocall's results of operations or
financial position for any future period or date.
<TABLE>
<CAPTION>
PRO FORMA
-----------------------
PAGE
COMBINED AMERICA
COMPANY EQUIVALENT(3)
PRO FORMA HISTORICAL AND PAGE ----------
METROCALL(1) PAGE AMERICA AMERICA(2) HIGH LOW
------------ ------------ ---------- ---- ---
<S> <C> <C> <C> <C> <C>
Loss from continuing operations per common
share:
Year ended December 31, 1996................. $(2.86) $(0.88) $(2.69) N/A N/A
Book value per share:
December 31, 1996............................ 6.78 (1.29) 6.40 N/A N/A
</TABLE>
- ---------------
(1) Reflects the acquisitions of Parkway, Satellite and A+ Network by Metrocall
as though they had occurred on January 1, 1996.
(2) Reflects the pending acquisition of Page America as though it had occurred
on January 1, 1996.
(3) See "Plan of Liquidation -- Implementation of Plan of Liquidation" for a
description of whether Metrocall Common Stock will be available for
distribution to Page America shareholders.
13
<PAGE> 24
RISK FACTORS
The following are certain risk factors that should be carefully considered
in evaluating the Acquisition, in addition to the other information described
elsewhere in this Proxy Statement/Prospectus.
NO ASSURANCE OF DISTRIBUTION TO PAGE AMERICA'S SHAREHOLDERS
The value of the assets of Page America to be available for distribution to
its shareholders upon liquidation and dissolution cannot be ascertained at this
time and will depend, among other things, on Page America's liabilities and the
market value of the shares of Metrocall Common Stock received by Page America
pursuant to the Acquisition Agreement. Page America is in default under its
Credit Facility and Subordinated Notes. At December 31, 1996, approximately
$51.9 million was due and owing thereunder. In addition, the holders of Series
One Preferred Stock have a liquidation preference of $105.00 per share (or
$30,067,905 in the aggregate) (the "Liquidation Preference") in any distribution
by Page America of its assets to its shareholders. Page America's liabilities
(including liquidation preference on the Series One Preferred Stock) currently
total approximately $92 million, which well exceed the consideration of
approximately $58.8 million expected to be received in the Acquisition. Upon the
completion of the Acquisition, Page America will not conduct any ongoing
business operations or generate any revenues by reason thereof. There is no
provision for termination of the Acquisition Agreement if the Consideration is
less than a specified amount or if the selling price of shares of Metrocall
Common Stock falls below a certain minimum. Therefore, the actual value of
Metrocall Common Stock received by Page America for distribution to its
shareholders could be substantially less than the trading price of such shares
on the day of the Special Meeting. Furthermore, the price of Metrocall Common
Stock may decline substantially after the Closing Date. In addition, the number
of shares of Metrocall Common Stock to be received by Page America may be
reduced because of adjustments based on changes in Page America's Working
Capital Deficit and decreases in service revenue below specified thresholds. If
the value or number of shares of Metrocall Common Stock to be received by Page
America is reduced, the amount of assets of Page America available for
distribution to Page America's shareholders would be reduced. Accordingly, there
can be no assurance that there will be any assets available for distribution to
Page America's shareholders upon liquidation and dissolution.
SUBSTANTIAL INDEBTEDNESS OF METROCALL
At March 31, 1997, Metrocall had outstanding approximately $338 million in
indebtedness consisting of bank loans, senior subordinated notes, mortgage
indebtedness and capital leases, and expects to incur additional indebtedness as
a result of the 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
Consideration. Metrocall also has issued and outstanding $39.9 million stated
value of the 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. Metrocall
also expects to incur additional indebtedness (in the form of draws on the
Metrocall Credit Facility or otherwise) to meet working capital needs, in
connection with future acquisitions, 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
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 New 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
14
<PAGE> 25
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
The Acquisition and other 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 the
current revenues of both Metrocall and Page America). 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
15
<PAGE> 26
regard, certain long distance carriers have announced their intention to market
paging services jointly with other telecommunications services.
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 in 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. No
assurance can be given that losses can be reversed in the future. In addition,
at December 31, 1996, Metrocall's accumulated deficit was $96.8 million and
Metrocall had a deficit in working capital of $7.3 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.
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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. See "Management of Metrocall."
CONVERSION AND REDEMPTION OF SERIES B PREFERRED STOCK AND COMMON STOCK
EQUIVALENTS
The Stock Consideration will include shares of Series B Preferred Stock and
Common Stock Equivalents. Each security by its terms is convertible into
Metrocall Common Stock in certain circumstances, but action by Metrocall
stockholders is necessary for convertibility. The convertibility of the Series B
Preferred Stock is subject to approval by the holders of a majority of the
Metrocall Common Stock voting on such proposition. In addition, the approval of
Metrocall stockholders is required for an amendment to the Metrocall Certificate
to increase the authorized number of shares by an amount sufficient to permit
issuance of common stock upon conversion of the Series B Preferred Stock or the
Common Stock Equivalents.
Metrocall's Board of Directors has adopted resolutions recommending the
approval by the stockholders of the conversion provisions of the Series B
Preferred Stock and an amendment to the Metrocall Certificate to increase the
number of authorized shares from 33.5 million to 60 million. These proposals
will be presented to the stockholders at the annual meeting of stockholders,
currently scheduled for May 7, 1997. Stockholders representing approximately
37.5% of the issued and outstanding Metrocall Common Stock as of March 31, 1997,
have agreed to vote in favor of these proposals. However, there can be no
assurance that these proposals will be approved. If the convertibility proposal
is not approved, the Series B Preferred Stock provides for an increase in the
applicable dividend rate until such time as it is approved. If the amendment of
the Metrocall Certificate is not approved by June 1, 1997, the Common Stock
Equivalents will be automatically converted to Series B Preferred Stock. In
addition, if the amendment is not approved, the dividend rate on the Series A
Preferred Stock will increase and will be payable in cash to the extent
permitted by debt covenants, and the holders of this class will be permitted to
elect additional directors to Metrocall's Board.
The Series B Preferred Stock is redeemable at any time at the option of
Metrocall, in whole or part, for its Stated Value plus accrued and unpaid
dividends, subject to the right of holders to convert into Common
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Stock shares of Series B Preferred Stock that are convertible when a notice of
redemption is issued. Redemption of Series B Preferred Stock will require the
consent of Metrocall's lenders. Metrocall's ability to redeem the Series B
Preferred Stock will depend on its ability to do so in compliance with
applicable debt covenants, which will in turn depend on the level of Metrocall's
other indebtedness, operating cash flow and future operating performance. Such
performance will be affected by prevailing economic conditions and financial,
business and other factors, many of which are beyond Metrocall's control.
Holders of the Series A Preferred Stock have agreed to allow redemptions of
Series B Preferred Stock, subject to certain limitations, so long as it is
otherwise consistent with the terms of the Series A Preferred Stock. Metrocall
has made no decisions whether it will exercise its right to redeem Series B
Preferred Stock if it can do so consistently with the applicable debt covenants.
NO TRADING MARKET FOR COMMON STOCK EQUIVALENTS AND SERIES B PREFERRED STOCK;
RESTRICTIONS ON TRANSFER
The Common Stock Equivalents and Series B Preferred Stock will not be
listed on any exchange or NNM, and there is no assurance that any trading market
for either of them will develop. In addition, the number of beneficial owners of
Series B Preferred Stock is limited to 10 and the holders thereof will not have
any public market to resell such stock.
OTHER RIGHTS OF THE SERIES B PREFERRED STOCK
While dividends on the Series B Preferred Stock are payable, at Metrocall's
option, in cash or in additional shares of Series B Preferred Stock, Metrocall
will be prohibited by the terms of the Metrocall Credit Facility and the Series
A Preferred Stock from paying cash dividends. The Series B Preferred Stock will
rank junior in right of payment upon liquidation to the Series A Preferred Stock
and to all existing and future indebtedness of Metrocall. The Series B Preferred
Stock will rank senior in right of payment upon liquidation to the Common Stock
and any other junior stock. The Series B Preferred Stock will have no voting
rights, except to approve certain changes in Metrocall's certificate of
incorporation or the terms of the Series B Preferred Stock, or the incurrence of
debt or senior equity securities in excess of a specified limit.
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 Metrocall Capital Stock."
POSSIBLE VOLATILITY OF STOCK PRICE; SHARES ELIGIBLE FOR FUTURE SALE
The value realized by Page America shareholders as a result of the
Acquisition Agreement and the Plan of Liquidation and the value assigned to
intangible assets recorded in the purchase accounting for Metrocall will depend
upon the market price of Metrocall Common Stock, which is subject to
fluctuation. Since the Metrocall Common Stock became publicly traded in July
1993, the closing price has ranged from a low of $3.81 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 December 31, 1996 of
approximately $6.78. 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. In addition to the 4,762,960
shares of Metrocall Common Stock being registered pursuant to the Registration
Statement of which this Proxy/Prospectus is a part, Metrocall currently has
effective registration statements with respect to approximately eight million
shares of Metrocall Common Stock held by certain stockholders of Metrocall and
with respect to 2,915,254 shares of Metrocall Common Stock which will be issued
upon the exercise of warrants held by the holders of Metrocall's Series A
Preferred Stock. In addition, Metrocall is obligated to register (a) 494,279
shares of Metrocall Common Stock issued pursuant to the acquisition of Radio and
Communications Consultants, Inc. and Advanced Cellular Telephone, Inc. by
Metrocall and (b) shares of Metrocall Common Stock acquired by certain
affiliates of A+ Network in the A+ Network Merger. Furthermore, in connection
with the
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A+ Network 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.
CONCENTRATION OF OWNERSHIP
Metrocall's executive officers, directors and their affiliates together
beneficially own 36.4% 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, one of which has been selected as of
January 17, 1997. This concentration of ownership may have the effect of
delaying or preventing a change of control of Metrocall.
ANTI-TAKEOVER AND OTHER PROVISIONS
The Metrocall Certificate and Metrocall's Fifth Amended and Restated
By-laws (the "Metrocall By-laws") 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.
POTENTIAL CONFLICTS OF INTEREST
David A. Barry and Jack Kadis, two of the three directors of Page America,
control a majority of the Series One Preferred Stock and, as a result, may have
a conflict of interest between the best interests of Page America and its Common
Stockholders and the best interests of the Series One Preferred Shareholders. In
addition, Daniels & Associates, L.P., Page America's financial advisor, has
acted as a financial advisor for Metrocall in other transactions. See "The
Acquisition Agreement -- Conflict of Interest."
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INTANGIBLE ASSETS
Intangible assets of Metrocall, net of accumulated amortization, increased
from approximately $129.1 million in 1995 to approximately $452.6 million in
1996 primarily as a result of Metrocall's 1996 acquisitions of Parkway,
Satellite, Message Network and A+ Network. At December 31, 1996, Metrocall's
total assets of approximately $651.4 million included net intangible assets of
approximately $452.6 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 or
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 Proxy Statement/Prospectus 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 "The Acquisition -- Background of the Acquisition,"
"-- Reasons of the Page America Board of Directors; Factors Considered," "Plan
of Liquidation," " Business of Page America" and "Recent Developments Regarding
Metrocall" as well as within this Proxy Statement/Prospectus generally. In
addition, when used in this Proxy Statement/Prospectus, 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 Proxy Statement/Prospectus
generally. Neither Metrocall nor Page America undertakes 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.
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THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Page
America Common Stock and Series One Preferred Stock in connection with the
solicitation of proxies by the Page America Board for use at the Special Meeting
to be held on , 1997, at , New York, New
York , at a.m., local time, and any adjournments or postponements
thereof.
This Proxy Statement/Prospectus is also furnished by Metrocall to Page
America and to each holder of Page America Common Stock and Series One Preferred
Stock as a prospectus in connection with the issuance by Metrocall of shares of
Metrocall Common Stock, Common Stock Equivalents and Series B Preferred Stock
upon the consummation of the Acquisition.
This Proxy Statement/Prospectus, the Notice of Meeting and the accompanying
form of proxy are first being mailed to shareholders of Page America on or about
, 1997.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, shareholders of Page America will be asked to
consider and act upon (a) a proposal to approve (i) the Acquisition Agreement
which provides for the sale of substantially all of the assets and certain of
the liabilities of Page America to Metrocall and (ii) the Plan of Liquidation
which provides for the subsequent discharge of, or provision for, the remaining
liabilities of Page America, the transfer of all of Page America's remaining
assets to its shareholders and the dissolution of Page America as a corporate
entity and (b) any other business that may properly come before the Special
Meeting.
THE PAGE AMERICA BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
ACQUISITION AGREEMENT AND THE PLAN OF LIQUIDATION.
RECORD DATE; VOTE REQUIRED
The Page America Board has fixed the Record Date as the record date for the
determination of Page America shareholders entitled to notice of and to vote at
the Special Meeting. Accordingly, only holders of record of shares of Page
America Common Stock and Series One Preferred Stock at the close of business on
the Record Date will be entitled to vote at the Special Meeting. At the close of
business on the Record Date, there were outstanding shares of Page
America Common Stock and 286,361 shares of Series One Preferred Stock, each of
which is entitled to one vote and 22.22 votes, respectively, on each matter
properly submitted to a vote at the Special Meeting. The affirmative vote of the
holders of at least two-thirds of the votes entitled to be cast at the Special
Meeting is required to approve the Acquisition Agreement and the Plan of
Liquidation.
Certain shareholders of Page America, who in the aggregate beneficially
owned approximately 6,097,125 shares of Page America Common Stock and 198,496
shares of Series One Preferred Stock as of the Record Date, or approximately 48%
of the voting rights as of the Record Date, have entered into an agreement (the
"Stockholders Agreement") to vote all of their shares of Page America Common
Stock and Series One Preferred Stock for the approval of the Acquisition
Agreement. See "The Acquisition -- The Stockholders Agreement." As of the Record
Date, directors and executive officers of Page America as a group beneficially
owned shares of Page America Common Stock and shares of
Series One Preferred Stock (including shares of Page America Common
Stock and shares of Series One Preferred Stock subject to the
Stockholders Agreement), or approximately % of the voting rights as of the
Record Date. All of such persons have advised Page America that they intend to
vote "for" the Acquisition Agreement and the Plan of Liquidation.
VOTING AND REVOCATION OF PROXIES
Shares of Page America Common Stock and Series One Preferred Stock which
are represented by a properly executed proxy received prior to the vote at the
Special Meeting will be voted at the Special Meeting
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in accordance with the directions on the proxy cards, unless such proxies are
revoked in the manner set forth herein in advance of such vote. PROPERLY
EXECUTED PROXIES CONTAINING NO INSTRUCTION REGARDING ANY PARTICULAR MATTER
SPECIFIED THEREIN WILL BE VOTED FOR THE APPROVAL OF SUCH MATTER. Failure to
return a properly executed proxy card, failure to vote in person at the Special
Meeting or abstaining from voting will have the practical effect of a vote
against the approval of the Acquisition Agreement and the Plan of Liquidation.
Shares of Page America Common Stock and Series One Preferred Stock subject
to abstentions will be treated as shares that are present and voting at the
Special Meeting for purposes of determining the presence of a quorum. Such votes
will have the effect of votes against the approval of the Acquisition Agreement
and the Plan of Liquidation. Broker "non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owners or other person entitled to vote shares with respect to which
the brokers or nominees do not have discretionary power to vote without such
instructions) will be considered as present for the purposes of determining the
presence of a quorum but will not be considered as voting at the Special
Meeting. Broker non-votes will have the effect of votes against the approval of
the Acquisition Agreement and the Plan of Liquidation.
Any shareholder of Page America who executes and returns a proxy has the
power to revoke it at any time before it is voted. The giving of a proxy does
not affect a shareholder's right to attend and vote in person at the Special
Meeting. A shareholder's presence at the Special Meeting, however, will not in
itself revoke the shareholder's proxy. Page America shareholders giving a proxy
pursuant to this solicitation may revoke such proxy by delivering a written
notice of revocation bearing a later date than the proxy or a later dated proxy
relating to the same shares to the Secretary of Page America at 125 State
Street, Suite 100, Hackensack, New Jersey 07601, or by attending the Special
Meeting and voting such shares in person.
The Page America Board is not currently aware of any other matters to be
brought before the Special Meeting other than that described herein. If,
however, other matters are properly presented for action at the Special Meeting,
or any adjournments or postponements thereof, the persons appointed as proxies
will have discretionary authority to vote the shares represented by duly
executed proxies in accordance with their discretion and judgment as in the best
interests of Page America.
SOLICITATION OF PROXIES
Page America will bear its own costs of soliciting proxies, except that
Metrocall will pay registration fees incurred in connection with preparing this
Proxy Statement/Prospectus. In addition to the use of the mails, proxies may be
solicited by telephone or in person by directors, officers and selected other
employees of Page America who will not be specially compensated for such
services. Brokerage houses, nominees, fiduciaries and other custodians will be
requested to forward proxy materials to beneficial owners and will be reimbursed
for their reasonable expenses incurred in sending proxy materials to beneficial
owners.
HOLDERS OF SHARES OF PAGE AMERICA COMMON STOCK AND SERIES ONE PREFERRED
STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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THE ACQUISITION
GENERAL
The following is a brief summary of certain aspects of the Acquisition.
This summary does not purport to be complete and is qualified in its entirety by
reference to the Acquisition Agreement, a copy of which is attached to this
Proxy Statement/Prospectus as Appendix A and is incorporated herein by
reference. Shareholders of Page America are urged to read the Acquisition
Agreement carefully.
Pursuant to the Acquisition Agreement, (i) Metrocall will acquire
substantially all of the assets and assume substantially all of Page America's
accounts payable and certain obligations under various office and equipment
leases and (ii) Page America will receive (A) $25 million in cash, (B) 1,500
shares of Series B Preferred Stock having a Stated Value of $15 million, (C)
762,960 shares of Metrocall Common Stock, and (D) shares of Metrocall Common
Stock or other equity securities having a Share Value equal to $15 million,
subject to adjustment based on changes in Page America's Working Capital Deficit
and decreases in service revenue below specified thresholds. Under the
Acquisition Agreement, Metrocall will retain the option to substitute cash at
closing for all or a portion of the Stock Consideration. Because $4 million of
the Stock Consideration will be held in escrow, on the Closing Date Page America
will receive the Cash Consideration, 1,500 shares of Series B Preferred Stock of
Metrocall, 762,960 shares of Metrocall Common Stock, and shares of Metrocall
Common Stock or Common Stock Equivalents having a Share Value of $11 million,
subject to adjustment. The number of shares of Metrocall Common Stock to be
issued pursuant to paragraph D above will be equal to $15 million, as adjusted,
divided by the Share Value. Because the Share Value is not determined until
immediately prior to the Closing Date, at the time the Page America shareholders
cast their votes at the Special Meeting, the exact number of shares of Metrocall
Common Stock or the exact value of the Consideration that Page America will
receive in the Acquisition will not have been finally determined. In the event
that at the Closing Date the number of Available Shares is less than the number
of shares of Metrocall Common Stock to be issued to Page America pursuant to the
Acquisition, then Metrocall shall issue that number of Common Stock Equivalents
equal to the excess of the number of shares to be issued over the Available
Shares. The Common Stock Equivalents will have voting, dividend, liquidation and
other rights equivalent to the Metrocall Common Stock. Metrocall has agreed to
seek to cause the Metrocall Certificate to be amended to increase its authorized
capital stock to 60 million shares, and holders representing 37.5% of the
outstanding Metrocall Common Stock have agreed to vote in favor of this
Amendment. If such proposal is approved, any Common Stock Equivalents would
automatically be converted into Metrocall Common Stock. If such proposal is not
approved by June 1, 1997, any Common Stock Equivalents would be converted into
Series B Preferred Stock having a stated value equal to the number of Common
Stock Equivalents multiplied by the Share Value. In the event the total number
of shares of Metrocall Common Stock or Common Stock Equivalents to be issued to
Page America in the Acquisition pursuant to paragraph (D) above exceeds
4,000,000 shares, Metrocall will issue an aggregate of 4,000,000 shares and will
issue an additional number of shares of Series B Preferred Stock having a stated
value equal to the difference between $15,000,000, as adjusted, and the Share
Value of 4,000,000 shares of Metrocall Common Stock or Common Stock Equivalents.
See "Description of Metrocall Capital Stock -- Series B Preferred Stock" and
"-- Common Stock Equivalents." There is no provision for termination of the
Acquisition Agreement in the event that the Share Value is less than or exceeds
any specified amounts. The Acquisition will be effective after satisfaction or
waiver of all conditions set forth in the Acquisition Agreement, including the
approval of the Acquisition by Page America's shareholders.
BACKGROUND OF THE ACQUISITION
The terms of the Acquisition Agreement resulted from arm's-length
negotiations between representatives of Page America and Metrocall. On October
5, 1995, Page America retained Daniels as its financial advisor to identify and
contact prospective financing sources for Page America, as well as to identify
and contact prospective purchasers of the assets or stock of Page America. In
connection with this engagement, Daniels extensively solicited entities which it
believed might wish to acquire the assets or stock of Page America.
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On December 15, 1995, Daniels furnished to Metrocall a proposed
confidentiality agreement pursuant to which Page America would agree to provide
various information to Metrocall. Metrocall executed the confidentiality
agreement on January 8, 1996. Thereafter, Page America furnished various
financial and other information relating to Page America to Metrocall. Between
January 26, 1996 and February 27, 1996, representatives of Metrocall and Daniels
discussed various proposals relating to the acquisition of Page America by
Metrocall and the possible purchase price which would be paid by Metrocall. The
discussions involved the total consideration to be paid, the mix of cash and
stock consideration and the structure of the acquisition.
After numerous proposals and extended negotiations, on February 27, 1996,
Metrocall offered to pay $78.5 million (subject to certain adjustments) for the
assets of Page America, with $55 million to be paid in cash and the balance in
Metrocall Common Stock, with the Metrocall Common Stock based on the formula
described below. Page America agreed to this proposal.
On March 1, 1996, representatives of Metrocall, including its financial
advisors and legal counsel, and representatives of Page America, including its
financial advisors and legal counsel, met in Alexandria, Virginia to discuss all
issues relating to the transaction. In addition, since Page America would be
receiving Metrocall Common Stock, management of Metrocall made a presentation to
Page America describing Metrocall and its operations. At that meeting, the
parties reached agreement on substantially all of the issues, including the
requirement for Page America to meet various targets in order to obtain the full
purchase price. At the meeting, in response to a request by Page America and in
light of Page America's difficulty in obtaining pagers, Metrocall agreed to sell
pagers to Page America from its inventory.
Counsel to Metrocall was directed to draft an appropriate asset purchase
agreement. Counsel to each of Metrocall and Page America negotiated the terms of
the Acquisition Agreement. On April 2, 1996, representatives of Metrocall,
including its financial advisors and legal counsel, and representatives of Page
America, including its financial advisors and legal counsel, once again met in
Alexandria to discuss and negotiate the final terms of the Acquisition
Agreement. At that meeting, the parties reached agreement in principle on all
the major provisions of the Acquisition Agreement. Subsequent to the meeting,
Page America expressed its concern that adjustments to the purchase price would
be made in cash. Metrocall agreed that any adjustments to the purchase price
would be made in Metrocall Common Stock and would not impact the cash portion of
the purchase price.
In April 1996, Page America engaged Daniels to render its opinion as to the
fairness of the Acquisition.
On April 16, 1996, the Board of Directors of Page America met to consider
the Metrocall transaction. After receiving an oral presentation from Daniels,
the Board of Directors determined that the Acquisition Agreement was in the best
interests of Page America and that the consideration to be received by Page
America was fair to Page America from a financial point of view.
On April 19, 1996, the Board of Directors of Metrocall met to consider the
Acquisition. The Metrocall Board reviewed the principal terms of the Acquisition
Agreement, approved the Acquisition Agreement and authorized the executive
officers of Metrocall to enter into such agreements as were necessary and
appropriate to effectuate the Acquisition.
The Acquisition Agreement was entered into on April 22, 1996. Concurrently
therewith and as a condition to signing the Acquisition Agreement, the
Stockholder's Agreement was entered into among Metrocall and certain
shareholders of Page America.
The original Acquisition Agreement, prior to the January 30, 1997
amendment, provided that the consideration to be received by Page America was to
be (A) $55 million in cash and (B) a number of shares of Metrocall Common Stock
to be determined based on the operating results of Page America through the
Closing Date. The number of shares of Metrocall Common Stock to be received by
shareholders of Page America was to be equal to $23.5 million (subject to
certain adjustments), divided by the average of the last sales price per share
of Metrocall Common Stock on the NNM for the 20 consecutive trading days ending
on the trading day five trading days immediately prior to the Closing Date,
provided that the share price was not to exceed 110% of or be less than 90% of
$19.8250. The value and number of shares of Metrocall Common
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Stock to be issued in the Acquisition was to be subject to adjustments based on
(a) working capital and operating results of Page America prior to the Closing
and (b) the share price of the Metrocall Common Stock at the Closing. Based on
financial information of Page America at September 30, 1996, the total amount of
working capital adjustment and operating adjustment would have been $9,886,890,
resulting in the value of the Metrocall Common Stock to be received by Page
America in the Acquisition being reduced from $23.5 million to $13,613,110. This
amount would then be divided by the minimum share price referenced above. Based
on the closing price of a share of Metrocall Common Stock on January 8, 1997,
Page America would have received an aggregate of 762,960 shares of Metrocall
Common Stock which would have had a market value at the date of $4,959,246.
Thus, the total transaction value to be received by Page America would have been
approximately $59.4 million, plus the assumption of approximately $2.3 million
of liabilities. The number of shares of Metrocall Common Stock to have been
received by Page America would have been subject to further adjustments based on
Page America's operations subsequent to September 30, 1996.
Subsequent to execution of the original Acquisition Agreement, Metrocall
entered into a merger agreement with A+ Network. The A+ Network Merger was
consummated on November 15, 1996. During this period, Metrocall also negotiated
and closed the Metrocall Credit Facility, as well as the sale of $40 million in
Series A Preferred Stock and warrants.
Beginning in November 1996, representatives of Page America and Metrocall
met to discuss the possibility of revising the terms of the Acquisition
Agreement to provide Metrocall financial flexibility in choosing the mix of
consideration to be paid for Page America's assets, in light of Metrocall's debt
position and borrowing capacity following the A+ Network Merger, and to reflect
adjustments based on Page America's operations. After numerous discussions and
several meetings, the purchase price set forth herein was agreed upon by
Metrocall and Page America. The Boards of Directors of Metrocall and Page
America approved the revised terms on January 17, 1997. The amendment to the
Acquisition Agreement to reflect the revised terms was signed by the parties on
January 30, 1997.
As of March 28, 1997, the parties executed an amendment to the Acquisition
Agreement that (1) provided for a reduction in the Cash Consideration to the
extent Page America owes money to Metrocall for pagers provided to Page America
by Metrocall, and (2) re-calculated the base amount of shares of Metrocall
Common Stock based on the final revenue results of Page America reported for
1996.
REASONS OF THE PAGE AMERICA BOARD OF DIRECTORS; FACTORS CONSIDERED
Page America has incurred net losses since its inception in 1976 and
believes that it will continue to incur losses for at least the next several
years. In 1994, Page America's credit facility with its bank lenders (the "Page
America Credit Facility") was amended to terminate the revolving credit portion
thereof. As a result, Page America did not have any readily available unused
bank line. This severely restricted its ability to purchase pagers and to grow.
In response to this, in May 1994, Page America retained Smith Barney Inc. to act
as its exclusive financial advisor to render financial advisory services to Page
America and to explore the sale of capital stock or assets of Page America. In
July 1995, Page America sold substantially all of its Florida and California
paging assets for a sales price of $19.4 million. The proceeds of such sale were
used to repay bank indebtedness and to improve Page America's working capital
position. This sale of assets and use of proceeds required lender approval. As a
condition of this approval, the Page America Credit Facility was amended to
accelerate the maturity date of such facility to December 29, 1995 from June 30,
1996. The amendment further provided that if on December 29, 1995, Page America
had entered into a letter of intent for the sale of assets sufficient to repay
in full the indebtedness, the maturity date would be extended to February 29,
1996. The maturity date would be further extended to June 28, 1996, if on
February 29, 1996, Page America had an agreement to sell assets or, if on or
before December 29, 1995 (or February 29, 1996 if the maturity date had been
extended as provided in the prior sentence), had a commitment for the
refinancing in full of the indebtedness under the Page America Credit Facility.
At the same time, Page America's 12% subordinated notes due 2003 (the
"Subordinated Notes") were modified to provide for a final maturity of six
months subsequent to the final maturity of the Page America Credit Facility and
to eliminate the cash payment of interest until maturity. At December 31, 1996,
inclusive of accrued interest, approximately $34.6 million was due and owing
under the Page America Credit Facility and $17.4 million was due and owing
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under the Subordinated Notes. The lenders under the Page America Credit Facility
are NationsBank of Texas, N.A., CIBC, Inc., Swiss Bank Corporation and Merrill
Lynch, Pierce, Fenner & Smith.
In order to repay amounts due under the Page America Credit Facility and
the Subordinated Notes and to obtain sufficient capital to purchase an adequate
number of pagers to at least maintain its level of business, Page America
determined that it would have to actively pursue opportunities to obtain
long-term debt and equity financing or to sell some or all of its remaining
assets. In August 1995, Page America terminated its engagement of Smith Barney
Inc. Subsequently, Page America retained Daniels as its financial advisor to
identify and contact prospective financing sources for Page America as well as
to identify and contact prospective purchasers of the assets or stock of Page
America. In addition, Page America met with a number of investment banking firms
to determine the viability of a refinancing or recapitalization of Page America.
In December 1995, Page America furnished to its banks a letter from an
investment banking firm pursuant to which this firm expressed its confidence and
intent to complete a recapitalization of Page America. The banks under the Page
America Credit Facility determined that the letter did not satisfy the
conditions precedent to the extension of the Page America Credit Facility and
they refused to extend the maturity date beyond December 29, 1995. Subsequent to
December 29, 1995, the banks advised Page America that it was in default under
the terms of the Page America Credit Facility and that all amounts were
immediately due and payable under the Page America Credit Facility. Page America
initially defaulted under its credit facility on December 29, 1995. Page America
has not had any discussions with its bank lenders to remedy any defaults if the
transaction with Metrocall is not consummated.
In addition, in August 1995, the American Stock Exchange (the "AMEX")
notified Page America that it failed to meet certain financial and other
guidelines for continued listing of its Common Stock and that the AMEX intended
to pursue the steps required to delist the Common Stock. After many months of
meetings and an appeal by Page America to the AMEX, the Page America Common
Stock was delisted by the AMEX in May 1996.
Page America's financial situation during this period was such that many
vendors were unwilling to extend credit and provide pagers to Page America. With
very limited access to pagers, Page America not only could not grow its business
but experienced significant difficulty obtaining pagers for new subscribers. In
view of the lack of funds available to Page America and acceleration of its
Credit Facility, Page America actively continued to explore all avenues,
consisting of the sale of some or all of its assets or a recapitalization of
Page America. The recapitalization alternative, as contemplated by the
aforementioned letter of intent, was explored and considered very thoroughly.
Page America ultimately concluded that the proceeds available to its
shareholders resulting from the Metrocall offer and the significantly higher
certainty of outcome made the proposed sale of assets to Metrocall a superior
alternative. In considering the Acquisition, the Page America Board considered a
number of factors of which the shareholders of Page America should be aware
including, without limitation, the following:
(a) The amount of consideration to be received in the Acquisition
relative to other offers or expressions of interest received by Page
America;
(b) The historical operating results of Page America and the
likelihood that Page America was expected to continue to incur losses;
(c) The difficulties and market uncertainties inherent in pursuing any
refinancing or recapitalization of Page America and the possibility that
Page America would be unable to complete the same in a timely fashion;
(d) If a refinancing was effectuated, the likelihood that the
refinancing would severely dilute any remaining value to the holders of
Page America Common Stock;
(e) The Page America Common Stock would not continue to be listed on
the AMEX and the resulting severe limitation in trading of such stock; and
(f) The advice and opinion of Daniels as to the fairness of the
consideration to be received in the Acquisition.
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Subsequent to the signing of the initial Acquisition Agreement, Page
America and its bank lenders amended the terms of the Page America Credit
Facility to, among other matters, (a) extend the maturity date of the Page
America Credit Facility to the earlier of consummation of the Acquisition or
November 30, 1996 , (b) provide Page America with a $750,000 revolving credit
facility, (c) eliminate all financial covenants and (d) waive all defaults. Page
America is currently in default in the payment of all amounts due under the Page
America Credit Facility and in payment of its Subordinated Notes.
Page America believes that the amended and restated Acquisition Agreement
signed on January 30, 1997, was in the best interests of Page America and its
shareholders. Although the cash portion of the purchase price was reduced
significantly, the amendment established the purchase price at the September 30,
1996 values, eliminated certain possible further operating adjustments to the
purchase price, and extended the time to close the Acquisition to July 1, 1997.
OPINION OF PAGE AMERICA'S FINANCIAL ADVISOR
Daniels has delivered a written opinion to the Page America Board that, as
of , 1997, the aggregate consideration to be received by Page
America from Metrocall for the assets being sold in the Acquisition is fair to
Page America from a financial point of view. No limitations were imposed by the
Page America Board upon Daniels with respect to the due diligence investigations
made or procedures followed by Daniels in rendering its opinion.
The full text of the opinion of Daniels dated as of , 1997,
which sets forth the assumptions made, analyses performed, and limits on the
review undertaken, is attached to this Proxy Statement/Prospectus as Appendix D.
PAGE AMERICA SHAREHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY.
Daniels' opinion is directed only to the aggregate consideration to be received
in the Acquisition and does not constitute a recommendation to any Page America
shareholder as to how such shareholder should vote at the Special Meeting. The
summary of the opinion of Daniels set forth below is qualified in its entirety
by reference to the full text of such opinion.
In arriving at its opinion, Daniels did, among other things, the following:
(1) reviewed this Proxy Statement/Prospectus and the Registration Statement; (2)
reviewed the annual reports and related financial information for the three
fiscal years ended December 31, 1996, and the most recently available related
unaudited financial information of each of Page America and Metrocall; (3)
reviewed certain information relating to the business, earnings, cash flow,
assets, and prospects of Page America and Metrocall; (4) conducted discussions
with members of senior management of Page America and Metrocall regarding the
business and prospects of Page America and Metrocall, respectively; (5) reviewed
minutes of meetings of the Page America Board at which the proposed Acquisition
was discussed; (6) compared the results of operations of Page America with those
of certain companies which Daniels deemed to be reasonably similar to Page
America; (7) compared the proposed financial terms of the Acquisition
contemplated by the Acquisition Agreement with the terms of certain other
mergers and acquisitions which Daniels deemed to be relevant; (8) reviewed the
following documents relating to the Acquisition: the Acquisition Agreement and
; and (9) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
Daniels deemed necessary for purposes of its opinion.
The following types of analyses were performed by Daniels:
1. Consideration of the fact that the Acquisition provided the
greatest amount of cash and total consideration relative to any other
offers or expressions of interest received after extensive solicitation
efforts were completed in the beginning of 1996.
2. Comparison of EBITDA trading multiples of recent transactions
involving companies with over 100,000 paging units.
3. Review of comparable public market trading multiples in the paging
industry relative to that of the Acquisition.
4. Review of Metrocall's financial condition on a proforma basis
factoring in the Acquisition, as well as all of its other announced
transactions.
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5. Review of Page America's leverage ratio on a stand-alone basis and
on a proforma basis with Metrocall.
The above summary is not a complete description of the matters considered,
the analyses performed by Daniels or the results thereof. No company used in any
analysis as a comparison is identical to Page America or Metrocall, and no
transaction so used is identical to the Acquisition. Accordingly, an analysis of
the results is not strictly mathematical, but involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies considered comparable, as well as other factors. In performing
its analyses, Daniels also made numerous assumptions about the operations,
financial condition, and prospects of both Page America and Metrocall, on
stand-alone and combined bases, as well as about general business, economic, and
market conditions existing as of , 1997. Daniels then made
qualitative judgments about the significance and relevance of the facts and
assumptions on which it relied and the particular analysis being performed. Its
analyses were considered by Daniels as a whole in reaching its conclusions about
the fairness of the aggregate consideration to be received in the Acquisition as
of , 1997. Daniels therefore believes that its analyses must be
considered as a whole and that selecting portions of factors considered and
analyses performed by it, without considering all factors and analyses, could
create a misleading or incomplete view of the process underlying its analyses
and fairness opinion.
In preparing its opinion, Daniels relied on the accuracy and completeness
of all information supplied or otherwise made available to Daniels by Page
America and Metrocall, and Daniels did not independently verify such information
and/or make or obtain an independent appraisal of the assets of Page America.
Daniels' opinion is based on market, economic, financial, and other conditions
as they existed and could be evaluated on , 1997.
Daniels is an international consulting and financial services company that
specializes in providing brokerage, investment banking, financial advisory, and
financial consulting services in the telecommunications and entertainment
industries. The Page America Board selected Daniels as a financial advisor and
to provide it with a fairness opinion based upon Daniels familiarity with the
paging industry generally, and with Page America in particular, having been
previously retained by Page America to identify and contact prospective
purchasers, as well as Daniels' experience, ability, and reputation with respect
to transactions similar to the Acquisition. Daniels does not have an ownership
position in Page America.
In connection with the engagement of Daniels to render its fairness opinion
to Page America, Page America has agreed to pay a fee in the amount of $200,000,
which amount became due upon Daniels delivery of the written opinion to Page
America, irrespective of whether or not the Acquisition being opined upon by
Daniels is ultimately consummated.
On October 5, 1995, Daniels was retained by Page America to, among other
things, contact prospects which were qualified and interested in a purchase or
merger transaction with Page America. Daniels is entitled to a fee from Page
America if the Acquisition with Metrocall is consummated in an amount of 1% of
the aggregate Acquisition consideration (or approximately $600,000), reduced by
the $200,000 previously paid. Page America has also agreed to reimburse Daniels
for all reasonable out-of-pocket expenses incurred by Daniels in connection with
its rendering of services to Page America, including fees and expenses of any
outside legal or other advisers, as supported by appropriate receipts and/or
documentation, in connection with the services to be rendered by Daniels and its
employees, subject to Page America's pre-approval of any travel-related or legal
expenses. In addition, Page America has agreed to indemnify Daniels for certain
liabilities to which Daniels may become subject as the result of its provision
of services to Page America.
Daniels has an interest in the consummation of the Acquisition in light of
its right to receive certain fees from Page America, as described above, and in
the section hereof entitled "The Acquisition -- Conflicts of Interest." Daniels
is not entitled to receive any fees from Metrocall in connection with the
Acquisition. However, Daniels has received certain fees from Metrocall for
advisory services rendered to Metrocall in connection with Metrocall's
acquisition of Satellite Paging and Message Network in August 1996 and of A+
Network, Inc. in November 1996.
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CONFLICTS OF INTEREST
David A. Barry, Chairman of the Board and Chief Executive Officer of Page
America, and Jack Kadis, directors of Page America, are the general partners of
BHI Associates VI, L.P., which is the sole general partner of Bariston Paging
Partners, L.P. ("Bariston Paging"). Messrs. Barry and Kadis are the controlling
shareholders of Bariston Holdings, Inc., which is the sole shareholder of
Bariston Associates, Inc. ("Bariston") and Bariston Securities, Inc. ("Bariston
Securities"). Bariston Paging, Bariston and Mr. Barry own in the aggregate
158,874 shares of Series One Preferred Stock, representing 55.5% of the
outstanding shares of Series One Preferred Stock. See "Certain Relationships and
Related Transactions."
Daniels has an interest in the consummation of the Acquisition in light of
its right to receive certain fees from Page America, as described above and in
the section hereof entitled "The Acquisition -- Opinion of Page America's
Financial Advisor." Daniels is not entitled to receive any fees from Metrocall
in connection with the Acquisition. However, Daniels has received certain fees
from Metrocall for advisory services rendered to Metrocall in connection with
Metrocall's acquisition of Satellite Paging and Message Network in August 1996
and of A+ Network, Inc. in November 1996.
ACCOUNTING TREATMENT
The Acquisition will be accounted for by Metrocall under the purchase
method of accounting in accordance with Accounting Principles Board Opinion No.
16, "Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on the estimated fair values at the time of acquisition. Income of
Metrocall will not include income (or loss) of Page America prior to the date of
acquisition.
REGULATORY APPROVALS
ANTITRUST
The Acquisition is subject to the HSR Act, which provides that certain
transactions may not be consummated until required information and material have
been furnished to the Antitrust Division of the DOJ and the FTC and certain
waiting periods have expired or been terminated. On September 20, 1996,
Metrocall and Page America each filed the required information and material with
the DOJ and the FTC. The statutory waiting period under the HSR Act terminated
on October 27, 1996. No additional filings or waiting periods are applicable
with respect to the Acquisition pursuant to the HSR Act and the rules
promulgated thereunder.
FCC
The Acquisition is subject to the consent of the FCC to the transfer of
various licenses owned by Page America to Metrocall. On May 7, 1996, Metrocall
and Page America filed applications with the FCC for consent to the approval of
the transfer of the licenses. On July 5, 1996, the FCC issued Public Notice
granting assignment of all of the RCC licenses used in Page America's business.
On August 14, 1996, the grant of assignment for the RCC licenses from Page
America to Metrocall became final. Metrocall and Page America have received an
extension of the time to close the Acquisition pursuant to this grant to May 31,
1997. Further extensions or approvals by the FCC are necessary for the transfer
of certain Private Carrier Paging ("PCP") licenses which Page America believes
are not material to the operations being sold to Metrocall.
THE ACQUISITION AGREEMENT
REPRESENTATIONS AND WARRANTIES
The Acquisition Agreement contains various customary representations and
warranties, relating to, among other things, (a) proper organization and similar
corporate matters; (b) Metrocall's capital structure; (c) the authorization,
execution, delivery, performance and enforceability of the Acquisition
Agreement; (d) the absence of conflicts under charters or by-laws and of
violations of any instruments or laws; (e) required governmental and regulatory
authority consents, approvals and authorizations; (f) financial
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statements; (g) documents filed by Metrocall with the Commission and the
accuracy of the information contained therein; (h) litigation; (i) the validity
of certain licenses, permits, franchises and other authorizations of
governmental authorities required for and/or used in the operation of Page
America's business, and compliance with laws generally (the "Licenses"); (j) tax
matters relating to Page America; (k) interests in Page America's real and
personal property; (l) Page America's material contracts; (m) environmental
matters relating to Page America; (n) Page America's employee benefit plans; (o)
affiliated party transactions with respect to Page America; (p) liens on assets
and principal properties; (q) qualifications and financial capabilities of
Metrocall; and (r) the due authorization, issuance and listing of the Metrocall
Common Stock to be issued pursuant to the Acquisition Agreement.
POSSIBLE ADJUSTMENTS IN THE STOCK CONSIDERATION
Pursuant to the Acquisition Agreement, the amount of Stock Consideration is
subject to adjustment based on changes in the Working Capital Deficit as of the
Closing Date. As used in the Acquisition Agreement, "Working Capital Deficit"
means, as of a date, the amount by which (i) the consolidated current assets
(including accounts receivable net of reserves for uncollectible accounts)
excluding (A) cash and cash equivalents of Page America and (B) any escrowed
monies from the July 28, 1995 asset sale to Paging Network of Florida, Inc., is
less than (ii) the consolidated current liabilities (excluding indebtedness on
borrowed money and indebtedness not assumed by Metrocall, but including amounts
necessary to satisfy certain liens) of Page America. The stock portion of the
purchase price will be decreased by the amount by which the Working Capital
Deficit as of the Closing Date exceeds $2,347,165, or will be increased by the
amount by which the Working Capital Deficit is less than $2,347,165 on the
Closing Date. As of December 31, 1996, the Working Capital Deficit would have
been $2,318,000, and the Stock Consideration would be increased by $29,165 as a
result of this adjustment.
In addition, the amount of the Stock Consideration will be decreased by an
amount equal to the product of (A) the shortfall, if any, between (1) Page
America's Pro Forma Service Revenue for the month immediately preceding the
Closing Date and (2) Page America's Pro Forma Service Revenue Threshold for the
month immediately preceding the Closing Date and (B) 35.16 (the "Operating
Adjustment"). As used in the Acquisition Agreement, "Pro Forma Service Revenue"
means for the calendar month immediately prior to the date of determination,
Page America's total paging operations service revenue to the extent that such
revenue has been derived in the ordinary course of business consistent with Page
America's past business practices, consisting of (a) service revenue, (b)
service revenue-agents, and (c) other revenue for such period, each such item to
be determined consistently with such items shown on Page America's audited
financial statements. The "Pro Forma Service Revenue Threshold" means Pro Forma
Service Revenue equal to (a) $1,567,233 minus (b) $100,000 times the number of
months elapsed from and including January 1997 through the relevant date.
Because of these adjustments and the fact that both the actual value of the
762,960 shares of Metrocall Common Stock and the final number of shares of
Metrocall Common Stock will not be determined until the Closing, the total
transaction value cannot be finally determined until Closing and may differ
substantially from any examples shown in this Proxy Statement/Prospectus.
CERTAIN COVENANTS
Page America has agreed to take all action necessary to convene a meeting
of its shareholders to approve the Acquisition Agreement and to use its
reasonable efforts to solicit proxies in favor of the Acquisition Agreement.
Page America has also agreed that from the date of signing of the Acquisition
Agreement until the Closing Date, it will, among other things, (a) conduct its
business only in the ordinary course; (b) maintain and keep its material
properties, machinery and equipment used in its business in the same condition
in all material respects, except for ordinary wear and tear; (c) not enter into
any agreement for the purchase, sale or other disposition, or purchase, sell or
dispose of, any equipment, supplies, inventory, investments or other assets,
except for sales of inventory and purchases of equipment, materials and supplies
in the ordinary course of business consistent with past business practices; (d)
consistent with past business practices, perform all its material obligations
under material contracts, leases and documents relating to or
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affecting Page America's business and, consistent with past business practices,
pay all accounts payable which become due according to their terms prior to the
Closing Date; (e) comply with and perform in all material respects all
obligations and duties imposed upon it by Federal, state and local laws; and (f)
give Metrocall reasonable access during normal business hours to all of its
plants, properties, books, accounts, contracts, documents and records.
Pursuant to the Acquisition Agreement, each of Page America and Metrocall
has agreed that it will, among other things, (a) join in and file applications
with the FCC and/or any other public utilities commission relating to the
assignment or transfer of control of the Licenses from Page America to Metrocall
and any similar applications required by other agencies; (b) timely and promptly
make all filings which are required under the HSR Act and furnish the other
party with such information and assistance as may be reasonably requested in
connection with the preparation of necessary filings or submissions to any
governmental agency, including, without limitation, any filing necessary under
the provisions of the HSR Act; (c) consistent with its past business practices,
use its reasonable efforts to maintain and preserve its business, including, but
not limited to in the case of Page America, maintaining and preserving its
Licenses and prosecuting diligently all applications for Licenses, including any
renewal applications; (d) maintain its corporate existence; and (e) use its best
reasonable efforts to assure, to the extent within its control, as soon as is
reasonably practicable, the satisfaction of the conditions required to
consummate the Acquisition, including, but not limited to, the filing and
prosecution of all requests for regulatory approvals and obtaining third party
consents.
CONSIDERATION OF OTHER PROPOSALS
Under the terms and conditions of the Acquisition Agreement, unless and
until the Acquisition Agreement shall have been terminated by either party in
accordance with the terms thereof (see "-- Amendment, Waiver and Termination"),
Page America agreed that it will not (and shall use its best efforts to ensure
that none of its shareholders, officers, directors, agents, representatives or
affiliates) take or cause, directly or indirectly, any of the following actions
with any party other than Metrocall or its designees: (i) solicit, initiate or
participate in any negotiations, inquiries or discussions with respect to any
offer or proposal to acquire all or a substantial part of Page America's
business, assets or capital shares whether by merger, consolidation, other
business combination, purchase of assets, tender or exchange offer or otherwise
(each of the foregoing, an "Acquisition Proposal"); (ii) disclose, in connection
with an Acquisition Proposal, any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, any effort or attempt by
any person to do or seek any of the foregoing; (iii) enter into or execute any
agreement relating to an Acquisition Proposal; or (iv) make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Proposal other than with respect to the transactions contemplated by the
Acquisition Agreement; provided, however, that the Acquisition Agreement does
not prohibit Page America from taking any of the actions specified above if, in
each case, its Board of Directors determines in good faith, after consultation
with legal counsel, that such action is required by the fiduciary duties of such
directors under applicable state law.
OTHER CONDITIONS TO THE ACQUISITION
In addition to the requisite approval of the Acquisition Agreement by Page
America's shareholders and satisfaction of the conditions described above under
"--Regulatory Approvals," the consummation of the Acquisition is subject to,
among other matters, the satisfaction of the following conditions (unless waived
where permissible): (a) the representations and warranties of the other party
shall be true and correct in all material respects as of the Closing Date; (b)
performance and compliance in all material respects with the obligations,
agreements, covenants and conditions required by the Acquisition Agreement to be
performed or complied with prior to or at the Closing Date; (c) execution of an
escrow agreement and registration rights agreements; and (d) receipt of various
legal opinions, certificates, consents, resolutions and documents from the other
party and from third parties, as applicable.
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INDEMNIFICATION
The Acquisition Agreement provides that Page America will indemnify
Metrocall from and against any and all claims, losses, damages, liabilities and
expenses ("Damages") that in the aggregate exceed $50,000 that relate to (a)
breaches of its representations, warranties, covenants, agreements and
obligations contained in the Acquisition Agreement; (b) claims arising out of
the operation of Page America's business prior to the Closing; (c) certain
pending tax assessments/audits and litigation; (d) the failure to obtain the
protection afforded by compliance with the notification requirements of certain
bulk sales laws; (e) the noncompliance by Page America with the terms and
conditions of Licenses issued by the FCC; and (f) any excluded liability (as
defined in Section 2.4 of the Acquisition Agreement). If Metrocall is the
indemnified party, Metrocall will recover the amount of its Damages from the
Escrowed Consideration before seeking any recovery from Page America.
Metrocall will indemnify Page America from and against any and all Damages
that in the aggregate exceed $50,000 that relate to (a) breaches of its
representations, warranties, covenants, agreements and obligations contained in
the Acquisition Agreement, (b) claims arising out of the business after the
Closing and (c) any assumed liability (as defined in Section 2.3 of the
Acquisition Agreement).
The representations and warranties of the respective parties to the
Acquisition Agreement will survive the Closing for a period of eighteen months
and neither party may seek indemnification from the other unless a claim for
indemnification is made within eighteen months of the Closing.
AMENDMENT, WAIVER AND TERMINATION
The Acquisition Agreement may be modified or amended by written agreement
of each of the parties. In addition, each party may at any time waive the other
party's compliance with certain terms and conditions of the Acquisition
Agreement.
The Acquisition Agreement may be terminated at any time prior to the
Closing Date (a) by mutual consent of Metrocall and Page America; (b) by either
Metrocall or Page America if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Acquisition (including FCC denial of required license
assignments) and such order, decree, ruling or other action shall have become
final and nonappealable; (c) by either Metrocall or Page America if there has
been a failure to comply with conditions precedent of the other party (other
than by reason of the material breach by such terminating party of any of its
representations, warranties, covenants or agreements set forth in the
Acquisition Agreement), and such noncompliance shall not have either been cured
within five days after receipt of written notice from the terminating party or
the waiver by the terminating party of such conditions; (d) by either Metrocall
or Page America if there has been a breach of any of Page America's
representations, warranties or covenants, which breach shall, in Metrocall's
good faith estimation, cost $500,000 or more to cure, and Page America is unable
or unwilling to cure the same, or such breach is not capable of being cured; (e)
by Metrocall if there is a loss or damage to any of Page America's assets
resulting from fire, theft or other casualty which is so substantial as to
prevent the normal operation of any material portion of Page America's business
or the replacement or restoration of the lost or damaged material asset within
30 days after the occurrence of the event resulting in the loss or damage; (f)
by Page America if Page America receives an Acquisition Proposal that is
financially superior to the transactions contemplated by the Acquisition
Agreement and is reasonably capable of being financed (as determined in each
case in good faith by the Page America Board after consultation with Page
America's financial advisors); and (g) by either Metrocall or Page America if
the Acquisition has not occurred on or before July 1, 1997.
Prior to a termination pursuant to clause (f) above, Page America will
negotiate in good faith with Metrocall to make such adjustments in the terms and
conditions of the Acquisition Agreement so as to enable Metrocall to match or
better the Acquisition Proposal. If Page America exercises its termination
rights pursuant to such clause (f), upon the closing of the transactions
contemplated by an Acquisition Proposal, Page America shall pay Metrocall, out
of the resulting proceeds, a "break-up" fee of $4 million, plus $2 million for
all of Metrocall's fees and expenses in connection with the Acquisition
Agreement. If the
32
<PAGE> 43
transaction contemplated by such Acquisition Proposal fails to close for any
reason, Page America shall, within 30 days of termination or abandonment of the
Acquisition Proposal transactions, enter into an agreement with Metrocall to
consummate a transaction on substantially the same terms as are contained in the
Acquisition Agreement.
LISTING
Metrocall Common Stock trades on the NNM. Metrocall intends to apply to
have the Metrocall Common Stock issued to Page America pursuant to the
Acquisition Agreement included in The Nasdaq Stock Market upon consummation of
the Acquisition.
INTEREST OF MANAGEMENT IN THE ACQUISITION
In order to assist Page America in consummating the Acquisition and
retaining key members of management pending the closing, Page America has
entered into employment arrangements with its three senior executive officers,
Kathleen C. Parramore, Martin Katz and Richard A. Contrera. Metrocall will not
assume any of Page America's obligations under these employment agreements.
The agreement with Ms. Parramore provides that she will continue her
employment with Page America through February 28, 1997. Upon the closing of the
Acquisition, Ms. Parramore will be entitled to receive a severance payment of
$165,000 (her present annual salary), payable in twelve equal monthly
installments commencing after the closing. This payment will not be made if Ms.
Parramore becomes employed by Metrocall. In May 1996, Ms. Parramore received a
cash bonus of $25,000. Upon closing of the Acquisition, Ms. Parramore will be
entitled to a further cash bonus of approximately $5,400.
Page America entered into a similar agreement with Martin Katz. Upon
closing of the Acquisition, Mr. Katz will be entitled to a six month severance
payment of $75,000, payable in six equal monthly installments commencing after
the closing. This payment will not be made if Mr. Katz becomes employed by
Metrocall. In May 1996, Mr. Katz received a cash bonus of $20,000. Upon closing
of the Acquisition, Mr. Katz will be entitled to a further cash bonus of
approximately $12,400.
Page America also entered into an employment arrangement with Richard
Contrera. Page America paid a cash bonus of $10,000 to Mr. Contrera in May 1996,
agreed to pay a second cash payment of $10,000 at the end of his employment with
Page America and an additional $10,000 for each of the four months following
termination of his employment with Page America.
ESCROW OF CONSIDERATION
In connection with the Acquisition Agreement, Metrocall and Page America
will enter into an escrow agreement which provides that of the Metrocall Common
Stock and Common Stock Equivalents issued to Page America shares of Metrocall
Common Stock and Common Stock Equivalents with a Share Value of $4 million will
be held in escrow (the "Escrowed Consideration") to satisfy, at least in part,
any indemnification claims made by Metrocall against Page America pursuant to
the provisions of the Acquisition Agreement. Upon certification by Metrocall to
the escrow agent of losses incurred by Metrocall that are indemnifiable pursuant
to the Acquisition Agreement, the escrow agent is authorized, absent objection
by Page America, to release to Metrocall shares of Metrocall Common Stock with a
Share Value equal to the amount of such losses. If Page America objects to the
disbursement, Metrocall and Page America are obligated to negotiate in good
faith to resolve such objection and, in the event of a resolution, to notify the
escrow agent to release the appropriate number of shares of Metrocall Common
Stock. If Metrocall and Page America are unable to reach a resolution, the
escrow agent shall only disburse shares of Metrocall Common Stock upon receipt
of a final, non-appealable judgment of a court of competent jurisdiction. The
escrow agreement contemplates that the Escrowed Consideration will be released
to Page America on April 1, 1998, unless the Escrowed Consideration had been
used or claimed prior to such time to satisfy claims by Metrocall for
indemnification.
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<PAGE> 44
REGISTRATION RIGHTS AGREEMENTS
In connection with the Acquisition Agreement, Metrocall and Page America
will enter into registration rights agreements pursuant to which Metrocall will
be required to file with the Commission, as soon as practicable after the
Closing Date, a registration statement on Form S-3 with respect to the sale of
all of the shares of Metrocall Common Stock received by Page America as the
Stock Consideration. In addition, Metrocall and Page America will enter into an
additional registration rights agreement pursuant to which Metrocall will be
required to file with the Commission a registration statement on Form S-3 with
respect to the sale of the Metrocall Common Stock issuable upon conversion of
the Series B Preferred Stock promptly after the stockholders of Metrocall
approve the amendment of its certificate of incorporation to authorize
additional shares of common stock into which the Series B Preferred Stock would
be convertible. Metrocall will be required to use its best efforts to have such
registration statements declared effective as soon as possible and to keep them
effective as long as such registration is necessary. Metrocall is responsible
for all fees and expenses associated with the registration.
STOCKHOLDERS AGREEMENT
Certain shareholders of Page America, including Bariston Paging, who in the
aggregate beneficially owned approximately 6,097,125 shares of Page America
Common Stock and 198,496 shares of Series One Preferred Stock as of the Record
Date, or approximately 48% of the voting rights as of the Record Date, have
entered into the Stockholders Agreement pursuant to which they have agreed to
vote all of their shares of Page America Common Stock and Series One Preferred
Stock for the approval of the Acquisition Agreement. In addition, pursuant to
the Stockholders Agreement, such shareholders have also agreed to vote at any
meeting of shareholders of Page America against (i) any Acquisition Proposal or
(ii) any amendment to Page America's Articles of Incorporation or By-laws or
other proposal or transaction involving Page America or any of its subsidiaries
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Acquisition, the Acquisition Agreement or any
other transactions contemplated by the Acquisition Agreement. Pursuant to the
terms of the Stockholders Agreement, each such shareholder has granted Metrocall
an option to purchase all of such shareholders' shares of Page America Common
Stock and Series One Preferred Stock, which option is exercisable in the event
that the Acquisition Agreement is terminated by Page America as a result of the
receipt by Page America of an Acquisition Proposal that is financially superior
to the Acquisition and is reasonably capable of being financed. Under the terms
of the option, Metrocall will pay for each share of (i) Page America Common
Stock, $ , representing the average of the last sales price per share
on the AMEX for the twenty consecutive trading days immediately prior to the
date of execution of the Stockholders Agreement, and (ii) Series One Preferred
Stock, $105.00, its liquidation preference.
CONSEQUENCES UNDER FEDERAL SECURITIES LAWS
Shares of Metrocall Common Stock, Common Stock Equivalents and Series B
Preferred Stock that will be issued upon consummation of the Acquisition and any
Common Stock issuable upon conversion of the Common Stock Equivalents and the
resale of Metrocall Common Stock by affiliates of Page America will have been
registered under the Securities Act. All of such shares will be freely
transferable by those persons who, at the time of the Closing, are not deemed to
be "affiliates" of Page America or Metrocall for purposes of Rule 145 under the
Securities Act. However, shares received by persons, including Page America, who
may be deemed to be "affiliates" of Page America or Metrocall, will not be
freely transferable. Such affiliates, including Page America, may not sell their
shares of Metrocall Common Stock, Common Stock Equivalents and Series B
Preferred Stock acquired pursuant to the Acquisition, except (a) pursuant to an
effective registration statement under the Securities Act covering those shares,
(b) in compliance with Rule 145 or (c) pursuant to another applicable exemption
from the registration requirements of the Securities Act. Page America has
agreed not to publicly sell the Series B Preferred Stock and to transfer such
stock only to up to 10 beneficial owners pursuant to an applicable exemption
from the registration requirements of the Securities Act.
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<PAGE> 45
PLAN OF LIQUIDATION
GENERAL
The following is a brief summary of the Plan of Liquidation and certain
aspects of the transactions contemplated by the Plan of Liquidation. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Plan of Liquidation, a copy of which is attached to this Proxy
Statement/ Prospectus as Appendix B and is incorporated herein by reference.
Page America's shareholders are urged to read the Plan of Liquidation carefully.
The Plan of Liquidation provides that (i) Page America shall enter into and
effect the transactions contemplated by the Acquisition Agreement, (ii) upon the
closing of the Acquisition, Page America shall continue in existence for the
sole purpose of winding up its affairs, and that it shall not thereafter engage
in any business activities other than activities related to the implementation
of the Plan of Liquidation, (iii) Page America shall take all necessary action
to settle and discharge, or otherwise provide for, all of its remaining
liabilities either through the payment of monies received as the Cash
Consideration, its available cash, the delivery of shares of Metrocall Common
Stock, Common Stock Equivalents and Series B Preferred Stock received as the
Stock Consideration pursuant to the Acquisition Agreement and/or pursuant to the
sale of any or all of such shares and the application of the proceeds of the
sale of such shares to the payment of Page America's remaining liabilities, (iv)
upon the discharge of, or other provision for, Page America's liabilities, all
of its remaining assets (less any assets retained as reasonable provisions to
meet claims, including unasserted, contingent, conditional or unmatured
liabilities or expenses, and specifically set aside for such purpose) will be
distributed to the holders of Subordinated Notes and shareholders of Page
America as described below and (v) Page America shall thereafter dissolve as a
corporate entity.
The value of the assets of Page America to be available for distribution to
its shareholders upon liquidation cannot be ascertained at this time and will
depend, among other things, on the amount of its remaining liabilities, the
number of shares of Metrocall Common Stock or Common Stock Equivalents to be
returned to Page America from the escrow and the sale or disposition of the
Metrocall Common Stock, Common Stock Equivalents and Series B Preferred Stock to
be received by Page America pursuant to the Acquisition Agreement. Upon the
completion of the Acquisition, Page America will not conduct any ongoing
business operations or generate any revenues by reason thereof.
Page America intends to proceed with the closing of the Acquisition
promptly after the approval of the Acquisition Agreement and the Plan of
Liquidation by the Page America shareholders. The Page America Board has
reserved the right (subject to the agreement between Page America and the
holders of Subordinated Notes as described below) to modify or delay the Plan of
Liquidation after the closing of the Acquisition in the event that the market
price of the Metrocall Common Stock declines substantially and the Board
determines, based upon the facts and circumstances at that time, that it would
be in the best interests of Page America and its shareholders to await a
possible increase in the market price of the Metrocall Common Stock before
transferring shares of Metrocall Common Stock, Common Stock Equivalents and
Series B Preferred Stock.
ASSETS AND LIABILITIES OF PAGE AMERICA AFTER THE ACQUISITION
The net cash proceeds to be received by Page America as a result of the
Acquisition will be approximately $24 million, after giving effect to
transaction costs (including fees and expenses of Daniels, and accounting and
legal fees). The liabilities of Page America following the Acquisition will
include the liabilities of Page America to its bank lenders under the Page
America Credit Facility, the holders of its Subordinated Notes, miscellaneous
liabilities, federal, state and other income, sales, transfer and other taxes
and the liabilities for legal, accounting and other expenses relating to the
Acquisition and the liquidation and dissolution of Page America. The primary
assets of Page America following the Acquisition will be available cash, the
Cash Consideration and the shares of Metrocall Common Stock, Common Stock
Equivalents and Series B Preferred Stock received as the Stock Consideration for
the Acquisition. These assets and liabilities are described in greater detail
below.
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<PAGE> 46
Liabilities
At December 31, 1996, Page America had outstanding approximately $34.6
million of principal and interest under the Page America Credit Facility,
$17,338,750 of principal and interest due under the Subordinated Notes, and
approximately $2.3 million of taxes and other liabilities (excluding transaction
costs) which will not be assumed by Metrocall. The $2.3 million of liabilities
include obligations to Page America's vendors, to Bariston Associates and to its
accountants, severance and bonus payments and taxes. In addition, Page America
presently intends that it will need at least an additional approximately $1.4
million as a reserve for taxes and other liabilities; however, the exact amount
needed for these purposes will not be determinable until at least one to two
years after the Closing.
Page America will also incur liabilities after the Acquisition for legal,
accounting and other expenses relating to the implementation of the Plan of
Liquidation. While Page America cannot accurately predict the extent of these
expenses, they could be substantial, depending on the issues that arise in the
implementation of the Plan of Liquidation.
Assets
The primary assets of Page America following the Acquisition will be cash
in hand at Closing, the Cash Consideration and the shares of Metrocall Common
Stock, Common Stock Equivalents and Series B Preferred Stock received as the
Stock Consideration for the Acquisition, together with $250,000 in cash held in
escrow pursuant to the sale of Page America's California and Florida operations.
Metrocall Common Stock or Common Stock Equivalents issued to Page America with a
Share Value of $4 million (the "Escrowed Consideration") will be held in escrow
pursuant to the escrow agreement. See "The Acquisition -- General" and
"-- Escrow of Consideration."
IMPLEMENTATION OF THE PLAN OF LIQUIDATION
The Cash Consideration to be received by Page America will not be
sufficient to discharge Page America's liabilities, including liabilities under
the Page America Credit Facility and under the Subordinated Notes. In connection
with the Acquisition and the subsequent Plan of Liquidation, Page America has
agreed on term sheets with the holders of the debt outstanding under the Page
America Credit Facility and under the Subordinated Notes with respect to the
repayment of amounts owed to them, subject to execution and delivery of
definitive agreements. There is no assurance that definitive agreements will be
agreed upon. These agreements are summarized as set forth below.
On closing of the Acquisition, Page America has agreed to pay $20.5 million
in cash to the lenders under the Page America Credit Agreement, plus an
additional amount equal to all cash received by Page America from the
Acquisition in excess of $25 million. Any balance due and owing under the Page
America Credit Agreement will be due and payable on or prior to December 31,
1998. Each lender will have the option to exchange all its remaining debt for an
equivalent amount of Series B Preferred Stock at any time before August 31,
1997. Any amounts outstanding under the Page America Credit Agreement will bear
interest payable monthly at prime plus 2% to 4%, depending on the principal
amount outstanding thereunder from time to time. Within three months after the
closing of the Acquisition, Page America will pay an additional $350,000 in cash
to such lenders, which represents a reinstatement fee which was due November
1996. Pending payment in full of the balance due under the Page America Credit
Facility, Page America will not be permitted to make any payments to the holders
of the Subordinated Notes or to its common or preferred stockholders, but will
be permitted to pay accounts payable, claims, expenses and liabilities incurred
in connection with its liquidation. Subject to payment of such accounts, claims,
expenses and liabilities, any amounts received by Page America from the sale or
redemption of any Metrocall securities must be paid in reduction of amounts
outstanding under the Page America Credit Facility. Page America will be
required to maintain a ratio of face amount of Series B Preferred Stock and
value of Metrocall Common Stock to amounts outstanding under the Page America
Credit Facility of at least 1.5 to 1. The lenders under the Page America Credit
Facility have consented to the Acquisition and to the release of their
collateral on the assets to
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<PAGE> 47
be sold to Metrocall. The lenders will be granted a security interest in all
securities of Metrocall received by Page America.
The holders of Subordinated Notes have agreed to forbear from collecting on
such Subordinated Notes until the earlier of or the occurrence of
certain events relating to Page America, including, various bankruptcy events,
Page America failing to file tax returns, Page America breaching any
representations, warranties and covenants in the definitive forbearance
agreement, liens or judgments being filed against Page America, Page America not
being in compliance with its Credit Facility, the existence of any judgment that
adversely affects Page America's performance of its obligations under the
definitive forbearance agreement or the existence of any judgment involving
claims against Page America equal to or greater than $500,000, the existence of
any injunction that restricts or prohibits the consummation of the Acquisition,
holders of Common Stock or Preferred Stock exercising appraisal or other rights
in which amounts payable to them may be payable prior to or on a pari passu
basis with the Subordinated Notes, or Page America failing to proceed diligently
and in good faith to liquidate and make distributions in accordance with the
terms of the definitive forbearance agreement. During the forbearance period,
Page America and its subsidiaries will not initiate any action, exercise any
remedy or make any claim against the holders of the Subordinated Notes with
respect to the Subordinated Notes. In consideration of such forbearance, after
all amounts have been paid in full under the Page America Credit Facility, the
holders of Subordinated Notes will be entitled to receive 70% of all
distributions made by Page America, up to an aggregate amount of $18.9 million,
with the remaining 30% to be distributed to the stockholders of Page America.
After the holders of Subordinated Notes have indefeasibly received a total of
$18.9 million, any remaining distributions will be made 50% to the holders of
the Subordinated Notes and 50% to the stockholders of Page America. Interest
will continue to accrue on the Subordinated Notes until the full amount of
principal and interest due thereunder shall have been paid in full or the
obligations thereunder shall have been otherwise satisfied in accordance with
the terms and provisions of the definitive forbearance agreement. Page America
will not be permitted to make any other distributions, other than payment of
amounts due under the Credit Facility and payment of other claims, expenses and
liabilities. Pursuant to the forebearance agreement, Page America's obligations
to repurchase the warrants held by the holders of Subordinated Notes will be
terminated. Page America will not be permitted to enter into transactions with
its stockholders, officers or directors or conduct any business or incur any
debt other than in connection with the satisfaction of its obligations under the
Page America Credit Facility, payment of other permitted liabilities and the
implementation of the Plan of Liquidation. Page America must consult regularly
with the holders of Subordinated Notes and agree with them on a specific plan
for implementation of its liquidation, including timing of sale of any Metrocall
securities. Upon the expiration of the forbearance period, the holders of the
Subordinated Notes, subject to the rights of the lenders under the Page America
Credit Agreement, will be entitled to exercise all of its rights and remedies
under the Subordinated Notes with respect to the indebtedness and obligations
evidenced or created thereby.
The holders of Page America's Series One Preferred Stock have agreed that
30% of any distributions payable to them with respect to their liquidation
preference will be distributed to the holders of Page America's Common Stock.
With respect to legal, accounting and other expenses that Page America will
incur in winding up the affairs of Page America, Page America will likely
require cash to satisfy such liabilities. To raise such cash, Page America may
be required to sell shares of Metrocall Common Stock, Common Stock Equivalents
or Series B Preferred Stock which in turn will cause Page America to incur the
costs of sale of the shares.
Following the discharge and/or provision for the liabilities of Page
America, the Plan of Liquidation contemplates that Page America will distribute
any remaining assets to its shareholders and to the holders of Subordinated
Notes in accordance with the terms and provisions of the definitive forbearance
agreement. It is anticipated that the only remaining assets will be any shares
of Metrocall Common Stock that have not been previously distributed in payment
of the liabilities discussed above and any shares of Metrocall Common Stock or
Common Stock Equivalents remaining in escrow after all indemnification
obligations have been satisfied or the proceeds from the sale of the foregoing.
The value of the assets to be available for distribution to the Page America
shareholders upon liquidation cannot be ascertained at this time and will
depend, among other things, on the total amount of its liabilities, the number
of shares of Metrocall Common Stock or
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<PAGE> 48
Common Stock Equivalents available to Page America from the escrow and the
market value of the Metrocall Common Stock to be received by Page America (which
is subject to change based upon, among other things, the earnings and perceived
prospects of Metrocall and market fluctuations).
The holders of Series One Preferred Stock have a liquidation preference of
$105.00 per share (or $30,067,905 in the aggregate) (the "Liquidation
Preference") in any distribution by Page America of its assets to its
shareholders. In addition to the Liquidation Preference, the holders of Series
One Preferred Stock are entitled to any accrued and unpaid dividends prior to
any distribution to the holders of Page America Common Stock upon liquidation.
As of December 31, 1996, accrued and unpaid dividends on Page America's
outstanding Series One Preferred Stock aggregated $2,863,610. Dividend payments
on the Series One Preferred Stock, however, may be made in cash or in Page
America Common Stock. The holders of Series One Preferred Stock have agreed to
waive and relinquish all right to these accrued dividends, contingent upon the
shareholders of the Company approving the Acquisition Agreement. In June 1996,
Page America distributed to the holders of Series One Preferred Stock
approximately 7,900,000 shares of Page America Common Stock in lieu of accrued
and unpaid dividends through December 31, 1995.
Set forth below is Page America's present estimate at April 30, 1997 of the
amount of funds which Page America will have after the Acquisition, based on the
closing price of Metrocall Common Stock on April 9, 1997, and the present
estimated liabilities.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SOURCES LIABILITIES
- ------------------------------ ------------------------------
Cash Consideration $25,000,000 Page America Credit Facility $35,487,000
Stock Consideration 33,528,000 Subordinated Notes 18,190,000
Cash balance, including cash
from existing escrow 340,000 Transaction Costs 1,100,000
Taxes 768,000
Other Liabilities 1,580,000
Estimated amounts for
liquidation 1,354,000
Liquidation Preference of
Series
One Preferred Stock
(including accrued
dividends) 33,650,000
----------- -----------
Total $58,868,000 Total $92,129,000
========== ==========
</TABLE>
The foregoing are based on future events that are not susceptible to
accurate prediction. It is probable that some of the events will not materialize
and that unanticipated events and circumstances will occur. Accordingly, the
estimates are inherently subject to significant uncertainties and contingencies,
many of which are beyond Page America's control.
There can be no assurances that (i) any shares of Metrocall Common Stock
will remain available for distribution to holders of Series One Preferred Stock
after all liabilities are discharged and expenses paid, in which event the Page
America shareholders would lose their entire investment or (ii) if there are any
shares of Metrocall Common Stock remaining available for distribution, that such
shares will be sufficient to pay the Liquidation Preference, in which event the
holders of the Series One Preferred Stock would lose all or a part of their
investment and the holders of Page America Common Stock would lose their entire
investment. The Page America Board has reserved the right to modify or delay the
Plan of Liquidation (subject to the terms and provisions of the definitive
forbearance agreement to be entered into between Page America and the holders of
Subordinated Notes) if the market price of the Metrocall Common Stock declines
substantially, which may delay any distribution to the Page America
shareholders. In the event the Plan of Liquidation cannot be implemented, Page
America may be forced to declare bankruptcy, or take other actions that may
adversely affect the ability of Page America to preserve any assets for
distribution to its shareholders.
Page America does not presently intend to distribute any Metrocall Common
Stock or Common Stock Equivalents to the holders of Page America Common Stock.
Any amounts to be distributed to the holders of
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<PAGE> 49
Page America Common Stock upon liquidation are expected to come from any cash
proceeds to be received from the sale of the Metrocall Common Stock, Series B
Preferred Stock or Common Stock Equivalents issued in the Acquisition. As a
result, Page America does not anticipate being able to distribute funds to, if
any such funds are available, its holders of Page America Common Stock for at
least twelve months after the Closing.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax consequences of the Plan of Liquidation to the holders of the Page
America Common Stock and Series One Preferred Stock. The discussion does not
address aspects of federal taxation other than income taxation and does not
address all aspects of federal income taxation. This discussion also does not
address aspects of federal income taxation that may be applicable to particular
shareholders of Page America, including but not limited to investors who are
subject to special treatment for federal income tax purposes, such as insurance
companies, tax-exempt entities, financial institutions, pass-through entities,
foreign companies, nonresident alien individuals, persons who received their
Page America Common Stock or Series One Preferred Stock by exercise of options
or otherwise as compensation, and foreign persons. In addition, the discussion
does not consider any state, local or foreign tax consequences of the Plan of
Liquidation. The discussion assumes that the holders of the Page America Common
Stock and Series One Preferred Stock hold their shares of Page America Common
Stock and Series One Preferred Stock as capital assets within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (generally
property held for investment). The description of federal income tax
consequences contained herein is based upon the opinion of Stroock & Stroock &
Lavan LLP.
HOLDERS OF THE PAGE AMERICA COMMON STOCK AND SERIES ONE PREFERRED STOCK ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN OF LIQUIDATION.
Federal Income Tax Treatment of Holders of Series One Preferred Stock
The fair market value of property received by a holder of Series One
Preferred Stock pursuant to the Plan of Liquidation or by exercise of
dissenters' rights will be treated as a dividend to the extent of any accrued
but unpaid dividends. Such amount will be taxable as ordinary income to the
extent of Page America's earnings and profits. Distributions in excess of such
earnings and profits will reduce a Series One Preferred Stockholder's tax basis
in its Series One Preferred Stock and the remainder, if any, will be treated as
taxable gain from the sale or exchange of the Series One Preferred Stock.
Any property received by a holder of Series One Preferred Stock in the Plan
of Liquidation or by exercise of dissenters' rights which is not treated as a
dividend (a "Non-Dividend Distribution") will be treated as full payment in
exchange for the holder's Series One Preferred Stock. A holder will recognize
gain or loss equal to the difference between the fair market value of the
Non-Dividend Distribution and the holder's basis in its Series One Preferred
Stock (after reducing the basis of the Series One Preferred Stock pursuant to
the immediately preceding paragraph).
All property received by a holder of Series One Preferred Stock pursuant to
the Plan of Liquidation or by exercise of a holder's dissenters' rights will
have a basis in the hands of a holder of Series One Preferred Stock equal to the
fair market value of the property as of the date of distribution.
Federal Income Tax Treatment of Holders of Page America Common Stock
A holder of Page America Common Stock will be treated as exchanging its
Page America Common Stock for the property received pursuant to the Plan of
Liquidation or the exercise of dissenters rights. A holder of Page America
Common Stock will recognize gain or loss equal to the difference between the
fair market value of the property received and its basis in its Page America
Common Stock. The basis of the property received in the hands of the holder of
Page America Common Stock will equal the fair market value of the property as of
the date of distribution.
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<PAGE> 50
DISSENTERS' RIGHTS OF PAGE AMERICA SHAREHOLDERS
Holders of shares of Page America Common Stock and Series One Preferred
Stock are entitled to relief as dissenting shareholders under Section 910 of the
NYBCL. A holder of shares of Page America Common Stock or Series One Preferred
Stock will only be entitled to dissenters' rights if he complies with Section
623 of the NYBCL. Dissenters' rights will not be available unless and until the
Acquisition is consummated. The following is a summary of the method of
compliance with Section 623 of the NYBCL. Such summary does not purport to be
complete and is qualified in its entirety by reference to the text of Section
623 of the NYBCL which is attached to this Proxy Statement/Prospectus as
Appendix C.
A PAGE AMERICA SHAREHOLDER WHO WISHES TO PERFECT HIS RIGHTS AS A DISSENTING
SHAREHOLDER IN THE EVENT THE ACQUISITION AGREEMENT IS ADOPTED MUST:
(A) NOT VOTE FOR NOR CONSENT IN WRITING TO THE ADOPTION OF THE
ACQUISITION AGREEMENT; AND
(B) FILE WITH PAGE AMERICA, BEFORE THE TAKING OF THE VOTE ON THE
ACQUISITION AGREEMENT AT THE SPECIAL MEETING, A WRITTEN OBJECTION TO THE
ACQUISITION. SUCH WRITTEN OBJECTION MUST INCLUDE A NOTICE OF HIS ELECTION
TO DISSENT, HIS NAME AND RESIDENCE ADDRESS, THE NUMBER OF SHARES AS TO
WHICH HE DISSENTS, AND A DEMAND FOR PAYMENT OF THE FAIR VALUE OF HIS SHARES
OF PAGE AMERICA COMMON STOCK OR SERIES ONE PREFERRED STOCK IF THE
ACQUISITION AGREEMENT IS APPROVED.
Any written demand for payment pursuant to clause (B) of the immediately
preceding paragraph should be mailed or delivered to Page America Group, Inc.,
125 State Street, Hackensack, New Jersey 07601, Attention: Secretary. Because
the written demand must be delivered to Page America before the Page America
shareholders vote on the Acquisition Agreement, it is recommended, although not
required, that a shareholder using the mails should use certified or registered
mail, return receipt requested, to confirm that he has made a timely delivery.
Within 10 days after the Special Meeting, Page America will, by registered
mail, give notice that the Acquisition Agreement was adopted (if applicable) to
each of the shareholders of Page America who has delivered a written objection
of the Acquisition to Page America and who did not vote for or consent in
writing to the Acquisition. The notice will be sent by registered mail, return
receipt requested, addressed to the Page America shareholder at his address as
it appears on the records of Page America.
A Page America shareholder shall have the right to dissent as to all shares
that he beneficially owns and may not dissent as to less than all of his shares
as to which he has a right to dissent. A nominee or fiduciary of a beneficial
owner of shares may not dissent on behalf of any beneficial owner as to less
than all of the shares of such owner as to which such nominee or fiduciary has a
right to dissent. Upon consummation of the Acquisition, dissenting shareholders
will cease to have any of the rights as a shareholder of Page America except the
right to be paid the fair value for their shares of Page America Common Stock or
Series One Preferred Stock and any other rights they may have under Section 623
of the NYBCL.
A notice of election to dissent may be withdrawn by a Page America
shareholder at any time prior to his acceptance in writing of an offer made by
Page America in accordance with Section 623 of the NYBCL, but in no event later
than 60 days from the date of the consummation of the Acquisition, except that
if Page America (as described below) fails to make a timely offer, the time for
withdrawal of a notice of election shall be extended until 60 days from the date
an offer is made. Thereafter, withdrawal of a notice of election by a Page
America shareholder requires the written consent of Page America. In order to be
effective, any withdrawal of a notice of election by a Page America shareholder
must be accompanied by the return to Page America of any advance payment made to
such shareholder pursuant to Section 623 of the NYBCL. If a notice of election
is withdrawn by a Page America shareholder, or if the Acquisition is rescinded,
or if a court determines that such shareholder is not entitled to receive
payment for his shares of Page America Common Stock or Series One Preferred
Stock, or if such shareholder otherwise loses his dissenters' rights, the Page
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America shareholder will not have the right to receive payment for his shares,
but he will be reinstated to all his rights as a Page America shareholder as of
the consummation of the Acquisition.
No payment shall be made to a dissenting shareholder at a time when Page
America is insolvent or when such payment would make it insolvent. Within 30
days of notice of insolvency, the dissenting shareholder by written notice to
Page America shall have the option to (i) withdraw the notice or (ii) retain the
status as a claimant against Page America. If the dissenting shareholder does
not exercise said option, Page America shall exercise the option by written
notice to the shareholder within 20 days after the expiration of the 30-day
period.
At the time a Page America shareholder files a notice of election to
dissent with Page America or within one month thereafter, the holder of shares
of Page America Common Stock or Series One Preferred Stock represented by
Certificates must submit such Certificates to Page America, or to Page America's
transfer agent, who shall note conspicuously thereon that a notice of election
to dissent has been filed. Once duly noted, Page America or its transfer agent,
as the case may be, shall return the Certificates to the Page America
shareholder. ANY HOLDER OF SHARES OF PAGE AMERICA COMMON STOCK OR SERIES ONE
PREFERRED STOCK REPRESENTED BY CERTIFICATES WHO FAILS TO SUBMIT HIS CERTIFICATES
FOR SUCH NOTATION SHALL, AT THE OPTION OF PAGE AMERICA, EXERCISED BY WRITTEN
NOTICE TO THE SHAREHOLDER WITHIN 45 DAYS FROM THE DATE OF FILING OF SUCH NOTICE
OF ELECTION TO DISSENT, LOSE HIS DISSENTERS' RIGHTS UNLESS A COURT, FOR GOOD
CAUSE SHOWN, OTHERWISE DIRECTS.
Within 15 days after the expiration of the period within which Page America
shareholders may file their notices of election to dissent, or within 15 days
after the consummation of the Acquisition, whichever is later (but in no event
later than 90 days from the date of the Special Meeting), Page America will make
a written offer by registered mail to each Page America shareholder who had
filed such notice of election, to purchase such Page America shareholder's
shares of Page America Common Stock or Series One Preferred Stock at a price
which Page America considers to be such share's fair value. Such offer shall be
accompanied by a statement setting forth the aggregate number of shares of Page
America Common Stock or Series One Preferred Stock with respect to which notices
of election to dissent have been received and the aggregate number of holders of
such shares. If the Acquisition has been consummated, such offer shall be
accompanied by (a) advance payment to each Page America shareholder who has
submitted the certificates representing his shares of Page America Common Stock
or Series One Preferred Stock to Page America of an amount equal to 80% of the
amount of the offer made by Page America for such shares or (b) as to each Page
America shareholder who had not yet submitted his Certificates to Page America,
a statement that advance payment to him of an amount equal to 80% of the amount
of such offer will be made by Page America promptly upon submission of his
Certificates. If the Acquisition has not been consummated at the time of the
offer, such advance payment or statement as to advance payment shall be sent to
each shareholder entitled thereto forthwith upon consummation of the
Acquisition.
If within thirty days after making the offer, Page America and any
dissenting shareholder agree upon the price to be paid for said dissenting
shares, payment therefor shall be made within sixty days of the offer or the
consummation of the Acquisition, whichever is later, upon surrender of the
dissenting shareholder's certificates.
If Page America fails to make such offer within the 15-day period specified
above, or if Page America makes the offer within such period but any dissenting
shareholder or shareholders fail to agree with Page America within the next 30
days upon the price to be paid for their shares:
(a) Page America shall, within the 20-day period after the expiration
of the applicable two periods specified above, institute a special
proceeding in the New York Supreme Court in the judicial district in which
Page America's office is located to determine the rights of Page America's
dissenting shareholders and to fix the fair value of their shares.
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(b) If Page America fails to institute such proceeding within such
20-day period, any dissenting shareholder of Page America may institute
such proceeding for the same purposes not later than 30 days after the
expiration of the 20-day period referred to in subparagraph (a) above. If
the proceeding is not instituted by any dissenting shareholder within such
30-day period, all dissenters' rights will be lost unless the Supreme
Court, for good cause shown, otherwise decides.
(c) All dissenting shareholders, except those who have agreed with
Page America upon the price to be paid for their shares, will be made
parties to the proceeding.
(d) The court will, without a jury and without referral to an
appraiser or referee, determine whether each dissenting shareholder, as to
whom Page America requests the court to make such determination, is
entitled to receive payment for his shares of Page America Common Stock or
Series One Preferred Stock. If Page America does not request such
determination of if the court finds that a dissenting shareholder is
entitled to payment for his shares of Page America Common Stock or Series
One Preferred Stock, the court will fix the fair value of such shares,
which, for such purposes, shall be the fair value as of the close of
business on the day prior to the Special Meeting. In fixing the value of
the shares, the court shall consider the nature of the transaction giving
rise to the Page America shareholder's right to receive payment for his
shares and its effects on Page America and its shareholders, the concepts
and methods then customary in the relevant securities and financial markets
for determining fair value of shares of a corporation engaging in a similar
transaction under comparable circumstances, and all other relevant factors.
The court may fix the value of the shares at higher or lower than the value
of the consideration offered in the Acquisition. The final order of the
court shall be entered against Page America in favor of each dissenting
shareholder who is party to the proceeding and who is entitled to the value
of his shares. The final order shall include interest at a rate determined
by the court and payable from the date the Acquisition was consummated
until the payment date, unless the court finds that the refusal of any
shareholder to accept the offer of payment was arbitrary, vexatious, or
otherwise not in good faith.
(e) Each party to the proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and any experts
employed. The court may, however, in its discretion, apportion and assess
all or any part of the costs, expenses, and fees incurred by Page America
against any or all of the dissenting shareholders who are parties to the
proceeding, including those who withdraw their notices of election to
dissent, if the court finds that the dissenting shareholders' refusal to
accept Page America's offer is arbitrary, vexatious, or otherwise not in
good faith. Likewise, the court may apportion and assess all or any of the
costs, expenses, and fees incurred by any or all of the dissenting
shareholders who are parties to the proceeding against Page America, if the
court finds (i) that the fair value of the shares of Page America Common
Stock or Series One Preferred Stock, as determined, materially exceeds the
amount which Page America offered to pay; (ii) that no offer or required
advance payment was made by Page America; (iii) that the refusal of the
shareholder to accept the offer was in good faith; or (iv) that the action
of Page America in complying with its obligations under Section 623 of the
NYBCL was arbitrary, vexatious, or otherwise not in good faith.
(f) Within 60 days after final determination of the proceeding, Page
America will pay to each dissenting shareholder the amount found to be due
him, upon surrender of the Certificates for any such shares represented by
Certificates.
BECAUSE A PROXY CARD WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL,
UNLESS REVOKED, BE VOTED FOR ADOPTION OF THE ACQUISITION AGREEMENT, A PAGE
AMERICA SHAREHOLDER WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS MUST EITHER
NOT SIGN AND RETURN HIS PROXY CARD, OR, IF HE SIGNS AND RETURNS HIS PROXY CARD,
VOTE AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE ACQUISITION
AGREEMENT.
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DESCRIPTION OF METROCALL CAPITAL STOCK
The authorized capital stock of Metrocall consists of 33,500,000 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, 9,000 shares will be designated Series B
Preferred Stock, and 4,000 shares will be designated Common Stock Equivalent
Preferred Stock. The Board of Directors of Metrocall has approved, and
shareholders of Metrocall are expected to vote in May 1997 on, an amendment to
the Metrocall Certificate increasing the number of authorized shares of
Metrocall Common Stock to 60,000,000 shares. Stockholders of Metrocall holding
9,385,204 shares (or approximately 37.5% of the issued and outstanding shares of
Metrocall Common Stock) have agreed to vote in favor of this amendment. 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 Proxy
Statement/Prospectus, the Board of Directors has authorized the Series A
Preferred Stock, the Series B Preferred Stock and Common Stock Equivalent
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 at 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.
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.
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The Metrocall Certificate provides for the division of the directors
elected by the 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 proposal 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% of 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 of Metrocall's stock in
accordance with the terms of any stock options 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
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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 the registration statement of
which this Proxy Statement/Prospectus is a part, and which is incorporated
herein by reference.
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) the failure of the stockholders of Metrocall to
approve an increase in the number of authorized shares of Metrocall Common Stock
to 50,000,000 on or prior to June 1, 1997, (ii) 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 Certificate of Designation, and (iii)
default on the payment of indebtedness of Metrocall in an amount of $5,000,000
or more. As long as a Triggering Event described in clause (i) is continuing,
dividends must be paid in cash to the extent permitted by the terms of
agreements relating to Metrocall's debt.
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 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
redemptions 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 purchaser). If a Triggering Event has
occurred and is continuing, the 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 undertaking: (i) any
changes in the Metrocall Certificate and Bylaws that adversely affects the
rights of holders of the Series A Preferred Stock,
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(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 or
redemption on 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 is 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 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 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 the registration statement of which this
Proxy Statement/Prospectus is a part, and which is incorporated herein by
reference.
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 semi-annually in cash or in additional shares of
Series B Preferred Stock, at Metrocall's option. If the stockholders of
Metrocall do not approve the conversion provisions discussed below, the dividend
rate will increase to 17% on July 1, 1997, 18% on October 1, 1997, 19% on
January 1, 1998 and 20% on April 1, 1998, but will revert to 14% at such time as
such stockholder approval is obtained.
Subject to approval of the conversion rights by the holders of Common Stock
of Metrocall, 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 affects 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.
COMMON STOCK EQUIVALENTS
As part of the Stock Consideration, Page America may receive Common Stock
Equivalents. Each Common Stock Equivalent shall equal .001 share of a series of
preferred stock. Common Stock Equivalents
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will have one vote per share on all matters submitted to a vote of holders of
Metrocall Common Stock, will be entitled to receive a dividend equal to any
dividend declared and paid with respect to Metrocall Common Stock, will have a
liquidation preference equal to that of the Metrocall Common Stock and will be
automatically converted into one share of Metrocall Common Stock if and when the
stockholders of Metrocall approve an amendment to its Certificate of
Incorporation increasing the authorized number of shares of Metrocall Common
Stock to 60 million. In the event the stockholder approval is not obtained by
June 1, 1997, the Common Stock Equivalents will be automatically converted into
that number of shares of Series B Preferred Stock equal to the total Share Value
of the Common Stock Equivalents divided by $10,000. The foregoing summary is
qualified in its entirety by reference to the Certificate of Designations,
Number, Powers, Preferences and Relative, Participating, Optional and Other
Rights of Common Stock Equivalent Preferred Stock which is an exhibit to the
registration statement of which this Proxy Statement/Prospectus is a part and
which is incorporated herein by reference.
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 Metrocall sells common stock or rights to
purchase common stock in private transactions for less than 125% of the then
current market price and other customary anti-dilution provisions. The Warrants
expire November 15, 2001. The Company 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 A+ Network Merger, 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 January 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.
DESCRIPTION OF PAGE AMERICA CAPITAL STOCK
COMMON STOCK
Page America is authorized to issue up to 100,000,000 shares of Common
Stock, par value $.10 per share, of which at March 1, 1997, 16,037,095 shares of
Common Stock were issued and outstanding. Subject to the rights of the holders
of any series of Preferred Stock, holders of the Common Stock of Page America
are entitled to share equally on a per share basis in such dividends as may be
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding-up of Page America, after payment of
creditors and the holders of any senior securities of Page America, including
Preferred Stock, the assets of Page America will be divided pro rata on a per
share basis among the holders of the shares of Common Stock. The Common Stock is
not subject to any liability for further assessments. There are no conversion or
redemption privileges nor any sinking fund provisions with respect to the Common
Stock, and the Common Stock is not subject to call. The holders of Common Stock
do not have any preemptive or other subscription rights.
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Holders of Common Stock are entitled to cast one vote for each share held
at all shareholders' meetings for all purposes, including the election of
directors. The Common Stock does not have cumulative voting rights.
PREFERRED STOCK
Page America is authorized to issue up to 5,000,000 shares of Preferred
Stock, par value $.01 per share. The Preferred Stock may be issued by the Board
of Directors from time to time in one or more series. The Board of Directors is
authorized to determine the rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, terms of
redemption (including sinking provisions, if any) and liquidation preferences of
any series of Preferred Stock and to fix the number of shares of any such series
without any further vote or action by the shareholders. Page America currently
has outstanding 286,361 shares of Series One Preferred Stock.
Page America may not declare or pay any dividends on its Common Stock or
make, directly or indirectly, any payment on the account of the redemption,
purchase or other acquisition of such stock unless all cumulative dividends on
Page America's outstanding Preferred Stock shall have been paid in full.
Series One Preferred Stock
On December 30, 1993, Page America issued an aggregate of 305,768 shares of
Series One Preferred Stock, convertible into an aggregate of 6,794,164 shares of
Common, of which 286,361 shares are outstanding. Holders of the Series One
Preferred Stock are entitled to vote the number of votes that they would be
entitled to vote if their shares of Series One Preferred Stock were converted
into shares of Common Stock. Holders of a majority of the Series One Preferred
Stock, as a class, are entitled to elect two representatives to the Board of
Directors.
Each share of Series One Preferred Stock has a 10% dividend, payable
semi-annually in arrears, and is convertible into Common Stock at an initial
price of $4.50 per share (the "Series One Conversion Price"), subject to certain
anti-dilution provisions. Payment of dividends may be made in cash or in Common
Stock of Page America registered under the Securities Act of 1933. Any dividend
payments not made will accrue at the 10% annual rate. Any dividend payments not
made when permitted under the Page America Credit Facility and the Subordinated
Notes will result in, among other things, an increase in the dividend rate to
15% per annum and entitle holders of a majority of Series One Preferred Stock to
elect an additional representative to the Board of Directors of Page America.
Upon conversion of Series One Preferred Stock, Page America will have the option
to pay accrued dividends by issuing additional shares of its Common Stock.
Holders of the Series One Preferred Stock will be entitled to a preference in
liquidation ahead of holders of the Common Stock of $105 per share of Series One
Preferred Stock plus any accrued by unpaid dividends.
Page America may redeem the Series One Preferred Stock if the average
closing price of the Common Stock for both the preceding 60 day and 5 day
periods has equalled or exceeded 150% of the Series One Conversion Price. After
December 31, 2000, the Series One Preferred Stock may be redeemed at par, plus
accrued dividends. If Page America calls the Series One Preferred Stock for
redemption, holders thereof will have a 30 day period to convert to shares of
Common Stock or have their shares of Series One Preferred Stock redeemed. Upon
any redemption, accrued dividends must be paid by Page America in cash. Upon the
sale by Page America of all its assets, the holders of Series One Preferred
Stock may elect to have Page America redeem such stock.
COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of certain material differences between the
rights of holders of Metrocall Common Stock and the rights of holders of Page
America Common Stock. As Metrocall is organized under the laws of Delaware and
Page America is organized under the laws of New York, some of these differences
arise from differences between various provisions of the corporate laws of those
states. Others arise from differences in the provisions of the respective
certificates of incorporation and by-laws of Metrocall and Page
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America. Shareholders of Page America who receive Metrocall Common Stock
pursuant to the Acquisition and the Plan of Liquidation will become stockholders
of Metrocall and their rights as such will be governed by the DGCL, the
Metrocall Certificate, the Series A Certificate of Designation, the Series B
Certificate of Designation and the Metrocall By-laws, as amended from time to
time in accordance with the DGCL and their respective terms.
Under the DGCL, amendments to the Metrocall Certificate require the
approval of stockholders holding a majority of the outstanding shares entitled
to vote on such amendment and a majority of the outstanding stock of each class
entitled to vote on such amendment as a class, unless a greater proportion is
specified in the certificate of incorporation or by the provisions of the DGCL.
The Metrocall Certificate requires the affirmative vote of two-thirds of all
outstanding shares entitled to vote to amend certain sections of the Metrocall
Certificate, the approval of 75% of all outstanding shares of Series A Preferred
Stock and a majority of the outstanding shares of Series B Preferred Stock to
amend the Metrocall Certificate in certain respects. Under the NYBCL, an
amendment to the Page America Restated Certificate of Incorporation (the "Page
America Certificate") requires the approval of the holders of a majority of all
outstanding shares entitled to vote except where the NYBCL or the Page America
Certificate prescribes a different proportion of votes.
The DGCL provides that after a corporation has received any payment for its
stock, the power to adopt, amend or repeal by-laws resides with the stockholders
entitled to vote. A corporation may, however, grant to its board of directors in
its certificate of incorporation concurrent power to adopt, amend or repeal
by-laws. The Metrocall Certificate expressly authorizes the Metrocall Board to
adopt, amend or repeal the Metrocall By-laws, subject to the approval of 75% of
all outstanding shares of Series A Preferred Stock and a majority of the
outstanding shares of Series B Preferred Stock for adoption, amendment or repeal
of certain By-laws. See "Description of Metrocall Capital Stock -- Series A
Preferred Stock." Under the NYBCL by-laws may be adopted, amended or repealed by
vote of the holders of the shares at the time entitled to vote in the election
of any directors. When so provided in the certificate of incorporation or a
by-law adopted by the shareholders, by-laws may also be adopted, amended or
repealed by the board by such vote as may be therein specified, but any by-law
adopted by the board may be amended or repealed by the shareholders entitled to
vote thereon. The Page America By-laws provide that the by-laws may be amended,
repealed or adopted by vote of the holders of the shares at the time entitled to
vote in the election of any directors. The Page America By-laws may also be
amended, repealed or adopted by the board but any by-law adopted by the board
may be amended by the shareholders entitled to vote thereon.
Under the DGCL, a corporation's board of directors must consist of one or
more members, with the number fixed by the corporation's by-laws or the
certificate of incorporation. Under the Metrocall By-laws, the Board of
Directors of Metrocall shall have a minimum of three and a maximum of eleven
members. The Metrocall Board of Directors is divided into three classes and
directors are elected to serve staggered three year terms. The holders of Series
A Preferred Stock are entitled to elect two directors and in certain
circumstances may be entitled to elect additional directors. See "Description of
Metrocall Capital Stock -- Series A Preferred Stock." Pursuant to the Page
America By-laws, the Page America Board shall not have less than three nor more
than eleven members. Each director is elected for a term of one year.
Under the NYBCL, directors, when taking action, including action which may
relate to a change in control of the corporation, are entitled to consider both
the long-term and the short-term interests of the corporation and its
stockholders and the effects that any such actions may have on the short-term or
the long-term or the corporation's prospects, current employees, customers and
creditors. Delaware has no comparable statutory provision but the Metrocall
Certificate contains a provision allowing the Metrocall Board of Directors to
take into account factors other than the potential economic benefits to
stockholders of a tender offer, merger or acquisition proposal, including the
social, legal and economic effects on employees, suppliers, subscribers and the
communities in which Metrocall conducts its business.
The DGCL allows any director or the entire board of directors to be
removed, with or without cause, by the vote of the holders of a majority of the
shares entitled to vote. Directors of a corporation with a classified board of
directors, however, can be removed only for cause unless the certificate of
incorporation otherwise provides. The Metrocall Certificate provides that any
director (other than directors elected by holders of the
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Series A Preferred Stock, who may be removed only by those holders having the
right to elect them) may be removed from office at any time, but only for cause
and only by the affirmative vote of not less than the holders of two-thirds of
the outstanding shares. The NYBCL provides that any or all of the directors may
be removed for cause by vote of the shareholders, or by action of the board if
so provided in the certificate of incorporation. Any or all of the directors may
be removed without cause by vote of the shareholders if so provided in the
certificate of incorporation or the by-laws. The Page America By-laws provide
that any or all of the directors may be removed for cause by vote of the
shareholders or by action of the board. Page America directors may be removed
without cause only by vote of the shareholders.
The DGCL provides that unless otherwise provided in the certificate of
incorporation or by-laws, vacancies, including those due to removal without
cause, and newly created directorships may be filled by majority vote of the
directors then in office, even if the number of directors then in office is less
than a quorum, or by a sole remaining director. In addition, if, at the time of
filling any vacancy or newly created directorship the directors then in office
constitute less than a majority of the whole board, the Delaware Court of
Chancery may, upon application of stockholders holding at least 10% of the
shares outstanding at the time and entitled to vote, summarily order an election
to be held to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office. Such elections are
to be conducted in accordance with the procedures provided by the DGCL for
holding stockholder meetings. Under the NYBCL, newly created directorships
resulting from an increase in the number of directors and vacancies occurring in
the board for any reason except the removal of directors without cause may be
filled by vote of the board. Vacancies occurring in the board by reason of the
removal of directors without cause may be filled only by vote of the
shareholders unless otherwise provided in the certificate of incorporation or
the specific provisions of a by-law adopted by the shareholders. The Page
America By-laws provide that newly created directorships resulting from an
increase in the number of directors and vacancies occurring in the board for any
reason except the removal of directors without cause may be filled by a vote of
a majority of the directors then in office, although less than a quorum exists,
unless otherwise provided in the certificate of incorporation. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the shareholders unless otherwise provided in the certificate of
incorporation.
The NYBCL generally requires the authorization of a corporation's board of
directors and the affirmative vote of two-thirds of a corporation's outstanding
shares entitled to vote in order to effect a merger, a consolidation, a share
exchange or the sale, lease, or other disposition of all or substantially all of
a corporation's assets. The DGCL requires approval of the board of directors and
the affirmative vote of a majority of the outstanding stock entitled to vote
thereon to authorize any such action, except that, unless required by its
certificate of incorporation, no stockholder vote is required of a corporation
surviving a merger if (i) such corporation's certificate of incorporation is not
amended by the merger, (ii) each share of stock of such corporation will be an
identical share of the surviving corporation after the merger and (iii) either
no shares are to be issued by the surviving corporation or the number of shares
to be issued in the merger does not exceed 20% of such corporation's outstanding
common stock immediately prior to the effective date of the merger. The
Metrocall Certificate requires approval of the holders of a majority of the
Series A Preferred Stock for certain mergers. See "Description of Metrocall
Capital Stock -- Series A Preferred Stock." Both the NYBCL and the DGCL contain
provisions allowing mergers and consolidations of a domestic corporation with a
foreign corporation, so long as the other jurisdiction allows such a combination
and the domestic corporation follows the procedures applicable to it.
Under the NYBCL, a vote of a majority of the shareholders is required for a
corporation to redeem more than 10% of its stock from shareholders at a price
above the market price. The DGCL does not have a comparable statutory provision.
New York regulates tender offers for the equity securities of New York
corporations having principal offices or significant business operations within
New York. The Security Takeover Disclosure Act (the "Takeover Act") applies to
offers with respect to which, after acquisition of the shares, the offeror would
be the owner of more than five percent of any class of the target company's
issued equity securities. In such cases, no tender offer may be made unless the
offeror files with the New York attorney general at his New York City office a
registration statement containing information required by certain sections of
the Takeover Act. The
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Takeover Act also regulates tender offers not subject to the requirements of
Section 14(d) of the Exchange Act and sets forth, among other things, the period
of time within which shares may be deposited and withdrawn pursuant to a
takeover bid, the requirement that shares be purchased on a pro rata basis and
the requirement that when an offeror increases the consideration offered in a
takeover bid, the offeror must pay such increased consideration with respect to
all shares accepted. The DGCL does not contain any comparable provision.
The DGCL prevents an "interested stockholder" (defined as a holder who
acquires 15% or more of a target company's stock) from entering into a business
combination within three years after the date it acquires such stock. However, a
business combination is permitted (i) if prior to the date the stockholder
became an interested stockholder, the board of directors of the target company
approved either the business combination or such acquisition of stock, (ii) if
at the time the interested stockholder acquired such 15% interest, it acquired
85% or more of the outstanding stock of the corporation, excluding shares held
by directors who are also officers and shares held under certain employee stock
plans or (iii) if the business combination is approved by the target company's
board of directors and two-thirds of the outstanding shares voting at an annual
or special meeting of stockholders, excluding shares held by the interested
stockholder. This provision applies automatically to Delaware corporations
except those corporations with 2,000 or fewer stockholders of record or whose
voting stock is not listed on a national securities exchange or authorized for
quotation on an interdealer quotation system of a registered national securities
association. Additional exceptions allow corporations, in certain instances, to
adopt certificates of incorporation or by-laws that elect not to be governed by
these provisions. Metrocall has not so elected; any amendment to effect such an
election would not be effective for 12 months and would not apply to those who
were already interested stockholders. The Metrocall Certificate also contains an
"anti-greenmail" provision prohibiting certain purchases of shares by Metrocall
from interested stockholders without a majority vote of disinterested
stockholders.
Under the NYBCL and the DGCL, holders of shares have the right, in certain
circumstances, to dissent from certain corporation reorganizations by demanding
payment in cash for their share equal to the fair value (excluding any
appreciation or depreciation as a consequence or in expectation of the
transaction) of such shares, as determined by agreement with the corporation or
by an independent appraiser appointed by a court in an action timely brought by
the corporation or the dissenters.
The NYBCL affords dissenters' rights of appraisal upon certain mergers,
consolidations, sales and other dispositions of assets requiring shareholder
approval and share exchanges. DGCL grants dissenters' appraisal rights only in
the case of certain mergers and not in the case of a sale or transfer of assets
or a purchase of assets for stock regardless of the number of shares being
issued. The DGCL does not grant appraisal rights in a merger in respect of
shares of any class of stock (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders, unless the plan of merger converts such
shares into anything other than stock of the surviving corporation or stock of
another corporation as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 stockholders (or cash in lieu of fractional shares
or some combination of the above). The NYBCL has no exceptions to such rights
comparable to those afforded by the DGCL.
The DGCL allows a corporation to limit or eliminate the personal liability
of directors to the corporation and its stockholders for monetary damages for
breaches of a director's fiduciary duty as a director. However, such a
limitation does not affect the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for intentional or negligent payment of unlawful
dividends or stock redemptions or (iv) for any transaction from which the
director derived an improper personal benefit. Additionally, the corporation may
not limit or eliminate liability for acts or omissions occurring prior to the
effective date of such a provision in the corporate certificate of
incorporation.
Both the NYBCL and the DGCL contain provisions setting forth conditions
under which a corporation may indemnify its directors and officers. These
provisions are generally referred to as "statutory indemnifica-
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tion" provisions. Both also permit corporations to adopt by-laws that provide
for additional indemnification of directors and officers. These non-exclusive
provisions are generally referred to as "non-statutory indemnification"
provisions. Non-statutory indemnification provisions are generally adopted to
expand the circumstances and liberalize the conditions under which
indemnification will occur. The NYBCL contains specific restrictions on the kind
of matters for which non-statutory indemnification will be permitted; the DGCL
does not contain any specific restrictions.
The Metrocall Certificate requires it to indemnify to the maximum extent
permissible under Delaware law its officers and directors for liability arising
out of their actions in such capacity. The Page America By-laws require it to
indemnify its officers and directors to the fullest extent permitted under New
York law.
Under the NYBCL, a corporation may make a loan to a director only after
authorization by the affirmative vote of holders of a majority of shares other
than those of the director-borrower. Under the DGCL, a corporation may make
loans to, guarantee the obligations of, or otherwise assist, its officers or
other employees and those of its subsidiaries, including any officer or employee
who is a director of a corporation or any of its subsidiaries, when such action,
in the judgment of the corporation's directors, may reasonably be expected to
benefit the corporation.
Under the NYBCL and the DGCL, special meetings of stockholders may be
called by the board of directors and by such other person or persons authorized
to do so by the corporation's certificate of incorporation or by-laws. Under the
Metrocall By-laws, special meetings of stockholders of Metrocall may be called
by either (a) the chairman, (b) a majority of directors or (c) stockholders
holding not less than 35% of the total number of votes of the then outstanding
shares of stock of Metrocall entitled to vote generally in the election of
directors. In addition, the NYBCL provides that if, for a period of one month
after the date fixed by or under the by-laws for the annual meeting of
stockholders, or if no date has been fixed for a period of 13 months after the
last annual meeting, there is a failure to elect a sufficient number of
directors to conduct the business of the corporation, the board of directors
shall call a special meeting for the election for directors. If the board fails
to call such meeting within 14 days of expiration of that period of time, or if
it is so called but there is a failure to elect such directors for a period of
two months after the expiration of such period, holders of 10% of the shares
entitled to vote in an election of directors may demand the call of a special
meeting for the election of directors. Under the DGCL, if an annual meeting is
not held within 30 days of the date designated for such a meeting, or is not
held for a period of 13 months after the last annual meeting, the Delaware Court
of Chancery may summarily order a meeting to be held upon the application of any
stockholder or director. In both New York and Delaware, the number of shares
represented at such meeting constitutes a quorum without regard to other
provisions of law.
Under the NYBCL and the DGCL, unless the certificate of incorporation
provides otherwise, stockholder action is generally by majority vote, except
under New York law, directors are elected by a plurality vote. Metrocall's
Certificate requires the affirmative vote of two-thirds of all outstanding
shares entitled to vote to (1) remove directors or (2) amend or repeal certain
sections of the Metrocall Certificate. The Metrocall By-laws require the
affirmative vote of two-thirds of all outstanding shares entitled to vote to
amend or repeal the Metrocall By-laws.
Unless a certificate of incorporation provides otherwise, the DGCL allows
any action required to be taken, or which may be taken, at an annual or special
meeting of stockholders to be taken without a meeting, without prior notice and
without a vote so long as the written consent of not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted is
delivered to the corporation. The Metrocall Certificate provides that any action
required or permitted to be taken by the stockholders must be effected at a duly
called meeting of stockholders, and may not be effected by any consent in
writing by such stockholders, unless such consent is unanimous. Under the NYBCL,
any action required to be taken, or which may be taken, at an annual or special
meeting of shareholders may be taken without a meeting only if the written
consent of all shareholders authorized to take such action is obtained.
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Stockholders of Metrocall are required to comply with certain advance
notice provisions with respect to any nominations by stockholders of candidates
for election to Metrocall's Board of Directors or other proposals submitted by
stockholders for stockholder vote.
Under the NYBCL and the DGCL, a corporation may generally pay dividends out
of surplus. New York requires a board of directors to make certain disclosures
when paying dividends out of any account other than earned surplus. The DGCL
also permits a corporation to pay dividends, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year. Dividends out of net profits may not be paid when the
capital of the corporation amounts to less than the aggregate amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets.
The NYBCL requires that a plan to issue, or the issuance of any rights or
options to directors, officers and employees as an incentive to service or
continued service with the corporation, a subsidiary or affiliate be approved by
the vote of the holders of a majority of the outstanding shares entitled to vote
thereon. Such approval is not required for the issuance of any rights or options
of a corporation in substitution for rights or options issued by another
corporation, in connection with such other corporation's merger or consolidation
with, or the acquisition of its shares or all or part of its assets by, the
corporation or its subsidiary. Under the DGCL, rights or options to purchase
shares of any class of stock may be authorized by a corporation's board of
directors.
In addition, under both the NYBCL and DGCL, a corporation may create and
issue rights or options entitling the holders thereof to purchase from the
corporation any shares of its capital stock on terms and conditions set by its
board of directors. The NYBCL specifically permits a "resident domestic
corporation" to restrict the exercise, or transfer of any rights or options by
an interested stockholder (defined as a beneficial owner of 20% or more of its
outstanding voting stock). Delaware does not have a comparable statutory
provision but Delaware courts have upheld rights or options which contain
similar limitations.
Under the Communications Act, not more than 20% of Metrocall's capital
stock may be owned of record by persons who are not United States citizens or
entities. The Metrocall Certificate authorizes the Board of Directors to redeem
any of Metrocall's 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 at 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).
The DGCL states that, absent a provision in a corporation's certificate of
incorporation, a stockholder does not possess preemptive rights unless such
rights arose prior to July 3, 1967 and were not terminated subsequently by
appropriate action. The Metrocall Certificate does not contain a provision
granting preemptive rights. Under the NYBCL, shareholders have preemptive rights
unless the certificate of incorporation otherwise provides. The Page America
Certificate eliminates preemptive rights.
The foregoing summary does not purport to be a complete statement of the
rights of holders of Metrocall Common Stock and Page America Common Stock under,
and is qualified in its entirety by reference to, the DGCL and NYBCL,
respectively, the Metrocall and Page America Certificates and By-laws, and the
Series A Certificate of Designation and Series B Certificate of Designation.
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BUSINESS OF PAGE AMERICA
GENERAL
Page America provides paging, messaging and information products and
services through networks which it owns and operates as a RCC under licenses
from the FCC. As of December 31, 1996, Page America provided paging services to
approximately 205,000 pagers in geographic areas encompassing a total population
of 34 million people.
Page America's strategy is to concentrate its operations in major
metropolitan markets in which it could achieve both critical mass and a
substantial market share position. Page America targets specific user segments
and, through its broad distribution capabilities, markets and delivers its
comprehensive package of paging and value-added messaging services to each
particular segment. Page America has secured licenses for multiple channels in
each of its markets and has developed networks which can support significant
future growth in paging units as well as value-added messaging and information
services. Page America emphasizes customer ownership of pagers, as compared to
leasing of pagers, which significantly reduces Page America's capital costs. At
March 1, 1997, approximately 75 percent of Page America's units in service were
owned by customers or resellers.
The accompanying financial statements have been prepared on a going concern
basis. Page America, since its inception, has experienced a deficiency in
working capital and recurring losses. In 1995, as a result of non-compliance by
Page America with certain covenants of the Page America Credit Facility, the
terms were modified to accelerate the final maturity to December 29, 1995, and
the Subordinated Notes were modified to provide for a final maturity of six
months thereafter. On April 26, 1996, the Credit Facility was again modified to
provide for a revolving credit loan of $750,000, a waiver of all existing
defaults on certain financial and other covenants, the omission of financial
covenants effective April 30, 1996 and an extension of the maturity date to
November 30, 1996. The Credit Facility was not repaid at maturity causing the
Credit Facility to be in default. In addition, the Subordinated Notes matured at
December 31, 1996 and are in default (see Note E of Notes to Consolidated
Financial Statements). Such debt is classified as a current liability and the
Company's current liabilities exceeded its current assets by $58.4 million at
December 31, 1996. The cash to be received by Page America from the sale of its
assets to Metrocall will not be sufficient for Page America to pay in full in
cash its outstanding obligations under the Credit Facility or under the
Subordinated Notes or to pay its other outstanding liabilities. There is no
assurance that this transaction will be completed or that Page America will have
sufficient funds to finance its operations, which continue to show losses,
through the year ending December 31, 1997.
All of these matters raise substantial doubt about Page America's ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts or classifications of liabilities that
may result from the outcome of this uncertainty.
Page America was incorporated in 1976 under the laws of the State of New
York. Page America's principal executive offices are located at 125 State
Street, Hackensack, New Jersey 07601, and its telephone number is (201)
342-6676.
SALE OF CALIFORNIA AND FLORIDA OPERATIONS
On July 28, 1995, Page America sold to Paging Network of Florida, Inc. its
California and Florida paging assets for a cash purchase price of $19.4 million.
Approximately $500,000 of the purchase price is held in escrow. Management
expects that the escrow will be released to Page America in accordance with the
time frame set forth in the agreement. The assets sold had a net book value of
approximately $19.1 million and consisted of the assets which Page America
acquired from Crico Communications Corporation ("Crico") on December 30, 1993
and the 900 Mhz channel which is licensed to provide state-wide coverage in
California which Page America acquired in 1994 for a purchase price of $500,000.
The purchase price paid by Page America for the Crico assets consisted of
$12,650,000 in cash paid to Crico's lenders, the issuance of an aggregate of
1,435,903 shares of Common Stock to Crico's lenders and the issuance of 240,000
shares of
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Common Stock and warrants to purchase 130,000 shares of Common Stock at an
exercise price of $5.00 per share to a company related to certain shareholders
of Crico. After expenses, the sale resulted in a loss of approximately $718,000.
BACKGROUND OF THE PAGING INDUSTRY
Radio paging began more than four decades ago as an adjunct to telephone
answering services, delivering tone-only messages to subscribers. Beginning in
the 1970's, cost-effective technological innovations and regulatory reforms
helped to accelerate the use of paging services. Advances in microprocessor
technology facilitated dramatic reductions in the size and weight of pagers. In
1982, the FCC increased the number of available channels for paging, further
stimulating growth of the industry.
During the 1980's, the paging industry expanded significantly. Factors
contributing to the growth in the paging industry include: (i) a continuing
shift towards a service-based economy and a resultant need to keep in contact;
(ii) increasing mobility among workers; (iii) increasing awareness of the
benefits of mobile communications; (iv) a reduction in the price of pagers; (v)
product distribution at the retail level; and (vi) increasing availability of
information service-based offerings.
In addition, the benefits of mobile and wireless communications have gained
widespread acceptance as a result of the growth in cellular communications. Page
America believes that paging will continue to grow with the wireless
communications industry generally, because it believes paging is the most
cost-effective form of mobile communication. Since paging is a form of one-way
communication, it is less expensive than communicating by cellular telephones.
Pagers and air time required to transmit an average message cost less than
equipment and air time for cellular telephones. In fact, some users of cellular
telephones use a pager in conjunction with their telephones to screen incoming
calls and to minimize usage-based charges.
The availability of value-added paging products and services is creating
demand within certain market segments which previously had not been attracted by
the benefits of basic paging services alone. Demand for paging services is
anticipated to increase further as a result of technological advances which
permit messaging to be integrated into business tools (such as lap top and palm
top computers) and into consumer products (such as wristwatches).
BUSINESS STRATEGY
In operating its business, Page America's objective is to maximize revenues
by focusing on a business strategy which emphasized the following elements: (i)
major metropolitan market focus; (ii) broad product distribution capabilities;
(iii) network infrastructure and channel capacity; (iv) comprehensive service
options; (v) targeted market segments; (vi) value-added services; and (vii)
customer ownership of pagers.
Major Metropolitan Market Focus. Page America presently operates in
the New York and Chicago metropolitan area markets serving an aggregate
population of 34 million. Based upon its knowledge and experience in these
markets, Page America believes that in each of its markets, the four
largest competitors serve approximately 80 percent of pager users.
Significant barriers to entry exist in the New York and Chicago
metropolitan area markets, since there are no more FCC paging channels
currently available for license and substantial capital would be required
to construct and operate efficient and competitive paging systems.
Broad Product Distribution Capabilities. Page America has developed
multiple distribution channels which reach targeted market segments.
Products are distributed through a number of different outlets, including 8
sales offices, four company-owned retail stores, a direct sales force and
resellers.
Network Infrastructure and Channel Capacity. Page America believes
that controlling licenses to a large number of FCC-allocated paging
channels is important to adequately service both current and future demand
for paging and messaging services. The New York network utilizes 220
transmitters over 14 available paging channels to provide service to
131,000 pagers throughout most of Connecticut, New York State south of
Albany (including Long Island), New Jersey and Eastern Pennsylvania. The
Chicago network consists of 82 transmitters over 11 available paging
channels. This network provides
55
<PAGE> 66
service to 74,000 pagers from the Wisconsin border, throughout Illinois,
Northern Indiana and into Western Michigan. Page America has substantial
capacity to expand in its New York and Chicago metropolitan area markets
utilizing its existing network without the need for more licenses or
significant additional capital expenditures for transmission and telephony
infrastructure.
Comprehensive Service Options. Since Page America has multiple
channels, it is able to offer customers the widest possible choice in
services (tone, tone/voice, numeric, alphanumeric), geographic coverage and
pricing options. Customers select from a wide variety of pagers, which come
with both silent and audible alerts. Convenience, as evidenced by the
location of the sales offices, and flexible policies regarding service plan
options are significant components of why customers select Page America.
Targeted Market Segments. Page America has designed its product and
service offerings to attract defined user groups. Page America's marketing
efforts are focused on four principal market segments: mobile workers;
medical and other on-call professionals; business professionals seeking a
competitive advantage and the home market.
Value-Added Services. Page America provides subscribers with
value-added services, such as voice mail messaging and operator-assisted
alphanumeric messaging, as well as equipment related services, including
loss and damage protection and paging maintenance programs. Such offerings
include: PageTalk(SM), a voice mail system; PageGram(SM), which involves
delivery of messages from a personal computer; Group Calling, which allows
notification of several pager users simultaneously with a common telephone
number; and Nationwide Paging which enables a subscriber to be paged in
over 200 cities across the United States.
Customer Ownership of Pagers. Page America emphasizes customer
ownership of pagers, as compared to leasing, since customer ownership
significantly reduces Page America's capital costs and reduces potential
exposure to changes in technology. Approximately 75 percent of Page
America's units in service are customer owned (including resellers).
PAGING SERVICES
Paging operations consist of a process of signaling, through the use of a
radio transmission network, a portable pocket size, battery-operated radio
receiver carried by a subscriber, commonly called a "pager" or a "beeper". Each
paging subscriber is assigned a distinct telephone number. When a telephone call
for a subscriber is received at one of Page America's computerized paging
terminals, Page America transmits a radio signal to the subscriber's pager,
which causes the pager to emit a beep, vibrate or generate another signal and,
in certain cases, provides the subscriber with additional information from the
caller.
Page America currently provides the following four types of pagers:
<TABLE>
<CAPTION>
TYPE OF PAGER FUNCTIONS
--------------------- -------------------------------------------------------------
<S> <C>
Tone Only Alerts the user with a signal, so the user will know to call
a pre-determined telephone number (such as the office).
Tone and Voice Alerts the user with a signal, followed by a brief voice
message.
Numeric (Digital) Visually displays numbers (such as a telephone number or a
Display coded message) on a screen to communicate with the user.
Alphanumeric Display Visually displays up to one-third of a page of text and/or
numbers on a screen so the user receives actual messages,
instead of just a telephone number or coded message.
</TABLE>
56
<PAGE> 67
The table below sets forth the number of various types of pagers in service
with subscribers of Page America at the dates indicated:
TYPES OF PAGERS IN SERVICE WITH SUBSCRIBERS OF PAGE AMERICA
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1994 1995 1996
--------------- --------------- ---------------
UNITS % UNITS % UNITS %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Digital display........................ 283,000 91.0% 207,000 93.7% 192,000 93.7%
Tone only.............................. 8,000 2.7 4,000 1.8 2,000 1.0
Tone and voice......................... 1,000 0.3 * -- * --
Alphanumeric display................... 19,000 6.0 10,000 4.5 11,000 5.3
------- ---- ------- ---- ------- ----
Total........................ 311,000 100.0% 221,000 100.0% 205,000 100.0%
======= ==== ======= ==== ======= ====
</TABLE>
- ---------------
* Less than 500 units in service
Page America sells and leases a variety of paging models, including
pen-like pagers and conventional pagers, with a range of available options, such
as silent vibrating alert and extended message memory. Page America provides its
subscribers with local, wide-area and national coverage.
Page America's value-added services include PageTalk(SM), which combines
the features of an answering machine and paging, enabling a caller to leave a
voice message in the private mailbox of an end user on Page America's voice mail
system, which in turn pages the end user to call the mailbox and retrieve the
message; PageGram(SM), which permits people originating messages to the end user
to use either an operator or a personal computer to send a message to an end
user who carries an alphanumeric pager; Group Calling, which allows the
notification of several pager users simultaneously with a common telephone
number; and Nationwide Paging, which allows a pager user to be paged in over 200
cities across the United States on a common frequency.
Page America provides paging services to pagers that are either (i) owned
by Page America and leased to its subscribers, (ii) owned by its subscribers or
(iii) owned by third party resellers which buy pagers from Page America, lease
or sell such pagers to their own subscribers and resell Page America's paging
services as resellers under agreements with Page America. Subscribers who own
their own pagers pay a monthly paging service fee to Page America. Subscribers
who lease pagers pay a monthly rental fee which is combined with a monthly
paging service fee. Service fees, leasing rates and purchase prices for pagers
vary widely by region served, service type and number of pagers purchased or
leased by the subscriber.
The following table sets forth the respective numbers and percentages of
pagers that are (i) serviced directly by Page America and owned by Page America,
(ii) serviced directly by Page America and owned by subscribers and (iii)
serviced by Page America through third party resellers, which may be owned by
the third party resellers or by their subscribers.
OWNERSHIP OF PAGERS IN SERVICE WITH SUBSCRIBERS OF PAGE AMERICA
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1994 1995 1996
---------------- ---------------- ----------------
UNITS % UNITS % UNITS %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Company owned........................... 96,000 30.9% 58,000 26.2% 53,000 25.9%
Subscriber owned........................ 109,000 35.0 87,000 39.4 88,000 42.9
Third party reseller.................... 106,000 34.1 76,000 34.4 64,000 31.2
------- ---- ------- ---- ------- ----
Total......................... 311,000 100.0% 221,000 100.0% 205,000 100.0%
======= ==== ======= ==== ======= ====
</TABLE>
57
<PAGE> 68
TECHNICAL FACILITIES
Page America owns and operates RCC network facilities in each of its two
markets. Page America presently provides service over six primary channels in
New York and three primary channels in Chicago enabling Page America to provide
a wide range of coverage, pricing and product offerings. One channel in New
York, for example, is devoted exclusively to alphanumeric service. Page
America's operations are highly automated and centralized, with all sales
offices linked to a centralized billing, inventory and customer service computer
system, and allowing direct interfacing from its resellers.
Page America completed construction of its own RCC system in New York in
1985. On July 13, 1990, Page America acquired the New York metropolitan area
paging assets and business of NYNEX Mobile Communications Company and its
affiliates ("NYNEX"). This acquisition increased Page America's number of units
in service by approximately 74,000 pagers. The New York technical facilities
currently consist of seven paging terminals. The New York network utilizes 220
transmitters over 14 available channels to provide service to 131,000 pagers
throughout most of Connecticut, New York State south of Albany (including Long
Island), New Jersey and Eastern Pennsylvania.
The Chicago RCC facilities, which were acquired by Page America in 1984,
serve approximately 74,000 pagers in the Illinois and Northwestern Indiana
areas. The Chicago technical facilities consist of three paging terminals, and
the Chicago network consists of 82 transmitters over 11 available channels. This
network provides service from the Wisconsin border, throughout Illinois,
Northwestern Indiana and into Western Michigan.
MARKETING
Page America's customers include individuals, corporations and other
organizations whose business or personal needs involve field operations or
require substantial mobility, accessibility and the need to receive timely
information. Potential users of pagers include people in every industry. Page
America services four principal market segments: mobile workers; medical and
other on-call professionals; business professionals seeking a competitive
advantage and the home market.
In order to reach these markets, Page America has developed four channels
of distribution: a direct sales force, resellers, independent retail dealers and
retail stores. Each of Page America's distribution channels focuses on those
market segments which it addresses most cost effectively. At December 31, 1996,
Page America employed 80 persons in direct sales and marketing support
positions.
The following table sets forth the respective revenues and percentages of
revenues that are attributed to (i) Page America's direct sales force, including
retail dealers, (ii) third party resellers and (iii) retail stores.
CHANNELS OF DISTRIBUTION
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1994 1995 1996
------------------- ------------------- -------------------
REVENUES % REVENUES % REVENUES %
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Direct Sales Force.............. $30,626,000 82.2% $24,117,000 82.9% $17,976,000 81.8%
Resellers....................... 6,505,000 17.5 4,611,000 15.8 3,275,000 14.8
Retail Stores................... 127,000 0.3 379,000 1.3 733,000 3.4
----------- --- ----------- --- ----------- ---
Total................. $37,258,000 100.0% $29,107,000 100.0% $21,984,000 100.0%
=========== === =========== === =========== ===
</TABLE>
Page America's own direct sales force operates out of 8 sales offices. The
direct sales effort is supported through a multimedia marketing campaign with
advertising, promotion and subscriber enhancement campaigns. Page America also
advertises in print media, including periodicals and yellow pages.
Page America also has a sales force which sells products and services in
bulk to resellers. Resellers purchase service at wholesale rates from Page
America, and in turn, provide service to their own customers.
58
<PAGE> 69
Resellers contribute to Page America's profits without Page America having to
incur any significant selling or administrative overhead.
Page America, in order to market its products directly to the consumers and
reduce its cost of sales has opened three Company-owned stores in New York and
one in Illinois. These stores sell cellular as well as paging products and
maintain a high end, high tech appearance attracting consumers at all levels.
Page America's marketing strategies have been focused on small to
medium-sized customer accounts, with the result that Page America is not
dependent on any single customer or reseller. No single customer or reseller
accounted for more than one percent of Page America's total revenues in the
fiscal year ended December 31, 1996.
REGULATION
The construction and operation of RCCs are subject to both federal and
state regulation, principally by the FCC under the Communications Act. Page
America believes it is in compliance with all applicable federal and state
regulations.
The FCC's review and revision of rules affecting paging companies is
ongoing and the regulatory requirements to which Page America is subject may be
modified significantly. The FCC recently has proposed adopting a market area
licensing scheme for all paging channels under which carriers would be licensed
to operate on a particular channel throughout a broad geographic area, rather
than being licensed on a site-by-site basis. Under the proposal, existing paging
facilities would be entitled to protection as grandfathered systems. The ability
of paging carriers to make major modifications to their current systems has been
restricted during the pendency of that rule making proceeding, and may continue
to be restricted once wide-area licensing rules are adopted. On February 8,
1996, the FCC announced a temporary cessation in the acceptance of applications
for new paging stations, and restricted current licensees from expanding into
new territories on existing channels. Existing licensees were (and are)
permitted to add transmitters or make modifications to existing facilities that
do not expand the licensee's previously authorized interference contours. On
April 23, 1996, the FCC partially lifted its "freeze" on the filing of paging
applications to permit limited expansion by existing licensees on their
previously-authorized channels. The FCC subsequently stated, by Public Notice,
that it would process paging applications filed on or before July 31, 1996;
applications filed after that date may or may not be processed, depending upon
their status when the FCC adopts a Report and Order in its rule making
proceeding to adopt market area licensing. The FCC also has proceedings underway
that may have a significant impact on the manner in which telephone numbers are
assigned and utilized by common carriers, including paging companies. Some of
the alternatives under consideration by the FCC, if adopted, could adversely
affect Page America.
Paging operations may be conducted only on channels assigned by the FCC.
The FCC grants a license for the use of such channels only upon compliance with
FCC regulations. Upon receiving a grant, a licensee is authorized to construct
and operate an RCC facility in the assigned area using the designated channel.
In Page America's markets all available channels have been allocated.
The FCC licenses granted to Page America are for terms of 10 years, at the
end of which time renewal applications must be approved by the FCC. The majority
of Page America's current licenses expire in 1999. In the past, FCC renewal
applications routinely have been granted upon a demonstration of compliance with
FCC regulations and adequate service to the public. The FCC has granted each
renewal license Page America has filed. Although Page America is unaware of any
circumstances which would prevent the grant of any renewal applications, no
assurance can be given that any of Page America's licenses will be renewed by
the FCC. In addition, the FCC has the authority to revoke or modify licenses. No
licenses owned by Page America have ever been revoked.
The Communications Act requires licensees such as Page America to obtain
prior approval from the FCC for the transfer of control of any construction
permit or station license, or any rights thereunder. The Communications Act also
requires prior approval by the FCC of acquisitions by Page America of other
paging companies and transfers by Page America of a controlling interest in any
of its licenses or construction
59
<PAGE> 70
permits. The FCC has approved each acquisition and transfer of control for which
Page America has sought approval.
The Communications Act also limits foreign ownership of entities that hold
licenses from the FCC. All of Page America's FCC licenses are owned by
wholly-owned subsidiaries of Page America. As a result, no more than 25 percent
of Page America's stock may be owned or voted by aliens or their
representatives, a foreign government or its representatives, or a foreign
entity.
Historically, RCC paging operations were also subject to regulation by the
states. The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act")
preempted most all state and local rate and entry regulation of all Commercial
Mobile Radio Services ("CMRS") operators effective August 10, 1994. Entry
regulations typically refer to the process whereby an RCC operator must apply to
the state to obtain a certificate to provide service in that state. Rate
regulation typically refers to the requirement that RCCs file a tariff
describing the carrier's rates, terms and conditions by which it provides paging
services. Under Section 332(c)(3)(B) of the Communications Act, however, any
state that had such regulations in place as of June 1, 1993, was permitted to
petition the FCC to extend such rate regulations. The FCC indicated that the
states who wished to continue such regulations bore the burden of proving that,
due to lack of marketplace competition and unavailability of local telephone
service, such continued regulation of RCC/CMRS operators would be necessary.
In August of 1994, eight states, Hawaii, Arizona, California, Connecticut
(cellular telephone service only) Louisiana, New York, Ohio, and Wyoming
petitioned the FCC to retain rate regulation authority over intrastate CMRS
operators. The FCC has denied all but one of these state petitions (no
confirmation as to the status of the Wyoming petition was available from the
FCC), and all appeals of those denials before the FCC have been exhausted. One
state, Connecticut, filed an appeal of the FCC's order denying its petition with
the U.S. Court of Appeals for the Second Circuit. The Second Circuit affirmed
the FCC's decision in early 1996.
Apart from rate regulations, some states may continue to regulate other
aspects of Page America's business in the form of zoning regulations, or "health
and safety" measures. The Budget Act does not preempt state authority to
regulate such matters. Although there can be no assurances given with respect to
future state regulatory approvals, based on its experience to date, Page America
knows of no reason to believe such approvals would not be granted.
More recently, Congress enacted the Telecommunications Act of 1996 (the
"Telecommunications Act"), which requires, inter alia, that state and local
zoning regulations shall not unreasonably discriminate among providers of
"functionally equivalent" wireless services, and shall not have the effect of
prohibiting the provision of personal wireless services. The Telecommunications
Act provides for expedited judicial review of state and local zoning decisions.
Additionally, state and local governments may not regulate the placement,
construction and modification of personal wireless service facilities on the
basis of the environmental effects of radio frequency emissions, if the
facilities comply with the FCC's requirements.
From time to time, legislation which could potentially affect Page America,
either beneficially or adversely, is proposed by federal and state legislators.
In 1993, federal legislation was enacted which permits auction of new radio
spectrum allocated by the FCC to new or existing services which may have the
effect of increasing competition for scarce spectrum and affecting costs of
operation in markets in which Page America operates.
The recently-enacted Telecommunications Act will also have an impact on the
paging industry; the Company expects that the impact will be mostly positive.
For example, the Telecommunications Act imposes a duty on all telecommunications
carriers to provide interconnection to other carriers, and requires local
exchange carriers (LECs) to, among other things, establish reciprocal
compensation arrangements for the transport and termination of calls, provide
other telecommunications carriers access to network elements on an unbundled
basis on reasonable and nondiscriminatory rates, terms and conditions. The
Telecommunications Act also requires the FCC to appoint (an) impartial
entit(y)(ies) to administer telecommunications numbering and to make numbers
available on an equitable basis. Additionally, as previously indicated, the
Telecommunications Act restricts state and local authority with regard to zoning
and environmental regulation
60
<PAGE> 71
of telecommunications operators. Other provisions of the Telecommunications Act,
however, may provide for increased competition to the Company (for example, the
provisions allowing the FCC to forbear from applying regulations and provisions
of the Communications Act to any class of carriers, not only to CMRS, and the
provisions allowing public utilities to provide telecommunications services
directly) and may impose additional regulatory costs (for example, provisions
requiring contributions to universal service by providers of both interstate and
intrastate telecommunications).
COMPETITION
Page America experiences competition, from independent companies as well as
Regional Bell Operating Companies, in its efforts to attract and retain
customers for its services in the markets in which it operates. Competition for
subscribers to Page America's paging services is based primarily on the quality,
price and breadth of services offered (including geographic coverage in each
market served). Since the transmitting and receiving equipment is virtually
identical, companies differentiate themselves by marketing, channels of
distribution, price competition, the variety of service options and breadth of
service coverage (more transmitters covering a larger territory). Page America
believes that based on the quality, price and breadth of services offered, it
generally competes effectively with its competitors.
Many RCCs in the United States are small companies serving limited market
areas; however, some of Page America's competitors, including Regional Bell
Operating Companies, are larger, have greater financial resources and are more
established than Page America.
In addition, future technological advances in the telecommunications
industry could create new services or products competitive with the paging
services currently provided by Page America. There can be no assurance that Page
America would not be adversely affected in the event of such technological
change.
EMPLOYEES
At February 28, 1997, Page America employed 140 persons, none of whom was
represented by a labor union. Page America believes that its relations with its
employees are good.
PROPERTIES
Page America leases approximately 15,200 square feet of office space at 125
State Street, Hackensack, New Jersey, under a lease expiring in 2000, at an
annual base rent of $281,000, approximately 10,715 square feet of office space
at 1919 South Highland Avenue, Lombard, Illinois, under a lease expiring in
2005, at an annual base rent of $151,000 and approximately 500 square feet of
retail space at 41 East 42nd Street, New York, New York, under a lease expiring
in 2004, at an annual base rent of $84,000. Page America has several other
leases for office and retail space which are not material individually and which
aggregate $472,000 per year expiring at various dates between 1997 and 2005.
Page America does not own any material real property. Page America also leases
sites for its transmitters on commercial broadcast towers, buildings and other
fixed sites at various rentals for various terms. Page America believes its
facilities are suitable and adequate for its purposes.
LEGAL PROCEEDINGS
Page America is involved in various lawsuits and proceedings arising in the
normal course of business. In the opinion of management of Page America, the
ultimate outcome of these lawsuits and proceedings will not have a material
effect on the results of operations, financial position or cash flows of Page
America.
61
<PAGE> 72
SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND STATISTICAL DATA OF PAGE AMERICA
The following selected consolidated financial data with respect to Page
America's statements of operations for each of the years in the three year
period ended December 31, 1996 and consolidated balance sheets at December 31,
1995 and 1996 are derived from the consolidated financial statements of Page
America that have been audited by Ernst & Young LLP, independent auditors, which
are included elsewhere herein and are qualified by reference to such financial
statements and notes related thereto. The consolidated statement of operations
data for the years ended December 31, 1992 and 1993 and the consolidated balance
sheet data at December 31, 1992, 1993 and 1994 are also derived from audited
financial statements not included in this Proxy Statement/Prospectus.
The selected consolidated financial data below should be read in
conjunction with "-- Management's Discussion and Analysis of Financial Condition
and Results of Operations of Page America" and the consolidated financial
statements of Page America and the related notes thereto contained elsewhere in
this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1992 1993 1994(4) 1995(2) 1996
-------- -------- -------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND PAGER DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:(1)
Total revenues............................................... $ 32,805 $ 30,257 $ 37,258 $ 29,107 $ 21,984
Operating Expenses:
Cost of service and sales.................................. 3,296 4,253 5,709 4,363 3,412
Selling.................................................... 6,544 4,879 6,842 6,066 3,988
General and administrative................................. 8,940 8,688 10,653 8,923 6,270
Technical.................................................. 3,455 3,343 4,685 4,262 3,190
Depreciation, amortization and
write-off of intangibles ................................ 9,519 9,793 10,817 8,585 6,173
------- ------- ------- ------- -------
Operating profit (loss)...................................... 1,051 (699) (1,448) (3,092) (1,049)
Interest expense............................................. 4,783 4,032 5,102 6,263 6,153
Other expenses............................................... 1,957 1,814 478 3,738 908
Extraordinary gain(5)........................................ 7,156 -- -- -- --
Cumulative effect of changes in accounting principles(7)..... (3,960) -- -- -- --
------- ------- ------- ------- -------
Net loss..................................................... (2,493) (6,545) (7,028) (13,093) (8,110)
Preferred stock dividend requirements........................ (2,791) (3,268) (3,023)(3) (2,863)(3) (2,864)
------- ------- ------- ------- -------
Net loss applicable to common shares......................... $ (5,284) $ (9,813) $(10,051) $(15,956) $ (10,974)
======= ======= ======= ======= =======
Net loss per common share(6)................................. $ (1.40) $ (2.55) $ (1.55) $ (2.01) $ (0.88)
======= ======= ======= ======= =======
Weighted average shares outstanding.......................... 3,774 3,847 6,464 7,936 12,498
OTHER DATA:
Pagers in service at end of period........................... 228,000 305,000 311,000 221,000 205,000
Capital expenditures, net of book value of pagers sold
(excluding acquisitions)................................... $ 4,296 $ 2,630 $ 5,365 $ 3,300 $ 2,597
Net cash provided by (used in):
Operating activities....................................... $ 5,688 $ 8,028 $ 8,602 $ 2,064 $ 2,988
Investing activities....................................... $ (8,375) $(20,312) $ (8,881) $ 11,329 $ (2,907)
Financing activities....................................... $ 2,779 $ 15,030 $ (1,505) $(13,770) $ (542)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1992(5) 1993(4) 1994(3) 1995(2)(3) 1996(2)
-------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficiency)................................ $(10,242) $ (2,053) $ (9,541) $(52,444) $ (58,409)
Total assets................................................ 58,755 75,193 70,229 44,003 39,561
Long-term debt, less current maturities..................... 48,269 57,850 56,953 69 37
Series A, A-2 and B Preferred Stock......................... 17,063 -- -- -- --
Accumulated deficit......................................... (59,365) (68,980) (78,989) (94,945) (105,919)
Shareholders' equity (deficit).............................. (21,402) 9,096 439 (11,222) (20,746)
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) for
the years ended December 31, 1992, 1993, 1994, 1995 and 1996 was $10.6
million, $9.1 million, $9.4 million, $5.5 million, and $5.1 million,
respectively. EBITDA is a standard measure of financial performance in the
paging industry but should not be construed as an alternative to operating
income or cash flows from operating activities as determined in accordance
with generally accepted accounting principles.
(2) In July 1995, Page America sold its California and Florida paging assets.
Concurrently with the sale, Page America amended the Page America Credit
Facility and Subordinated Notes providing, among other things, for
accelerated maturities. Such debt, which was classified as long term at
December 31, 1994, is in default and is classified as a current liability at
December 31, 1995 and 1996. See Note E of Notes to Consolidated Financial
Statements.
(3) In August 1994 and March 1995, Page America issued shares of its Common
Stock as full payment of fiscal year 1994 dividends on Series One Preferred
Stock. On June 30, 1995, in exchange for the waiver of the dividend payment
on Series One Preferred Stock, the accrued dividends were added to the
liquidation value. In June 1996, Page America issued shares of its Common
Stock in payment of accrued dividends at December 31, 1995 on Series One
Convertible Preferred Stock. See Note G of Notes to Consolidated Financial
Statements.
(4) On December 30, 1993, Page America acquired Crico and refinanced its senior
and subordinated debt and redeemable Preferred Stocks.
(5) In June 1992, Page America repurchased its subordinated note payable.
(6) Page America has never paid any cash dividends on its Common Stock.
(7) Effective January 1, 1992, Page America changed its method of depreciation
for pager equipment from the straight line method to the double declining
balance method.
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<PAGE> 73
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PAGE AMERICA
RESULTS OF OPERATIONS
The following table presents certain items in the Consolidated Statement of
Operations and as a percentage of total revenues for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1994 1995 1996
--------------- ---------------- ---------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total revenues............................................... $37,258 100.0% $ 29,107 100.0% $21,984 100.0%
Operating expenses:
Cost of service and sales.................................... 5,709 15.3 4,363 15.0 3,412 15.5
Selling expenses............................................. 6,842 18.4 6,066 20.8 3,988 18.2
General and administrative expenses.......................... 10,653 28.6 8,923 30.7 6,270 28.5
Technical expenses........................................... 4,685 12.6 4,262 14.6 3,190 14.5
Depreciation, amortization and write-off of intangibles...... 10,817 29.0 8,585 29.5 6,173 28.1
------- ----- ------- -------
Operating profit (loss)...................................... (1,448) (3.9) (3,092) (10.6) (1,049) (4.8)
Interest expense............................................. 5,102 13.7 6,263 21.5 6,153 28.0
Net loss..................................................... $(7,028) (18.9)% $(13,093) (45.0)% $(8,110) (36.9)%
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES for fiscal 1996 were approximately $7.1 million (24.5
percent) lower than that of 1995. The decline was due to the sale, in 1995, of
Page America's Florida and California operations ($4.4 million) plus a reduction
in continuing operations ($2.7 million) resulting from lower average revenue per
unit (ARPU) and a reduction in units in service. ARPU declined as a result of
the emphasis on the sale of pagers (for which Page America does not receive
recurring equipment rental revenue) and rates obtained from new subscribers were
lower than the rates associated with lost subscribers due to competitive
pressure. While revenue rates associated with leased units are higher than rates
associated with customer owned units, Page America does not believe that overall
profitability of these arrangements is substantially different because of the
depreciation costs associated with leased units. Page America's units in service
at December 31, 1996 declined by 16,000 units from the 221,000 units in service
at December 31, 1995 as a result of limited capital available to purchase new
pagers.
COST OF SERVICE decreased by $512,000 (19.4 percent) in 1996. The decrease
was principally due to cost of service associated with the sold operations. COST
OF SALES decreased by approximately $439,000 (25.4 percent) in 1996. As a
percent of sales revenues, cost of sales increased from 64% of sales revenues in
1995 to 67% in 1996, primarily as a result of lower selling prices due to
competitive pressure. The average per unit sales price was $55 in 1996 versus
$58 in 1995.
SELLING EXPENSE decreased by approximately $2.1 million (34.3 percent) in
1996 as compared to 1995. $1 million of the decrease was due to selling expenses
associated with the sold operations. Page America's remaining operations
experienced a decrease of $1.1 million primarily due to a reduction in sales
personnel ($500,000) and advertising ($600,000).
GENERAL AND ADMINISTRATIVE EXPENSES decreased by $2.7 million (29.7
percent). A decrease of $1.4 million was due to expenses associated with the
sold operations. Page America's remaining operations experienced a decrease of
$1.3 million primarily due to a reduction in personnel and a decrease in
professional fees, partially offset by an increase in bad debt expense.
TECHNICAL EXPENSES decreased by $1.1 million (25.1 percent), principally as
a result of the sale of the Florida and California operations.
DEPRECIATION EXPENSE decreased by $938,000 (17.9 percent), $778,000 of
which was due to the sale of depreciable assets in Florida and California. The
decrease experienced by Page America's remaining operations resulted from the
decrease in pagers on lease to customers.
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<PAGE> 74
AMORTIZATION EXPENSE decreased by approximately $1.5 million (44.0 percent)
in 1996 over 1995, principally due to the elimination of intangible assets
related to the Florida and California operations.
INTEREST EXPENSE remained relatively constant in 1996 as compared to 1995.
OTHER EXPENSES decreased approximately $2.8 million (75.7 percent) in 1996.
The decrease was primarily due to the following special charges in 1995: a
write-down of deferred financing costs related to the senior debt and
subordinated debt amounting to $1.6 million, loss realized on the sale of the
Florida and California operations of approximately $718,000 and costs associated
with the debt restructuring in the amount of $726,000. Fiscal year 1996 included
banking fees of $450,000 associated with the modification of the senior credit
facility.
NET LOSS was $8.1 million (36.9 percent of total revenues) in the year
ended December 31, 1996, as compared to $13.1 million (45.0 percent of total
revenues) in the year ended December 31, 1995.
EBITDA (earnings before interest, taxes, depreciation and amortization) in
1996 was $5.1 million as compared to $5.5 million in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Total revenues for fiscal 1995 were approximately $8.2 million (21.9
percent) lower than that of 1994. The decline was due to the sale, in 1995, of
Page America's Florida and California operations ($4.5 million) plus a reduction
in continuing operations ($3.7 million) resulting from lower average revenue per
unit (ARPU) and a reduction in units in service. ARPU declined as a result of
the emphasis on the sale of pagers (for which Page America does not receive
recurring equipment rental revenue) and rates obtained from new subscribers were
lower than the rates associated with lost subscribers due to competitive
pressure. While revenue rates associated with leased units are higher than rates
associated with customer owned units, Page America does not believe that overall
profitability of these arrangements is substantially different because of the
depreciation costs associated with leased units. Page America's units in service
at December 31, 1995 declined by 90,000 units (78,000 units are attributable to
the sale of the Florida and California operations) from the 311,000 units in
service at December 31, 1994. The decline attributable to the remaining
operation is a result of limited capital available to purchase new pagers.
COST OF SERVICE decreased $303,000 (10.3 percent) in 1995. This decrease
was principally due to cost of service associated with the sold operations. Cost
of sales decreased by approximately $1 million (37.7 percent) in 1995. As a
percent of sales revenues, cost of sales increased from 61% of sales revenues in
1994 to 64% in 1995, primarily as a result of lower selling prices due to
competitive pressure. The average per unit sales price was $58 in 1995 versus
$68 in 1994.
SELLING EXPENSE decreased by approximately $776,000 (11.3 percent) in 1995
as compared to 1994. $661,000 of the decrease was due to selling expenses
associated with the sold operations.
GENERAL AND ADMINISTRATIVE EXPENSES decreased by $1.7 million (16.2
percent). A decrease of $1 million was due to expenses associated with the sold
operations. Page America's remaining operations experienced a decrease of
$700,000 primarily due to a reduction in bad debt expense and, to a lesser
extent, reductions in personnel.
TECHNICAL EXPENSES decreased by $423,000 (9.0 percent), principally as a
result of the sale of the Florida and California operations, partially offset by
an increase in personnel costs.
DEPRECIATION EXPENSE decreased by $1.1 million (17.8 percent), $462,000 of
which was due to the sale of depreciable assets in Florida and California. The
decrease experienced by Page America's remaining operations resulted from the
lower average price of pagers purchased in 1995 and the decrease in pagers on
lease to customers, partially offset by a $465,000 valuation adjustment of pager
assets in the fourth quarter of 1995.
AMORTIZATION EXPENSE decreased by approximately $1.1 million (24.7 percent)
in 1995 over 1994, principally due to the elimination of intangible assets
related to the Florida and California operations and
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<PAGE> 75
certain customer lists becoming fully amortized in the second quarter of 1994
and first quarter of 1995, partially offset by a write off of certain
intangibles related to the NYNEX acquisition.
INTEREST EXPENSE increased by approximately $1.2 million (22.8 percent) in
1995 primarily due to higher interest rates, in the current period, on
borrowings outstanding under Page America's senior credit facility and
subordinated debt agreement.
OTHER EXPENSES increased approximately $3.3 million (682 percent) in 1995.
The increase was primarily due to a write-down of deferred financing costs
related to the senior debt and subordinated debt amounting to $1.6 million, loss
realized on the sale of the Florida and California operations of approximately
$718,000 and costs associated with the debt restructuring in the amount of
$726,000.
NET LOSS was $13.1 million (45.0 percent of total revenues) in the year
ended December 31, 1995, as compared to $7.0 million (18.9 percent of total
revenues) in the year ended December 31, 1994.
EBITDA in 1995 was $5.5 million as compared to $9.4 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Page America had working capital deficiencies of $58.4 million, $52.4
million, $9.5 million and $2.1 million at December 31, 1996, 1995, 1994 and
1993, respectively. The $6.0 million increase in working capital deficiency from
1995 to 1996 was principally due to increases in accrued interest ($3.2
million), accrued dividends ($1.4 million) and short term borrowings ($900,000).
The $42.9 million increase from 1994 to 1995 was principally due to an increase
in current debt maturities related to Page America's Senior Credit Facility
($33.2 million) and Subordinated Notes ($14.7 million), offset by decreases in
accounts payable ($2.8 million), accrued expenses ($1.5 million) and accrued
interest ($700,000). The $7.4 million increase from 1993 to 1994 was principally
due to Page America's investment in RCC equipment ($2.0 million), additional
purchase price in connection with the Crico acquisition ($1.5 million), and to
increases in accrued dividends ($1.4 million), accounts payable ($1.0 million)
and accrued interest ($800,000).
Page America, since its inception, has experienced a deficiency in working
capital and recurring losses. In 1995, as a result of non-compliance by Page
America with certain covenants of its credit facility (the "Credit Facility"),
the terms were modified to accelerate the final maturity to December 29, 1995,
and the Subordinated Notes were modified to provide for a final maturity of six
months thereafter. On April 26, 1996, the Credit Facility was again modified to
provide for a revolving credit loan of $750,000, a waiver of all existing
defaults on certain financial and other covenants, the omission of financial
covenants effective April 30, 1996 and an extension of the maturity date to
November 30, 1996. The Credit Facility was not repaid at maturity causing the
Credit Facility to be in default. In addition, the Subordinated Notes matured at
December 31, 1996 and are in default (see Note E of Notes to Consolidated
Financial Statements). Such debt is classified as a current liability and Page
America's current liabilities exceeded its current assets by $58.4 million at
December 31, 1996. On April 23, 1996, Page America entered into a definitive
agreement to sell substantially all of its assets to Metrocall, Inc. On January
30, 1997, this agreement was amended. The amended agreement provides for a
purchase price of (A) $25 million in cash, (B) 1,500 shares of series B
Preferred Stock of Metrocall having a stated value of $15 million, (C) 762,960
shares of Metrocall Common Stock, and (D) shares of Metrocall Common Stock or
other equity securities having a share value equal to $15 million, subject to
adjustment based on changes in the Company's Working Capital Deficit and
decreases in service revenue below specified thresholds. Metrocall has the
option to substitute cash at closing for all or a portion of the stock
consideration. Excluded from the sale are cash, assets related to the employee
benefits plans and to the Florida and California operations which had been
previously sold, liabilities under the senior credit facility, subordinated debt
agreement and NEC America leasing contract and obligations with respect to
federal, state and local taxes. This sale is subject to the approval of Page
America's shareholders. After expenses, it is anticipated that the sale will
result in a gain of approximately $21 million. There is no assurance that the
transaction will be consummated.
Following completion of the sale of its assets to Metrocall, Page America
plans to liquidate. The cash to be received by Page America from this sale will
not be sufficient for Page America to pay in full in cash its
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<PAGE> 76
outstanding obligations under the Credit Facility or under the Subordinated
Notes or to pay its other outstanding liabilities. Page America anticipates
paying off the balance of its obligations from proceeds generated by the sale of
Metrocall Common Stock, Common Stock Equivalents and Series B Preferred Stock.
The value of the assets of Page America to be available for distribution to
its shareholders upon liquidation cannot be ascertained at this time and will
depend, among other things, on the amount of its remaining liabilities, the
number of shares of Metrocall Common Stock or Common Stock Equivalents to be
returned to Page America from the escrow and the sale or disposition of the
Metrocall Common Stock, Common Stock Equivalents and Series B Preferred Stock to
be received by Page America. Upon the completion of the sale to Metrocall, Page
America will not conduct any ongoing business operations or generate any
revenues by reason thereof. Accordingly, there can be no assurance that there
will be any assets available for distribution to Page America's shareholders
upon liquidation and dissolution.
At December 31, 1996 Page America had net operating losses of approximately
$79.9 million for federal income tax purposes which will expire at varying dates
between 1998 and 2011. Certain stockholder transactions have resulted in an
ownership change, as defined, which, under the Internal Revenue Code, limits the
utilization of the net operating loss carryforwards.
Page America maintains a policy for delinquent customers of billing and
attempting to collect the balance of the unexpired term of their contracts and
the value of unreturned leased pagers. In 1996, the Company wrote off
approximately $900,000 of accounts receivable against the allowance of doubtful
accounts.
INFLATION AND CHANGING PRICES
Inflation has not materially affected the sale of paging services by Page
America. Paging systems equipment, leasing costs and transmission costs have not
risen significantly, nor has Page America substantially increased its charges to
customers. Pager costs have actually declined in recent years. This reduction in
cost has generally been reflected in lower prices charged to subscribers.
Overhead expenses are, however, subject to inflationary pressure.
DIRECTORS AND EXECUTIVE OFFICERS OF PAGE AMERICA
The executive officers and directors of Page America are as follows:
<TABLE>
<CAPTION>
DIRECTOR OR
NAME AGE POSITION WITH PAGE AMERICA OFFICER SINCE
- --------------------------------------- --- ------------------------------------ -------------
<S> <C> <C> <C>
Kathleen C. Parramore.................. 45 President, Chief Operating Officer 1990
and Director
Richard A. Contrera.................... 51 Vice President -- RCC Engineering 1985
Martin Katz............................ 44 Vice President -- Administration
and Chief Financial Officer 1995
Martin H. Neidell...................... 51 Secretary 1983
David A. Barry(1)(2)................... 50 Chairman of the Board, Director 1988
and Chief Executive Officer
Jack Kadis............................. 48 Director 1996
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
The Directors are presently elected for one year terms which expire at the
next annual meeting of shareholders. Executive officers are elected annually by
the Board of Directors to hold office until the first meeting of the Board
following the next annual meeting of shareholders and until their successors are
chosen and qualified.
Ms. Parramore has been President and Chief Operating Officer of Page
America since March 1995 and was Vice President from December 1990 until 1995.
She has been employed by Page America since April
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<PAGE> 77
1990. From 1989 to 1990, she was general manager of Nationwide Cellular; from
1987 to 1989, she was Chief Financial Officer of American Mobile Communications;
and from 1984 to 1987, she was Chief Financial Officer of AT&T Intelliserve.
Mr. Contrera has been Vice President -- RCC Engineering of Page America
since July 1985 and has been employed by Page America since November 1983. In
1983, Mr. Contrera was a Project Manager for 3M Corporation and from 1973
through 1982 held various positions with U.A. Columbia Cablevision, Inc.,
including Director of Operations.
Mr. Katz has been Vice President-Administration and Chief Financial Officer
since April 1995. From 1987 through 1994, Mr. Katz was Chief Financial Officer
and Vice President of Finance and Business Affairs at CEL Communications, Inc.
Mr. Neidell has been Secretary of Page America since 1983. For more than
the past five years, Mr. Neidell has been a partner of Stroock & Stroock & Lavan
LLP, counsel to Page America.
Mr. Barry has been President of Bariston since April 1986. He has been
acting as Chairman of the Board and Chief Executive Officer of Page America
since August 1, 1995. Mr. Barry was Managing Director and Principal of Winthrop
Financial Associates from September 1982 to April 1986. Prior thereto Mr. Barry
was a Managing Director of PaineWebber Incorporated.
Mr. Kadis has been a director since 1996. Mr. Kadis has been Executive Vice
President of Bariston for the past ten years.
Page America's non-employee Directors are entitled to annual fees of $1,500
and $250 for each meeting attended, plus reimbursement for expenses in attending
meetings. Messrs. Barry and Kadis have waived their rights to these fees.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid to
Page America's Chief Executive Officer and to each of the other most highly
compensated executive officers of Page America whose salary and bonus for 1996
exceeded $100,000. Mr. Barry, Page America's Chief Executive Officer, does not
receive any compensation for service in such capacity.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
------------------------------- COMPENSATION
OTHER ------------ ALL OTHER
SALARY BONUS ANNUAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMP. ($) (#) (1)($)
- ---------------------------------- ----- -------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Kathleen C. Parramore............. 1996 $165,000 $ 25,000 -- -- $2,807
President and Chief 1995 $160,673 -- -- 150,000 $4,957
Operating Officer 1994 $140,000 $ 39,000 -- -- --
-- -- --
Martin Katz....................... 1996 $150,000 $ 20,000 -- -- $2,045
Vice President 1995 $102,692 -- -- 75,000 $1,038
Richard A. Contrera............... 1996 $110,140 $ 10,000 -- -- $1,377
Vice President 1995 $110,039 -- -- -- $5,173
1994 $104,745 $7,867 -- -- --
</TABLE>
- ---------------
(1) Consists of company matching contributions under Page America's Stock
Purchase Plan and $650 in premiums on an insurance policy on the life of Ms.
Parramore under which she designates the beneficiaries.
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<PAGE> 78
AGREEMENTS
Ms. Parramore is employed under an employment agreement with Page America
which expires on February 28, 1997, and provides for an annual salary at the
rate of $165,000 per year, plus a discretionary bonus. This agreement is
automatically extended for successive one year periods unless terminated by Page
America or Ms. Parramore at least three months prior to any expiration date.
Page America may terminate the agreement at any time, with or without cause;
provided, however, that if such termination is without cause, Ms. Parramore will
be entitled to continue to receive her salary for one year.
In connection with the Acquisition, Page America entered into additional
employment arrangements with Ms. Parramore, Richard Contrera and Martin Katz.
See "The Acquisition--Interest of Management in the Acquisition." Metrocall will
not assume any of Page America's obligations under these employment agreements.
STOCK OPTION GRANTS AND EXERCISES
There were no stock options granted during the fiscal year ended December
31, 1996. The following table sets forth information with respect to the named
executives concerning exercise of options during the fiscal year ended December
31, 1996 and unexercised options held at December 31, 1996. The value of
unexercised, in-the-money options at December 31, 1996 is the difference between
the exercise price of options and the fair market value of Page America Common
Stock on December 31, 1996. The last available price quotation for Page America
Common Stock was on April 16, 1996 and, therefore, current price quotations are
not available.
STOCK OPTION EXERCISES TABLE
FOR THE YEAR ENDED DECEMBER 31, 1996
YEAR END STOCK VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR END($)
ACQUIRED ON VALUE ---------------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ----------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kathleen C.
Parramore........... 0 0 37,500 120,500 0 0
Martin Katz........... 0 0 15,000 60,000 0 0
Richard A. Contrera... 0 0 5,000 0 0 0
</TABLE>
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<PAGE> 79
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of Page America Common Stock at January 31, 1997 by (i)
each person known by Page America to beneficially own more than five percent of
outstanding Page America Common Stock, (ii) each Director of Page America, (iii)
each of the most highly compensated executive officers of Page America and (iv)
all Directors and executive officers of Page America as a group. Except as noted
below, each person or entity has sole voting and investment power with respect
to all shares listed as owned by such person or entity.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER(1) PERCENT OF CLASS
- ------------------------------------------------------------------ --------- ----------------
<S> <C> <C>
David A. Barry(2)................................................. 8,104,940 33.6%
One International Place
Boston, MA 02110
Jack Kadis(2)..................................................... 8,069,113 33.5%
One International Place
Boston, MA 02110
Bariston Paging Partners, L.P.(2)................................. 7,781,837 32.7%
c/o Bariston Associates, Inc.
One International Pl.
Boston, MA 02110
T. Rowe Price High Yield Fund, Inc.(3)............................ 2,264,135 12.4%
100 East Pratt Street
Baltimore, MD 21202
T. Rowe Price Strategic Partners Associates, Inc.(4).............. 974,401 5.7%
100 East Pratt Street
Baltimore, MD 21202
Sandler Mezzanine General Partnership(5).......................... 1,497,464 8.5%
767 Fifth Avenue
New York, NY 10153
Revy Investment Co., Inc.(6)...................................... 1,022,724 6.0%
1300 S.W. Fifth Avenue
Portland, OR 97201
Richard Contrera(7)............................................... 25,757 *
Kathleen Parramore(8)............................................. 168,624 1.0%
Martin Katz(9).................................................... 75,000 *
Directors and executive officers as a group(10) (5 persons)....... 296,467 1.8%
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes exercise of options or warrants to purchase shares of Page America
Common Stock and conversion of shares of Series One Preferred Stock into
shares of Page America Common Stock.
(2) David A. Barry is a director of Page America elected by the holders of Page
America's Series One Preferred Stock. Mr. Barry and Jack Kadis are the
general partners of BHI Associates VI, L.P., which is the sole general
partner of Bariston Paging. Messrs. Barry and Kadis are the controlling
shareholders of Bariston Holdings, Inc., which is the sole shareholder of
Bariston and Bariston Securities. The total number of shares listed above
include 156,242 shares of Series One Preferred Stock owned by Bariston
Paging; 2,254 shares of Series One Preferred Stock owned by Bariston
Associates; 378 shares of Series One Preferred Stock owned by Mr. Barry,
which are convertible into an aggregate of 3,530,180 shares of Page America
Common Stock; 125,778 shares of Page America Common Stock issuable upon
exercise of warrants owned by BHI Associates VI, L.P.; 41,672 shares of
Page America Common Stock issuable upon exercise of warrants owned by
Bariston; 4,310,140 shares of Page America Common Stock owned by Bariston
Paging; 69,742 shares of Page America Common Stock owned by Bariston; and
27,428 shares of Page America Common Stock owned by Mr. Barry. Messrs.
Barry and Kadis disclaim beneficial ownership of the portion of the
foregoing shares in which they have no actual pecuniary interest.
(3) Consists of 20,000 shares of Series One Preferred Stock convertible into an
aggregate of 444,400 shares of Page America Common Stock; warrants to
purchase 711,111 shares of Page America Common Stock at an exercise price
of $3.50 per share; and 1,108,624 shares of Page America Common Stock.
(4) T. Rowe Price Strategic Partners Associates, Inc. is the general partner of
T. Rowe Price Strategic Partners Fund, L.P. (the "Fund") and T. Rowe Price
Strategic Partners Fund II, L.P. ("Fund II").
69
<PAGE> 80
Consists of 5,642 shares of Series One Preferred Stock convertible into an
aggregate of 125,365 shares of Page America Common Stock, warrants to
purchase 15,200 shares of Page America Common Stock at an exercise price of
$3.50 per share and 356,358 shares of Page America Common Stock owned by
the Fund and 12,918 shares of Series One Preferred Stock convertible into
an aggregate of 287,037 shares of Page America Common Stock, warrants to
purchase an aggregate of 34,800 shares of Page America Common Stock at an
exercise price of $3.50 per share and 155,641 shares of Page America Common
Stock owned by Fund II.
(5) Sandler Mezzanine General Partnership is the investment General Partner of
each of Sandler Mezzanine T-E Partners, L.P. ("TE"), Sandler Mezzanine
Partners, L.P. ("SM") and Sandler Mezzanine Foreign Partners, L.P. ("FP").
Each of MJM Media Corp., which is controlled by Michael J. Marocco, ARPH
Media Corp., which is controlled by Harvey Sandler, EMEBE Media Corp.,
which is controlled by Barry Lewis, and Kornreich Media Corp., which is
controlled by John A. Kornreich, is a General Partner of Sandler Mezzanine
General Partnership. Consists of 5,390, 12,020, and 2,590 shares of Series
One Preferred Stock owned by TE, SM, and FP, respectively, which are
convertible into an aggregate of 444,400 shares of Page America Common
Stock; 164,022, 365,782 and 78,815 shares of Page America Common Stock
owned by TE, SM and FP, respectively; and warrants to purchase 119,823,
267,200 and 57,422 shares of Page America Common Stock owned by TE, SM, and
FP, respectively, at an exercise price of $3.50 per share. Messrs. Marocco,
Sandler, Lewis and Kornreich disclaim beneficial ownership of the portion
of the foregoing shares in which they have no actual pecuniary interest.
(6) Includes 551,729 shares of Page America Common Stock and 20,000 shares of
Series One Preferred Stock convertible into an aggregate of 444,400 shares
of Page America Common Stock.
(7) Includes 10,000 shares of Page America Common Stock issuable upon exercise
of options and 15,757 shares of Page America Common Stock vested under Page
America's Stock Purchase Plan.
(8) Includes 162,500 shares of Page America Common Stock issuable upon exercise
of options and 5,724 shares of Page America Common Stock vested under Page
America's Stock Purchase Plan.
(9) Consists of 75,000 shares of Page America Common Stock issuable upon
exercise of options.
(10) Includes 237,500 shares of Page America Common Stock issuable upon exercise
of options owned by all executive officers and Directors; 23,140 shares of
Page America Common Stock vested under Page America's Stock Purchase Plan;
27,428 shares of Page America Common Stock and 378 shares of Series One
Preferred Stock which are convertible into 8,399 shares of Page America
Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bariston has been engaged by Page America to provide investment banking
functions for which it receives an annual fee of $105,000, subject to cost of
living adjustments. This agreement will terminate upon the earlier to occur of
Bariston and its affiliates ceasing to control a majority of the Series One
Preferred Stock or Page America Common Stock issued upon conversion thereof or
Bariston and its affiliates owning less than 20 percent of Page America's fully
diluted shares of Page America Common Stock. At December 31, 1996, Page America
owed to Bariston the amount of approximately $288,565, which amount is expected
to be paid at the Closing of the Acquisition. Bariston will receive an
additional fee, estimated to be $100,000, in connection with management of Page
America during its liquidation, and will be reimbursed for expenses incurred by
it in connection therewith.
Holders of a majority of Series One Preferred Stock, as a class, have the
right to elect two directors of Page America. In addition, if any dividend
payments are not made to the holders of shares of Series One Preferred Stock,
the dividend rate will increase to 15% per annum and the holders of a majority
of Series One Preferred Stock will be entitled to elect an additional director
of Page America. If a change in control of Page America occurs, the holders of
Series One Preferred Stock have the right to cause Page America to repurchase
such stock at its liquidation value, plus accrued dividends. Bariston Paging
holds a majority of the Series One Preferred Stock. Messrs. Barry and Kadis are
the directors elected by the holders of Series One Preferred Stock. The holders
of a majority of the Series One Preferred Stock have agreed that as long as they
continue to own a majority of such stock they will vote for a nominee designated
by the holders of a majority of such stock.
70
<PAGE> 81
David A. Barry and Jack Kadis, directors of Page America, are affiliated
with Bariston Securities and Bariston.
All of the terms and provisions of the foregoing transactions were
determined on an arm's-length basis. Page America believes that the terms of
these transactions were no less favorable to Page America than those which could
have been obtained from unaffiliated third parties.
71
<PAGE> 82
MANAGEMENT OF METROCALL
The directors and executive officers of Metrocall are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------------
<S> <C> <C>
Richard M. Johnston.............. 62 Chairman of the Board (term expires in 1999)
William L. Collins, III.......... 46 President, Chief Executive Officer and Vice
Chairman of the Board (term expires in 1997)
Harry L. Brock, Jr............... 61 Director (term expires in 1999)
Ronald V. Aprahamian............. 50 Director (term expires in 1998)
Suzanne S. Brock................. 58 Director (term expires in 1997)
Francis A. Martin, III........... 53 Director (term expires in 1997)
Elliott H. Singer................ 56 Director (term expires in 1998)
Ray D. Russenberger.............. 42 Director (term expires in 1999)
Ryal R. Poppa.................... 63 Director (term expires in 1998)
Michael Greene................... 35 Director (term expires in 1999)
Royce Yudkoff.................... 41 Director (term expires in 1999)
Steven D. Jacoby................. 39 Chief Operating Officer and Executive Vice
President
Vincent D. Kelly................. 37 Chief Financial Officer, Treasurer and Executive
Vice President
</TABLE>
The holders of Series A Preferred Stock have the right to designate two
directors of Metrocall. Michael Greene and Royce Yudkoff have been designated by
such holders.
Set forth below is certain biographical information regarding the directors
and executive officers of the Company.
Ronald V. Aprahamian has been a member of the Board of Directors of
Metrocall since May 1995. Mr. Aprahamian serves as a Consulting Director for the
Riggs National Bank of Washington, D.C., and serves on the board of directors of
Sunrise Assisted Living, Inc. Mr. Aprahamian was Chairman and Chief Executive
Officer of The Compucare Company, a healthcare computer software services firm,
from January 1988 to October 1996. Mr. Aprahamian's son, Tom Aprahamian, is Vice
President of Financial Operations of Metrocall and receives an annual salary of
approximately $85,000.
Harry L. Brock, Jr. founded Metrocall and served as Chairman of the Board
(through January 1996) and President (through August 1995). Mr. Brock has been a
director of Metrocall since 1982, and its predecessor companies since 1965. Mr.
Brock was a founding partner of Cellular One of Washington, one of the first
operating cellular systems. Mr. Brock is the husband of Suzanne S. Brock.
Richard M. Johnston has served as Chairman of the Board of Directors of
Metrocall since January 1996, and has been a member of the Board of Directors
since September 1994. Mr. Johnston has been Vice President -- Investments of The
Hillman Company, an investment firm which is a greater than 5% beneficial owner
of Metrocall's Common Stock, since 1970 and has been a director of The Hillman
Company since 1994. Mr. Johnston serves on the board of directors of Novoste
Corporation.
Suzanne S. Brock has been a director of Metrocall since 1982 and was
Secretary (through May 1996) and Treasurer (through August 1995) of Metrocall.
Ms. Brock was employed by Metrocall and its predecessor companies from 1965
through May 1996. Ms. Brock is the wife of Harry L. Brock, Jr.
William L. Collins III has been President and Chief Executive Officer of
Metrocall since January 1996 and has served as Director and Vice Chairman of the
Board since September 1994. From 1988 to 1994, Mr. Collins was the Chairman of
the Board, Chief Executive Officer, President and a director of FirstPAGE USA,
Inc. and its predecessor companies. Mr. Collins serves as Chairman of the Board
of Directors of USA Telecommunications, Inc. From 1977 to 1988, Mr. Collins was
President of C&C, Inc. ("C&C"), a national communications marketing and
management company.
72
<PAGE> 83
Francis A. Martin III has been a member of the Board of Directors of
Metrocall since November 1994. Mr. Martin is a principal of U.S. Media Group and
Chairman of the Board, President and Chief Executive Officer of U.S. Media
Holdings, Inc. Mr. Martin previously served as President and Chief Executive
Officer of Chronicle Broadcasting Company, a publicly-held television
broadcasting company.
Ray D. Russenberger has been a director of Metrocall since November 1996.
Mr. Russenberger was Vice Chairman of A+ Network from October 1995 through the
merger of A+ Network into Metrocall in November 1996. He served as Chairman of
the Board and Chief Executive Officer of Network Paging Corporation ("Network")
(which was merged with A+ Communications, Inc. in 1995 to form A+ Network) since
December 1988. From 1985 to 1990, he founded and was President of Network Paging
Corporation, a paging company sold to Mobile Communications Corporation of
America, a wholly-owned subsidiary of BellSouth Corporation, in 1990. Mr.
Russenberger serves on the board of directors of the First American Bank of
Pensacola.
Elliott H. Singer has been a director of Metrocall since November 1996. Mr.
Singer was Chairman of the Board of A+ Communications, Inc. from its formation
in 1985 and was chairman of A+ Network from October 1995 until its merger with
Metrocall in November 1996, and also served as Chief Executive Officer of A+
Network from 1985 to January 15, 1996. Mr. Singer was the owner and Chief
Executive Officer of A+ Network's predecessor entities, through which he had
been engaged in the telemessaging service business since 1974 and in the paging
business since 1983.
Ryal R. Poppa is a private investor and has been a director of Metrocall
since November 1996. Mr. Poppa served as Chairman of the Board, President and
Chief Executive Officer of Storage Technology Corporation, an international
company that manufactures, markets and services information storage and
retrieval services for high performance computers, from January 1985 through
June 1996. Mr. Poppa serves on the board of directors of Semitool, Inc. and
Carrier Access, Inc.
Michael Greene has been a director of Metrocall since January 1997. He is a
Managing Director of UBS Capital LLC, which is the private equity subsidiary of
the Union Bank of Switzerland ("UBS"). Mr. Greene has worked in UBS' private
equity and leveraged finance businesses since he joined UBS in 1990. Mr. Greene
serves on the board of directors of CBP Resources Inc.
Royce Yudkoff has been a director of Metrocall since April 1997. Mr.
Yudkoff is the Managing Partner of ABRY Partners, Inc., a private equity
investment firm which invests in the communications and media industries. Prior
to co-founding ABRY in 1988, Mr. Yudkoff was a partner at Bain & Company
("Bain"), an international management consulting firm where he had significant
responsibility for Bain's media practice. Mr. Yudkoff serves on the board of
directors of Sullivan Broadcasting Company, Pinnacle Towers and several other
private companies.
Steven D. Jacoby has been Chief Operating Officer and Vice President of
Metrocall since September 1994. Mr. Jacoby joined Metrocall from FirstPAGE USA,
Inc. where he had served as Chief Operating Officer, Vice President and
Secretary since 1988. Mr. Jacoby was a director of Metrocall from September 1994
until November 1996. Mr. Jacoby was appointed Executive Vice President in
February 1997.
Vincent D. Kelly has been the Chief Financial Officer and Vice President of
Metrocall since January 1989. Mr. Kelly has also served as Treasurer since
August 1995 and was appointed Executive Vice President in February 1997. Mr.
Kelly served as Chief Operating Officer and Chief Financial Officer of Metrocall
from February 1993 through August 31, 1994, when Metrocall acquired FirstPAGE
USA, Inc. Mr. Kelly was a director of Metrocall from 1990 until November 1996.
Mr. Kelly is a certified public accountant.
Messrs. Aprahamian, Brock, Collins, Jacoby, Martin, Kelly, Russenberger and
Singer, Ms. Brock, certain stockholders affiliated with the Hillman Company, and
UBS Capital LLC, have agreed to vote all shares of Metrocall Common Stock held
by them in favor of proposals (i) to increase the authorized number of shares of
Metrocall Common Stock to 60 million; and (ii) to permit the convertibility of
Series B Preferred Stock into Common Stock. The shares held by these
stockholders represent approximately 37.5% of the issued and outstanding shares
of Metrocall Common Stock on the date hereof.
Certain stockholders of Metrocall were parties to a voting agreement (the
"Voting Agreement") pursuant to which the stockholders agreed to vote for up to
seven persons designated by various of the
73
<PAGE> 84
stockholders to serve as directors of Metrocall. The terms of the Voting
Agreement expired on November 15, 1996, except that the parties to the
agreement, who now hold 21.8% of the issued and outstanding shares of Metrocall
Common Stock, agreed to vote in favor of the reelection of Ms. Brock at the
Annual Meeting. Messrs. Singer and Russenberger have separately agreed to vote
the shares of Metrocall Common Stock they hold in favor of the reelection of Ms.
Brock at the Annual Meeting.
Mr. Collins, Mr. Jacoby, and Mr. Kelly entered into new employment
contracts approved by the Compensation Committee and dated May 15, 1996. The new
contracts did not change the salary or benefits of any of those officers, except
that Metrocall will now be responsible for certain life insurance premiums
incurred by Mr. Collins. The term of employment for each of the officers was
extended to December 31, 1999 from December 31, 1996 (for Mr. Collins), August
31, 1998 (for Mr. Jacoby), and June 1, 1999 (for Mr. Kelly). In addition, Mr.
Collins' contract now includes a provision (similar to that in Messrs. Jacoby's
and Kelly's contracts) for automatic one-year extensions on anniversaries of May
15. Pursuant to their terms, each of Messrs. Collins', Jacoby's and Kelly's
contract has been automatically extended through December 31, 2000.
Each of Messrs. Collins', Jacoby's and Kelly's contracts provides that, if
the executive's employment is terminated without cause, if the executive
terminates the contract for good reason, or if the executive's employment is
terminated by reason of death or disability, Metrocall will pay the executive or
his estate the full base salary and benefits (in connection with termination
without cause or resignation for good reason) that would otherwise have been
paid to the executive during the remaining term of the agreement. Terminations
without cause or resignations for good reason would also require Metrocall to
pay the executive, at his election, the difference between the fair market value
of stock subject to options (including those otherwise unexercisable) and the
price he would have had to pay to exercise the options. If the executive
voluntarily terminates employment (other than for good reason), Metrocall will
pay the executive one year's base salary and benefits under the contract. The
reasons for resignation for good reason under the revised contracts include the
termination of any of the others for reasons other than cause, death, or
disability.
Messrs. Collins, Jacoby, and Kelly entered into separate change of control
agreements approved by the Compensation Committee as of May 15, 1996 to run
through December 31, 1999 (with automatic extensions). Each such contract has
been automatically extended through December 31, 2000. Changes of control are
defined as (i) any action required to be reported pursuant to Item 6(e) of
Schedule 14A as a "change of control" (generally a 50% change in share ownership
but other changes may also qualify), (ii) any person's acquiring more than 25%
of the voting power of Metrocall voting stock, unless with the prior approval of
the Board, (iii) changes in Board membership such that during any two
consecutive years, Board members at the beginning constitute less than a
majority of the Board at the end (including as Board members at the beginning of
the period any directors added during the period with approval of two-thirds of
the Board), (iv) a merger or reorganization in which Metrocall does not survive
or in which the outstanding shares of Metrocall are converted into other shares
or securities (except through a reincorporation or setting up a holding
company); (v) a more than 50% turnover of voting power in a merger,
reorganization, or similar transaction approved by stockholders, unless 75% of
the Board carries over to the new entity; or (vi) any other event the Board
determines constitutes a change of control. A change of control is also deemed
to occur if the executive is removed at the request of a third party who has
taken steps to effect a change of control or the termination was otherwise
caused by a change of control. Under the change of control agreements,
executives would be entitled to payment of three times the sum of their salary
and most recent bonus within 30 days after termination of employment after a
change of control (other than termination for death, disability, or cause),
together with a payment of the option spread (as described above under
terminations of employment), paid health coverage for up to 18 months, and
certain other benefits. Payments would be grossed up, as necessary, to provide
that the executive receives his payments net of any excise taxes and any taxes
on the excise payment (but the executive would remain responsible for any income
taxes on the payment).
Messrs. Collins, Jacoby, Kelly, Brock and Johnston hold options to acquire
118,846, 109,477, 206,588, 122,510 and 52,000 shares of Metrocall Common Stock,
respectively. On September 18, 1996, the Compensation Committee of the Metrocall
Board of Directors changed the exercise price of all non-qualified options
outstanding to all current employees of Metrocall as of that date to equal
$7.9375 per share, the closing price of Metrocall Common Stock on that date. As
a result, the exercise price on all of the foregoing
74
<PAGE> 85
options (other than 11,846, 9,477 and 2,000 options held by Messrs. Collins,
Jacoby and Johnston, respectively) was reduced to $7.9375 per share. Prior to
this action: Mr. Collins' options were exercisable until January 16, 2006 for a
price of $19.125; Mr. Jacoby's options were exercisable until July 26, 2005 for
a price of $20.25 (50,000 shares), until January 16, 2006 for a price of $19.125
(25,000 shares) and until February 7, 2006 for a price of $20.25 (25,000); Mr.
Kelly's options were exercisable until November 8, 2003 for a price of $19.50
(72,000 shares), until May 23, 2004 for a price of $13.00 (34,588 shares), until
July 26, 2005 for a price of $20.25 (50,000 shares), until January 16, 2006 for
a price of $19.125 (25,000 shares) and until February 7, 2006 for a price of
$20.25 (25,000 shares); Mr. Brock's options were exercisable until November 8,
2003 for a price of $19.50 (76,000), until May 23, 2004 for a price of $13.00
(36,510 shares) and until July 26, 2005 for a price of $20.25 (10,000 shares);
and Mr. Johnston's options were exercisable until January 16, 2006 for a price
of $19.125. On February 4, 1997, the Compensation Committee approved a further
repricing of all of the foregoing options (except for 11,846 and 9,477 options
held by Messrs. Collins and Jacoby, respectively, but including, subject to
stockholder approval, 2,000 options held by Mr. Johnston) to an exercise price
of $6.00 per share.
75
<PAGE> 86
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(UNAUDITED)
The following unaudited pro forma condensed combined balance sheet under
the heading "Pro Forma Metrocall and Page America" gives effect to the
acquisition of substantially all of the assets of Page America Group, Inc. (the
"Page America Acquisition") for (A) cash of approximately $25.0 million, subject
to reduction for amounts payable for pagers provided to Page America by
Metrocall, (B) approximately 4,292,000 shares of Metrocall Common Stock at $4.25
per share, (C) 1,500 shares of Series B Junior Convertible Preferred Stock
having a Stated Value of $15 million bearing dividends at 14% per year, and
expected direct acquisition costs of approximately $1.1 million as if the
acquisition had occurred on December 31, 1996. The Page America Acquisition is
subject to adjustment based upon its financial performance prior to closing. In
the accompanying pro forma statements, these adjustments are estimated based
upon financial performance for the period ended December 31, 1996. Accordingly,
the actual cash and stock consideration to be issued by Metrocall could differ.
The unaudited pro forma condensed combined statements of operations for the
year ended December 31, 1996 give effect to (a) the Parkway and Satellite
Acquisitions and the A+ Network merger under the heading "Pro Forma Metrocall"
together with the issuance of $39.9 million of Series A Redeemable Convertible
Preferred Stock and the refinancing of A+ Network's long-term debt and (b) the
pending acquisition of Page America under the heading "Pro Forma Combined
Company and Page America" as if each had occurred on January 1, 1996.
Each of the recent and pending acquisitions has been or will be accounted
for by the purchase method of accounting. The purchase prices have been or will
be allocated on a preliminary basis to the assets to be acquired based upon the
estimated value of such assets. The final allocation of intangible assets will
be based upon appraised values.
This information should be read in conjunction with the notes included
herein and the Parkway Financial Statements, Satellite Financial Statements and
A+ Network Consolidated Financial Statements incorporated by reference herein,
and Page America Financial Statements included herewith. The unaudited pro forma
condensed combined financial data do not purport to represent what Surviving
Corporation's results of operations or financial position actually would have
been had such transactions and events occurred on the dates specified, or to
project the Surviving Corporation's results of operations or financial position
for any future period or date. The pro forma adjustments are based upon
available information and certain adjustments that management of Metrocall
believes are reasonable. In the opinion of management of Metrocall, all
adjustments have been made that are necessary to present the unaudited pro forma
condensed combined data.
In addition, the unaudited pro forma condensed balance sheet of Page
America Group, Inc. as of December 31, 1996, gives effect to the sale of
substantially all assets and liabilities acquired or assumed by Metrocall, Inc.
and the proceeds therefrom and the related transaction costs.
76
<PAGE> 87
METROCALL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(in Thousands)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------ COMBINED
HISTORICAL ASSETS AND COMPANY
--------------------- LIABILITIES NOT OTHER PRO AND
PAGE ACQUIRED OR FORMA PAGE
METROCALL AMERICA ASSUMED(A) ADJUSTMENTS AMERICA
--------- -------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 10,917 $ 290 $ (290) $ -- $ 10,917
Accounts receivable, net.............. 25,796 899 -- -- 26,695
Prepaid expenses and other current
assets.............................. 5,681 672 (564) -- 5,789
-------- -------- -------- -------- --------
Total current assets................ 42,394 1,861 (854) -- 43,401
Furniture and equipment, net............ 153,412 5,382 -- -- 158,794
Intangibles, net........................ 452,639 31,815 -- 24,158(B) 508,612
Other assets............................ 3,023 503 (190) -- 3,336
-------- -------- -------- -------- --------
Total assets................... $ 651,468 $ 39,561 $ (1,044) $ 24,158 $ 714,143
======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations......................... $ 700 $ 51,814 $ (51,814) $ -- $ 700
Accounts payable and accrued
expenses............................ 34,440 3,807 (2,267) 1,107(C) 37,087
Deferred revenues and subscriber
deposits............................ 12,827 1,785 -- -- 14,612
Other current liabilities............. 1,694 2,864 (2,864) -- 1,694
-------- -------- -------- -------- --------
Total current liabilities........... 49,661 60,270 (56,945) 1,107 54,093
Capital lease obligations............... 3,244 -- -- -- 3,244
Long-term obligations................... 323,848 37 (37) 25,000(D) 348,848
Deferred income taxes................... 76,687 -- -- -- 76,687
Minority interest....................... 499 -- -- -- 499
-------- -------- -------- -------- --------
Total liabilities................... 453,939 60,307 (56,982) 26,107 483,371
Redeemable preferred stock.............. 31,231 -- -- 15,000(E) 46,231
Total stockholders' equity.............. 166,298 (20,746) 55,938 (16,949)(F) 184,541
-------- -------- -------- -------- --------
Total liabilities, redeemable preferred
stock and stockholders' equity........ $ 651,468 $ 39,561 $ (1,044) $ 24,158 $ 714,143
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to this unaudited statement.
77
<PAGE> 88
METROCALL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------- PRO
A+ FORMA
METROCALL PARKWAY(G) SATELLITE(G) NETWORK(G) ADJUSTMENTS
--------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Service, rent & maintenance revenues.... $124,029 $5,302 $6,564 $ 78,994 $ --
Product sales........................... 25,928 860 801 5,408 --
-------- ------ ------ -------- ---------
Total revenues.................. 149,957 6,162 7,365 84,402 --
Net book value of products sold......... (21,633) (934) (805) (7,435) 220(H)
-------- ------ ------ -------- ---------
128,324 5,228 6,560 76,967 220
Service, rent & maintenance expense..... 38,347 1,417 2,418 17,016 --
Selling, marketing, general and
administrative........................ 57,226 2,305 2,449 43,329 (1,087)(I)
Depreciation & amortization............. 58,196 586 447 24,882 16,181(J)
Other................................... -- -- 12 396 --
-------- ------ ------ -------- ---------
Total operating expenses........ 153,769 4,308 5,326 85,623 15,094
-------- ------ ------ -------- ---------
(Loss) income from operations........... (25,445) 920 1,234 (8,656) (14,874)
Interest and other income
(expense) net......................... (21,031) (274) (713) (11,844) 3,289(K)
-------- ------ ------ -------- ---------
Net (loss) income before taxes...... (46,476) 646 521 (20,500) (11,585)
Benefit (provision) for taxes........... 1,021 (229) -- -- 4,822(L)
-------- ------ ------ -------- ---------
Net (loss) income................... $(45,455) $ 417 $ 521 $(20,500) $ (6,763)
======== ====== ====== ======== =========
Net loss per share...................... $ (2.80)
========
Shares used in computing net loss per
share................................. 16,253
========
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------- COMBINED
OTHER COMPANY
HISTORICAL PRO AND
PRO FORMA PAGE OPERATIONS FORMA PAGE
METROCALL AMERICA NOT ACQUIRED(A) ADJUSTMENTS AMERICA
--------- ---------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Service, rent & maintenance revenues.... $214,889 $ 20,074 $ -- $ -- $234,963
Product sales........................... 32,997 1,910 -- -- 34,907
-------- -------- ------- ------- --------
Total revenues.................. 247,886 21,984 -- -- 269,870
Net book value of products sold......... (30,587) (1,284) -- -- (31,871)
-------- -------- ------- ------- --------
217,299 20,700 -- -- 237,999
Service, rent & maintenance expense..... 59,198 5,318 -- -- 64,516
Selling, marketing, general and
administrative........................ 104,222 10,258 -- -- 114,480
Depreciation & amortization............. 100,292 6,173 -- 3,318 (J) 109,783
Other................................... 408 -- 408
-------- -------- ------- ------- --------
Total operating expenses........ 264,120 21,749 -- 3,318 289,187
-------- -------- ------- ------- --------
(Loss) income from operations........... (46,821) (1,049) -- (3,318) (51,188)
Interest and other income
(expense) net......................... (30,573) (7,061) 6,153 (2,000) (K) (33,481)
-------- -------- ------- ------- --------
Net (loss) income before taxes...... (77,394) (8,110) 6,153 (5,318) (84,669)
Benefit (provision) for taxes........... 5,614 -- -- -- 5,614
-------- -------- ------- ------- --------
Net (loss) income................... $(71,780) $ (8,110) $ 6,153 $(5,318) $(79,055)
======== ======== ======= ======= ========
Net loss per share...................... $ (2.86) $ (2.69)
======== ========
Shares used in computing net loss per
share................................. 25,113 29,405
======== ========
</TABLE>
See accompanying notes to this unaudited statement.
78
<PAGE> 89
PAGE AMERICA GROUP, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONSIDERATION
HISTORICAL ASSETS ACQUIRED/ RECEIVED/OTHER PRO FORMA
PAGE AMERICA LIABILITIES ASSUMED(A) TRANSACTION COSTS(M) PAGE AMERICA
------------ ---------------------- -------------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents....... $ 290 $ -- $ 25,000 $ 25,290
Accounts receivable............. 899 899 -- --
Prepaid expenses and other
current assets............... 672 108 -- 564
-------- ------- ------- --------
Total current assets.... 1,861 1,007 25,000 25,854
Equipment, net.................... 5,382 5,382 -- --
Other assets:
Intangibles, net................ 31,815 31,815 -- --
Other assets.................... 503 313 -- 190
Equity investments.............. -- -- 33,243 33,243
-------- ------- ------- --------
32,318 32,128 33,243 33,433
-------- ------- ------- --------
$ 39,561 $ 38,517 $ 58,243 $ 59,287
======== ======= ======= ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C> <C> <C>
Current liabilities:
Current maturities of long-term
debt......................... $ 51,814 $ -- $ -- $ 51,814
Accounts payable and accrued
expenses..................... 3,807 1,540 2,180 4,447
Deferred revenue and customer
deposits..................... 1,785 1,785 -- --
Other current liabilities....... 2,864 -- -- 2,864
-------- ------- ------- --------
Total current
liabilities........... 60,270 3,325 2,180 59,125
Long-term obligations............. 37 -- -- 37
-------- ------- ------- --------
Total liabilities....... 60,307 3,325 2,180 59,162
-------- ------- ------- --------
Shareholders' equity:
Preferred stock................. 30,068 -- -- 30,068
Other stockholders' equity
(deficit).................... (50,814) -- 20,871 (29,943)
-------- ------- ------- --------
Total stockholders'
equity................ (20,746) -- 20,871 125
-------- ------- ------- --------
$ 39,561 $ 3,325 $ 23,051 $ 59,287
======== ======= ======= ========
</TABLE>
See accompanying notes to this unaudited statement.
79
<PAGE> 90
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The pro forma condensed combined financial statements assume a per share
price of $4.25 for the Company Common Stock to be issued in connection with the
Page America Acquisition ("Acquisition"). The purchase price ultimately will be
based upon the trading price of Company Common Stock on the closing date of the
Acquisition. The purchase price and allocations are subject to change, which may
be material, based upon a variety of factors including actual share prices at
closing, financial performance prior to closing, and asset appraisals.
(A) Reflects those assets not acquired and liabilities not assumed of Page
America in the asset purchase transaction including cash, certain prepaid
expenses and other assets, substantially all debt and related obligations
(including accrued but unpaid dividends).
Reflects those revenues, expenses and results of operations not assumed of
Page America including interest related to unacquired debt.
(B) Reflects fair values assigned to intangible assets acquired which
consists of the following (in thousands):
<TABLE>
<CAPTION>
PAGE AMERICA
------------
<S> <C>
FCC License............................................................. $ 37,502
Subscriber Lists........................................................ 18,471
Less: Historical Intangibles............................................ (31,815)
------------
$ 24,158
==========
</TABLE>
(C) Reflects estimated accruals for direct acquisition costs related to
Page America acquisition.
(D) Reflects the cash payment of $25 million related to Page America
acquisition which is assumed to be financed as long-term debt.
(E) Reflects the issuance of 1,500 shares of Series B Junior Convertible
Preferred Stock of Metrocall having a Stated Value of $15 million bearing
dividends at 14% per year.
(F) Reflects the issuance of 762,960 shares of Metrocall Common Stock and
additional shares of Metrocall Common Stock, subject to adjustment based on
changes in Page America's financial position. As of December 31, 1996, the total
Metrocall Common Stock estimated to be issued is approximately 4,292,372 shares.
(G) Historical statements for Parkway, Satellite and A+ Network in 1996 are
through July 16, 1996, August 30, 1996, and November 15, 1996, respectively,
which are the dates the respective acquisitions were completed. Subsequent to
completion of the acquisitions, all financial reporting data is included in the
historical Metrocall data.
(H) Reflects the estimated difference in the net book value of products
sold based upon Metrocall's estimated useful lives of subscriber equipment.
(I) Reflects the elimination of certain executive salaries and bonuses for
Parkway, Satellite and A+ Network executives terminated upon completion of the
respective acquisitions in July, August and November of 1996.
(J) Reflects incremental depreciation and amortization based upon the
preliminary allocation of depreciable and amortizable assets and assumed useful
lives of 5 years for subscriber lists, 25 years for FCC licenses and 15 years
for goodwill.
(K) Represents the estimated incremental interest at a rate of 8.00% that
would have been incurred assuming all acquisitions were completed on January 1,
1996.
(L) Represents the tax benefit resulting from the amortization of acquired
intangibles for A+ Network and Parkway assuming an effective tax rate of 40%.
(M) As to Page America, reflects proceeds described in Notes D, E and F
above and reflects transaction costs payable ($1.1 million) and liabilities for
taxes, severance and other payments ($1.1 million).
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<PAGE> 91
OTHER MATTERS
Page America is not aware of any matters, other than those referred to
herein, which may be presented at the Special Meeting. If, however, any other
appropriate business should properly be presented at the Special Meeting, the
persons named in the proxies will vote the shares represented thereby, pursuant
to their discretionary authority, in accordance with their best judgment.
MISCELLANEOUS
If the Acquisition is not consummated for any reason, proposals of
shareholders intended to be presented at the Annual Meeting of Shareholders of
Page America for 1997 must be received by Page America not later than
, 1997 to be eligible for inclusion in the proxy materials for such
meeting.
LEGAL MATTERS
Wilmer, Cutler and Pickering, Washington, D.C. will render an opinion with
respect to the validity of the Metrocall Common Stock, Series B Preferred Stock,
Common Stock Equivalents and Common Stock issuable upon conversion of the Common
Stock Equivalents to be issued to Page America in connection with the
Acquisition and will pass upon certain other legal matters on behalf of
Metrocall. Stroock & Stroock & Lavan LLP, New York, New York will pass upon
certain legal matters on behalf of Page America. Martin H. Neidell, a member of
Stroock & Stroock & Lavan LLP, is Secretary of Page America.
81
<PAGE> 92
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and December 31, 1995............... F-3
Consolidated Statements of Operations for the years ended December 31, 1996, December
31, 1995, and December 31, 1994.................................................... F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1996, December
31, 1995, and December 31, 1994.................................................... F-5
Consolidated Statement of Shareholders' Equity (Deficit) for the years ended December
31, 1996, December 31, 1995, and December 31, 1994................................. F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE> 93
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Page America Group, Inc.
We have audited the accompanying consolidated balance sheets of Page
America Group, Inc. and subsidiaries as of December 31, 1996 and December 31,
1995, and the related consolidated statements of operations, shareholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Page America Group, Inc. and subsidiaries at December 31, 1996 and December 31,
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Page America Group, Inc. will continue as a going concern. Losses
from operations in recent years have significantly weakened the Company's
financial position and its ability to purchase paging equipment and meet current
operating expenses. Further, as discussed in Note A, the Company is in default
of its debt agreements under which it has outstanding borrowings of $51 million,
including $34 million of borrowings under a credit facility with certain banks
which is secured by substantially all of the assets of the Company. Such debt is
classified as a current liability and the Company's current liabilities exceeded
its current assets by $58 million at December 31, 1996. Management's plans in
regard to these matters which are also described further in Note A, include the
sale of substantially all of the Company's net operating assets in 1997 and the
liquidation of the Company thereafter. These planned transactions require the
approval of the Company's shareholders, lenders and certain other creditors.
The matters referred to in the preceding paragraph raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
or classifications of liabilities that may result from the outcome of this
uncertainty.
ERNST & YOUNG LLP
Hackensack, New Jersey
March 12, 1997
F-2
<PAGE> 94
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................. $ 290 $ 751
Accounts receivable, net of allowance for doubtful accounts of $278
and $277........................................................... 899 1,017
Prepaid expenses and other current assets............................. 672 944
--------- --------
Total current assets.......................................... 1,861 2,712
EQUIPMENT, less accumulated depreciation and amortization............... 5,382 6,662
OTHER ASSETS
Certificates of authority, net of accumulated amortization of $3,821
and $3,216......................................................... 20,363 20,968
Customer lists, net of accumulated amortization of $8,537 and
$7,992............................................................. 3,232 3,776
Other intangibles, net of accumulated amortization of $3,472 and
$3,184............................................................. 8,220 8,945
Deferred financing costs, net......................................... -- 32
Deposits and other non-current assets................................. 503 908
--------- --------
32,318 34,629
--------- --------
$ 39,561 $ 44,003
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt.................................. $ 51,814 $ 48,666
Accounts payable...................................................... 1,620 1,982
Accrued expenses and other liabilities................................ 2,187 1,535
Preferred dividends payable........................................... 2,864 1,432
Customer deposits..................................................... 249 299
Deferred revenue...................................................... 1,536 1,242
--------- --------
Total current liabilities..................................... 60,270 55,156
LONG-TERM DEBT, less current maturities................................. 37 69
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Series One Convertible Preferred Stock, 10% cumulative, $.01 par
value, authorized 310,000 shares; issued and outstanding -- 286,361
shares; liquidation value -- $105 per share........................ 30,068 30,068
Common stock -- $.10 par value, authorized -- 100,000,000 shares;
issued and outstanding 16,037,095 and 8,052,305 shares............. 1,604 805
Paid-in capital......................................................... 53,501 52,850
Accumulated deficit..................................................... (105,919) (94,945)
--------- --------
(20,746) (11,222)
--------- --------
$ 39,561 $ 44,003
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 95
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Service revenues........................................ $ 20,074 $ 26,415 $ 32,693
Sales revenues.......................................... 1,910 2,692 4,565
----------- ---------- ----------
Total revenues................................ 21,984 29,107 37,258
Operating expenses:
Cost of service....................................... 2,128 2,640 2,943
Cost of sales......................................... 1,284 1,723 2,766
Selling............................................... 3,988 6,066 6,842
General and administrative............................ 6,270 8,923 10,653
Technical............................................. 3,190 4,262 4,685
Depreciation.......................................... 4,297 5,235 6,370
Amortization and write-off of intangibles............. 1,876 3,350 4,447
----------- ---------- ----------
23,033 32,199 38,706
----------- ---------- ----------
Operating loss........................................ (1,049) (3,092) (1,448)
Interest expense........................................ (6,153) (6,263) (5,102)
Other income (expenses)
(Loss) gain on disposal of assets..................... (91) (657) 371
Amortization and write-off of deferred costs.......... (80) (2,688) (437)
Other................................................. (737) (393) (412)
----------- ---------- ----------
(908) (3,738) (478)
----------- ---------- ----------
Net loss................................................ (8,110) (13,093) (7,028)
Preferred stock dividend requirements................... (2,864) (2,863) (3,023)
----------- ---------- ----------
Net loss applicable to common stock..................... $ (10,974) $ (15,956) $ (10,051)
=========== ========== ==========
Loss per common share................................... $ (0.88) $ (2.01) $ (1.55)
=========== ========== ==========
Weighted average number of shares outstanding........... 12,497,800 7,936,410 6,463,889
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 96
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
DECREASE IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Net loss........................................................ $(8,110) $(13,093) $(7,028)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................. 6,253 9,690 11,254
Write-off of deferred financing costs......................... -- 1,584 --
Net book value of pagers sold................................. 1,164 1,596 2,731
Provision for losses on accounts receivable................... 908 710 1,703
Provision for lost pagers..................................... 238 249 342
Non-cash interest expense..................................... 1,950 1,950 --
Loss (gain) on disposal of assets............................. 91 657 (371)
Other......................................................... 492 578 204
Change in assets and liabilities:
(Increase) decrease in accounts receivable................. (790) 374 (698)
Decrease (increase) in prepaid expenses and other assets... 170 279 (245)
(Decrease) increase in accounts payable.................... (293) (1,759) 83
Increase (decrease) in accrued expenses.................... 671 (219) 229
Increase (decrease) in customer deposits and deferred
revenue.................................................. 244 (532) 398
------- -------- -------
Net cash provided by operating activities....................... 2,988 2,064 8,602
Cash flows from investing activities:
Capital expenditures.......................................... (3,523) (5,938) (8,016)
Licensing costs............................................... -- (206) (1,016)
Acquisitions and related liabilities.......................... -- -- (265)
Net proceeds from disposal of assets.......................... 616 17,473 416
------- -------- -------
Net cash (used in) provided by investing activities........ (2,907) 11,329 (8,881)
Cash flows from financing activities:
Proceeds from issuance of debt................................ 1,337 116 --
Principal payments on debt.................................... (1,562) (13,077) (919)
Costs related to financing of debt............................ (129) (741) (177)
Costs related to planned Metrocall transaction................ (188) -- --
Cost related to issuance of preferred and common stock........ -- (68) (409)
------- -------- -------
Net cash used in financing activities...................... (542) (13,770) (1,505)
------- -------- -------
Net decrease in cash and cash equivalents....................... (461) (377) (1,784)
Cash and cash equivalents at beginning of period................ 751 1,128 2,912
------- -------- -------
Cash and cash equivalents at end of period...................... $ 290 $ 751 $ 1,128
======= ======== =======
Supplemental schedule of noncash investing and financing
activities:
Dividends accrued on preferred stock.......................... $ 2,864 $ 1,432 $ 1,444
Dividends added to the liquidation value of preferred
shares..................................................... -- 1,432 --
Common stock issued in connection with acquisition............ -- 1,471 --
Common stock issued to employee stock purchase plan........... 22 16 130
Common stock adjustment relating to Crico asset acquisition... -- -- 1,471
Common stock issued as payment on preferred stock............. 1,432 1,445 1,527
Capital expenditures in accounts payable and accrued
expenses................................................... 31 94 1,367
Capital expenditures financed................................. 989 1,287 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 97
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES ONE SERIES C COMMON
PREFERRED STOCK PREFERRED STOCK STOCK
------------------ ------------------- ----------
SHARES AMOUNT SHARES AMOUNT SHARES
------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994.............................................. 305,768 $30,577 131,479 $1,831 5,999,322
Issuance of Common Stock:
To employee stock purchase plan and trust............................. 33,548
For dividends on Preferred Stock -- Series One........................ 406,220
Purchase price adjustment related to an acquisition................... (38,000)
Conversion of Preferred Stock........................................... (16,887) (1,689) (18,970) (264) 394,197
Preferred Stock -- Series C Exchange.................................... (112,509) (1,567) 306,581
Expenses related to issuance of Common Stock and Preferred
Stock -- Series One...................................................
Dividends declared on Preferred Stock...................................
Net loss................................................................
------- ------- -------- ------- ----------
BALANCE AT DECEMBER 31, 1994............................................ 288,881 28,888 0 0 7,101,868
Issuance of Common Stock:
To employee stock purchase plan and trust............................. 20,912
For dividends on Preferred Stock -- Series One........................ 437,629
Purchase price adjustment related to an acquisition................... 435,903
Conversion of Preferred Stock........................................... (2,520) (252) 55,993
Dividends added to the liquidation value of Preferred Stock............. 1,432
Expenses related to issuance of Common Stock............................
Dividends declared on Preferred Stock...................................
Net loss................................................................
------- ------- -------- ------- ----------
BALANCE AT DECEMBER 31, 1995............................................ 286,361 30,068 0 0 8,052,305
Issuance of Common Stock:
To employee stock purchase plan and trust............................. 85,200
For dividends on Preferred Stock -- Series One........................ 7,899,590
Expenses related to issuance of Common Stock............................
Dividends declared on Preferred Stock...................................
Net Loss................................................................
------- ------- -------- ------- ----------
BALANCE AT DECEMBER 31, 1996............................................ 286,361 $30,068 0 $ 0 16,037,095
======= ======= ======== ======= ==========
<CAPTION>
PAID-IN
CAPITAL ACCUMULATED
AMOUNT AMOUNT DEFICIT TOTAL
------ ------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994.............................................. $ 600 $45,069 $ (68,980) $ 9,097
Issuance of Common Stock:
To employee stock purchase plan and trust............................. 3 127 130
For dividends on Preferred Stock -- Series One........................ 40 1,487 1,527
Purchase price adjustment related to an acquisition................... (4) (163) (167)
Conversion of Preferred Stock........................................... 40 1,913 0
Preferred Stock -- Series C Exchange.................................... 31 1,536 0
Expenses related to issuance of Common Stock and Preferred
Stock -- Series One................................................... (139) (139)
Dividends declared on Preferred Stock................................... (2,981) (2,981)
Net loss................................................................ (7,028) (7,028)
------ ------- ----------- --------
BALANCE AT DECEMBER 31, 1994............................................ 710 49,830 (78,989) 439
Issuance of Common Stock:
To employee stock purchase plan and trust............................. 2 14 16
For dividends on Preferred Stock -- Series One........................ 44 1,401 1,445
Purchase price adjustment related to an acquisition................... 43 1,427 1,470
Conversion of Preferred Stock........................................... 6 246 0
Dividends added to the liquidation value of Preferred Stock............. 1,432
Expenses related to issuance of Common Stock............................ (68) (68)
Dividends declared on Preferred Stock................................... (2,863) (2,863)
Net loss................................................................ (13,093) (13,093)
------ ------- ----------- --------
BALANCE AT DECEMBER 31, 1995............................................ 805 52,850 (94,945) (11,222)
Issuance of Common Stock:
To employee stock purchase plan and trust............................. 9 13 22
For dividends on Preferred Stock -- Series One........................ 790 642 1,432
Expenses related to issuance of Common Stock............................ (4) (4)
Dividends declared on Preferred Stock................................... (2,864) (2,864)
Net Loss................................................................ (8,110) (8,110)
------ ------- ----------- --------
BALANCE AT DECEMBER 31, 1996............................................ $1,604 $53,501 $(105,919) $(20,746)
======= ======= =========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE> 98
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS -- The Company is a radio paging company which
markets and provides over-the-air messaging information, products and services
in the New York and Chicago metropolitan area markets through facilities which
it owns and operates as a radio common carrier ("RCC") under licenses from the
Federal Communications Commission. The Company's diversified customer base
provides for a lack of concentration of credit risk.
BASIS OF PRESENTATION -- Certain amounts in the prior year financial
statements have been reclassified to conform with the current year presentation.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less, at date of
acquisition, to be cash equivalents.
EQUIPMENT -- Equipment is stated at cost less accumulated depreciation and
amortization and includes pagers held for sale or lease. Depreciation is
computed by the declining balance method for pager equipment and the
straight-line method for all other equipment in amounts sufficient to allocate
the cost of depreciable assets to operations over their estimated useful lives.
Leasehold improvements are amortized over the shorter of the life of the
respective lease or service life of the improvement. Cost of sales and service
does not include depreciation expense, which is presented separately in the
accompanying statements of operations.
CERTIFICATES OF AUTHORITY -- The costs of certificates of authority related
to the conduct of RCC operations are amortized on a straightline basis
principally over periods of 40 years.
CUSTOMER LISTS -- Customer lists generally consist of a portion of the cost
of business acquisitions assigned to the value of customer accounts and are
amortized on a straight-line basis over the estimated lives of those customers
which range up to fourteen years.
OTHER INTANGIBLES -- Other intangibles include the excess of the purchase
price over the fair market value of the net assets acquired and are amortized on
a straight-line basis principally over 40 year periods. The Company routinely
evaluates the carrying value of all of its intangibles for impairment.
INTEREST RATE PROTECTION -- On December 30, 1993, the Company entered into
a new senior credit facility with certain banks. On February 15, 1994, the
Company entered into an interest rate cap agreement which protected the Company
against increases in interest rates on $25 million of this debt. The cost of
this agreement was fully amortized as of December 31, 1996.
LOSS PER SHARE -- Loss per share is computed based upon the weighted
average number of common shares outstanding during the periods presented and is
computed after giving effect to preferred stock dividend requirements. Stock
options, warrants and the assumed conversion of the convertible preferred stock
have not been included in the calculation, since their inclusion would be
anti-dilutive for each of the periods presented.
EMPLOYEE STOCK BASED COMPENSATION -- The Company follows Accounting
Principles Board Statement No. 25 with regard to the accounting for stock issued
as compensation for employees.
NET LOSSES AND MANAGEMENT'S PLANS -- The accompanying financial statements
have been prepared on a going concern basis. The Company, since its inception,
has experienced a deficiency in working capital and recurring losses. In 1995,
as a result of non-compliance by the Company with certain covenants of its
credit
F-7
<PAGE> 99
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facility (the "Credit Facility"), the terms were modified to accelerate the
final maturity to December 29, 1995, and the Subordinated Notes were modified to
provide for a final maturity of six months thereafter. On April 26, 1996, the
Credit Facility was again modified to provide for a revolving credit loan of
$750,000, a waiver of all existing defaults on certain financial and other
covenants, the omission of financial covenants effective April 30, 1996 and an
extension of the maturity date to the earlier of November 30, 1996 or the
completion of the sale of the Company's assets to Metrocall, Inc. The Credit
Facility has not been repaid and the lenders have declared the Company in
default. In addition, the Subordinated Notes matured at December 31, 1996 and
are in default (see Note E). Such debt is classified as a current liability and
the Company's current liabilities exceeded its current assets by $58.4 million
at December 31, 1996. The Company has entered into a definitive agreement to
sell substantially all of its assets to Metrocall, Inc. The cash to be received
by Page America from this sale will not be sufficient for Page America to pay in
full in cash its outstanding obligations under the Credit Facility or under the
Subordinated Notes or to pay its other outstanding liabilities. Page America is
negotiating with the creditors to satisfy its obligations. In addition, the
consent of Page America's lenders is required for the sale to Metrocall. There
is no assurance that Page America will be able to reach agreement with its
creditors, that this transaction will be completed or that the Company will have
sufficient funds to finance its operations, which continue to show losses,
through the year ending December 31, 1997.
All of these matters raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts or classifications of liabilities that
may result from the outcome of this uncertainty.
Following completion of the sale of its assets to Metrocall, the Company
plans to liquidate.
NOTE B -- SALE OF FLORIDA AND CALIFORNIA OPERATIONS
On July 28, 1995, the Company sold its California and Florida paging assets
for a cash sale price of $19.4 million. At December 31, 1996, cash proceeds of
$500,000 are being held in escrow and are scheduled to be released to the
Company in 1997, as provided for in the agreement. Part of the proceeds was used
to reduce the Company's senior debt by $11.8 million and to prepay interest of
$1.2 million through December 29, 1995. In connection with this sale, the
Company incurred expenses amounting to approximately $1.0 million. This sale
included approximately 78,000 pagers, two statewide and several regional
frequencies. The assets sold had a net book value of approximately $19.1 million
and consisted of the assets which the Company acquired from Crico Communications
Corporation ("Crico") on December 30, 1993 and the 900 Mhz channel which is
licensed to provide state-wide coverage in California which the Company acquired
in 1994 for a purchase price of $500,000. The purchase price paid by the Company
for the Crico assets consisted of $12,650,000 in cash paid to Crico's lenders,
the issuance of an aggregate of 1,435,903 shares of Common Stock to Crico's
lenders and the issuance of 240,000 shares of Common Stock and warrants to
purchase 130,000 shares of Common Stock at an exercise price of $5.00 per share
to a company related to certain shareholders of Crico. As a result of the sale,
the Company incurred a loss of approximately $718,000.
NOTE C -- PLANNED SALE OF NEW YORK AND CHICAGO OPERATIONS
On April 23, 1996, Page America entered into a definitive agreement to sell
substantially all of its assets to Metrocall, Inc. On January 30, 1997, this
agreement was amended. The amended agreement provides for a purchase price of
(A) $25 million in cash, (B) 1,500 shares of series B Preferred Stock of
Metrocall having a stated value of $15 million, (C) 762,960 shares of Metrocall
Common Stock, and (D) shares of Metrocall Common Stock or other equity
securities having a share value equal to $15 million, subject to adjustment
based on changes in the Company's Working Capital Deficit and decreases in
service revenue below specified thresholds. Metrocall has the option to
substitute cash at closing for all or a portion of the stock consideration.
F-8
<PAGE> 100
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Excluded from the sale are cash, assets related to the employee benefit plans
and to the Florida and California operations which had been previously sold,
liabilities under the senior credit facility, subordinated debt agreement and
NEC America leasing contract and obligations with respect to federal, state and
local taxes. This sale is subject to the approval of the Company's shareholders.
There is no assurance that the transaction will be consummated.
NOTE D -- BALANCE SHEET CLASSIFICATIONS ($ IN THOUSANDS)
Prepaid expenses and other current assets comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Current portion of escrow amount from the sale of
Florida and California assets......................... $ 502 $ 502
-------- --------
Other current assets.................................... 170 442
$ 672 $ 944
======== ========
</TABLE>
Equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Pagers.................................................. $ 6,510 $ 8,164
Radio common carrier equipment.......................... 13,282 12,914
Office equipment........................................ 3,939 3,946
Leasehold improvements.................................. 614 614
Building and land....................................... 64 64
-------- --------
24,409 25,702
Less accumulated depreciation and amortization.......... (19,027) (19,040)
-------- --------
$ 5,382 $ 6,662
======== ========
</TABLE>
Accrued expenses and other liabilities comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Interest................................................ $ 751 $ 101
Taxes................................................... 768 818
Salaries and bonuses.................................... 132 366
Professional services................................... 116 95
Other................................................... 420 155
-------- --------
$ 2,187 $ 1,535
======== ========
</TABLE>
F-9
<PAGE> 101
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Bank credit facility.................................... $ 33,948 $ 33,200
Subordinated notes (including deferred interest)........ 16,900 14,667
Other................................................... 1,003 868
-------- --------
51,851 48,735
Less current maturities................................. 51,814 48,666
-------- --------
$ 37 $ 69
======== ========
</TABLE>
On December 30, 1993, the Company entered into a senior secured credit
facility with certain banks. The bank credit facility replacing the Company's
then existing credit facility, provided for an $11.27 million reducing revolving
credit line and a $45 million term loan facility, each with an original final
maturity of March 31, 2000. At closing, the Company paid a fee to the Banks in
the amount of $951,550. The Company was also required to pay the Banks a
commitment fee of 0.5 percent on the unused balance of the revolving credit
facility and annual fees of $55,000. The Company canceled its revolving credit
facility effective November 29, 1994. Payments on the Credit Facility initially
were to be interest only with mandatory principal payments due quarterly
beginning on September 30, 1995.
On July 28, 1995, concurrent with the sale of the Company's Florida and
California paging assets, the Credit Facility was amended. Among other things,
the amendment provided for an acceleration of the maturity to December 29, 1995
and modified the financial covenants so that the Company would no longer be in
default as of the amendment date. The Company used the net proceeds from the
sale of its Florida and California operations to reduce the debt by $11.8
million and prepay interest at the LIBOR rate from August 1, 1995 through
December 29, 1995. In the third fiscal quarter of 1995, the Company recorded a
charge of approximately $1.8 million related to the amended agreement which
includes the write-down of deferred financing costs of approximately $1.1
million. On April 26, 1996, the Company's Credit Facility was again modified to
provide for a revolving credit loan of $750,000, a waiver of all existing
defaults on certain financial and other covenants, the omission of financial
covenants effective April 30, 1996 and an extension of the maturity date to the
earlier of November 30, 1996 or the completion of the sale of the Company's
assets to Metrocall, Inc. The Credit Facility has not been repaid and the
lenders have declared the Company in default. The Credit Facility is secured by
substantially all the assets of the Company. At December 31, 1996, the interest
rate was prime of 8.25 percent plus margin of 1.75 percent and 3.75 percent on
the term loan and revolving credit loan, respectively.
On December 30, 1993, the Company sold $13 million aggregate principal
amount of 12 percent Subordinated Notes originally due 2003, with warrants,
pursuant to a Note Purchase Agreement. Payments on the Subordinated Notes
initially were to be interest only with mandatory principal payments of $1.3
million due semi-annually beginning on June 30, 1999. All payments on the notes
are subordinated to the prior payment in full of all amounts outstanding under
the Credit Facility. The notes are governed by certain financial covenants. In
July, 1994, the Company exchanged the notes for identical notes which were
registered under the Securities Act of 1933.
On July 28, 1995, the subordinated notes were modified to provide for a
final maturity of six months subsequent to the final maturity of the Credit
Facility and to defer the cash payment of interest until maturity. The
subordinated notes were due on December 31, 1996 and have not been paid. The
Company is in default on payment of the subordinated notes. Commencing January
1, 1995, interest is increased from 12 to
F-10
<PAGE> 102
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15 percent per annum, compounded semi-annually and is satisfied by the issuance
of additional promissory notes with terms substantially identical to the
subordinated notes, as amended. In 1995 the Company recorded a charge of
approximately $500,000 related to the modified agreement, which includes the
write-down of deferred financing costs of approximately $479,000. If a change in
control of the Company occurs, the note holders will have the right to require
the Company to repurchase the notes at par plus accrued interest.
As a result of the default of the aforementioned loans, it is not
practicable for the Company to estimate the fair value of its long-term debt.
Interest payments for the fiscal years 1996, 1995 and 1994 were $3.3
million, $4.5 million and $4.1 million, respectively.
NOTE F -- CUMULATIVE SERIES C PREFERRED STOCK EXCHANGE
On March 7, 1994, the Company offered the holders of its Cumulative Series
C Preferred Stock to exchange each share of such stock, and undeclared dividends
thereon, for 2.725 shares of common stock. The holders of 112,509 shares of
Series C elected to accept this offer. Accordingly, 306,581 shares of Common
Stock of the Company were issued in exchange for those shares of Series C and
the holders' right to $970,400 of associated undeclared dividends. In accordance
with the original terms, on September 12, 1994, the remaining shares outstanding
were mandatorily converted to shares of Common Stock of the Company and accrued
dividends of $17,500 were paid.
NOTE G -- SHAREHOLDERS' EQUITY
SERIES ONE CONVERTIBLE PREFERRED STOCK -- The Series One Convertible
Preferred Stock has a 10 percent dividend, payable semi-annually in arrears and
is convertible into Common Stock at $4.50 per share, subject to certain
anti-dilution provisions. Payment of dividends may be made in cash or in Common
Stock of the Company. Any dividend payments not made when permitted under the
Credit Facility and the Subordinated Note Financing will result in, among other
things, an increase in the dividend rate to 15 percent per annum and entitle
holders of the majority of the Series One Convertible Preferred Stock to elect
an additional representative to the Board of Directors of the Company. On August
11, 1994 and March 8, 1995, the Company issued 406,220 shares and 437,629 shares
of its Common Stock, respectively, to the holders of Series One Convertible
Preferred Stock, as full payment of dividends for the year ended December 31,
1994. On June 30, 1995, the Preferred shareholders waived their rights to
receive the dividend payment of $1,432,000 due on the same date. In exchange,
this amount was added to the liquidation value of the shares. On June 12, 1996,
the Company issued 7,899,590 shares of its Common Stock as full payment of the
dividends accrued at December 31, 1995.
The Company may redeem the Series One Convertible Preferred Stock if the
average closing price of the Common Stock for both the preceding 60 day and five
day periods has equalled or exceeded 150 percent of the conversion price. After
December 31, 2000, the Series One Convertible Preferred Stock may be redeemed at
par, plus accrued dividends. If the Company calls the Series One Convertible
Preferred Stock for redemption, the holders may convert to shares of Common
Stock. Upon any redemption, accrued dividends must be paid by the Company in
cash. Upon conversion of the Series One Convertible Preferred Stock, the Company
will have the option to pay accrued dividends by issuing additional shares of
its Common Stock. Holders of the Series One Convertible Preferred Stock are
entitled to vote as if their shares of Series One Convertible Preferred Stock
were converted into shares of Common Stock. Holders of a majority of the Series
One Convertible Preferred Stock, as a class, are entitled to elect two
representatives to the Board of Directors. If a change in control in the Company
occurs, the holders of Series One Convertible Preferred Stock will have the
right to cause the Company to repurchase such stock at the liquidation value,
plus accrued dividends.
F-11
<PAGE> 103
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WARRANTS -- In connection with the issuance of the Subordinated Notes, the
Company also issued warrants to purchase an aggregate of 1,205,556 shares of
Common Stock, at a purchase price of $3.50 per share. The warrants expire in
2003. The Company may accelerate the expiration of the warrants if the average
closing price of the Common Stock for both the 60 day and the five day periods
preceding the notice date is equal to or greater than 150 percent of the warrant
exercise price. The holders will be entitled to anti-dilution protection under
certain circumstances. If a change of control of the Company occurs at less than
a 25 percent premium over the exercise price, the warrant holders will have the
right to cause the Company to pay to them the difference between the exercise
price and 125 percent of the exercise price; provided, however, the warrants
must be exercised.
COMMON STOCK RESERVED FOR ISSUANCE -- As of December 31, 1996, unissued
Common Stock of the Company was reserved for issuance in accordance with the
terms of outstanding warrants (1,503,252), stock options (240,000) and
convertible preferred stock (6,363,578).
STOCK OPTIONS -- The Company's 1983 Stock Option Plan, as amended, provides
for the granting of options to purchase an aggregate of 235,000 shares of the
Company's Common Stock to key employees. The option prices cannot be less than
the fair market value of Common Stock at dates of grant. Options may not be
exercised until specified time restrictions have lapsed and option periods
cannot exceed five years. No more options may be granted under this plan.
The Company's 1990 Stock Option Plan provides for the grant by the Company
of options to purchase not more than 555,000 shares of Common Stock to key
employees and directors. The exercise price per share is the fair market value
of a share of Common Stock for options granted after December 29, 1992, and the
greater of (i) the fair market value of a share of Common Stock or (ii) $7.00,
for options granted on or before December 29, 1992. Options to be granted under
the 1990 Stock Option Plan may not be exercised prior to one year from the date
of grant and options may be exercised 20 percent per year thereafter. Exercise
of such options will be accelerated if the Company is sold, a change in control
occurs or as the Compensation Committee of the Board of Directors deems
appropriate.
Option activities under the Incentive Plans are detailed in the following
table:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE OPTION
1990 PLAN 1983 PLAN PRICE PER SHARE
--------- --------- ---------------
<S> <C> <C> <C>
Outstanding at January 1, 1994.................... 300,458 106,000 $5.09
Forfeited/Cancelled............................. (11,750) -- 7.16
--------- --------- ------
Outstanding at December 31, 1994.................. 288,708 106,000 5.03
Granted......................................... 225,000 -- .75
Forfeited/Cancelled............................. (267,008) (101,000) 4.90
--------- --------- ------
Outstanding at December 31, 1995.................. 246,700 5,000 1.39
Forfeited/Cancelled............................. (11,700) -- 7.00
--------- --------- ------
Outstanding at December 31, 1996.................. 235,000 5,000 1.12
========= ========= ======
Exercisable at December 31, 1996.................. 54,000 5,000 2.13
--------- --------- ------
Exercisable at December 31, 1995.................. 18,700 3,750 6.80
--------- --------- ------
Exercisable at December 31, 1994.................. 225,566 53,000 4.96
--------- --------- ------
</TABLE>
F-12
<PAGE> 104
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, for each of the following classes of options as
determined by range of exercise price, the information regarding
weighted-average exercise prices and weighted-average remaining contractual
lives of each said class is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
WEIGHTED-AVERAGE REMAINING EXERCISE
EXERCISE PRICE CONTRACTUAL NUMBER OF PRICE OF
NUMBER OF OF LIFE OF OPTIONS OPTIONS
OPTIONS OUTSTANDING OUTSTANDING CURRENTLY CURRENTLY
OPTION CLASS OUTSTANDING OPTIONS OPTIONS EXERCISABLE EXERCISABLE
- ------------------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Price of $.75............ 225,000 $ .75 5.8 yrs 45,000 $ .75
Prices ranging from
$5.25-$7.38............ 15,000 $ 6.66 .7 yrs 14,000 $ 6.59
</TABLE>
During 1996 and 1995, the Company did not sell any shares of common stock
under the 1990 or the 1983 plans.
Had the Company been accounting for its employee stock options under the
fair value method of SFAS No. 123, there would not have been a material impact
on the Company's net loss or net loss per common share during 1995 and 1996.
NOTE H -- INCOME TAXES
The Tax Reform Act of 1986 enacted a complex set of rules limiting the
utilization of net operating loss and tax credit carryforwards to offset future
taxable income following a corporate "ownership change". In general, an
ownership change occurs if the percentage of stock of a loss corporation owned
(actually, constructively and, in some cases, deemed ownership) by one or more
"5 percent shareholders" has increased by more than 50 percentage points over
the lowest percentage of such stock owned by those persons during a three year
testing period. If an ownership change occurs it would limit the utilization of
the net operating loss carryforwards for federal income tax purposes. The
Company has determined that there has been an ownership change as of December
31, 1993. As of December 31, 1996, the Company had net operating losses of
approximately $80.2 million for federal income tax purposes which will expire at
various dates between 1998 and 2011. Net operating losses of $52.6 million are
subject to the aforementioned limitations. In addition, the Company has
investment tax credit carryforwards of approximately $670,000 which expire
principally in 1997 through 2000, which are also subject to limitation.
F-13
<PAGE> 105
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of temporary differences that gave rise to deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- ---------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred tax assets:
FCC License amortization.......................... $ 32 $ 110
Allowance for bad debts........................... $ 13
Commission expense................................ 1,351 1,425
Investment tax credit carryforwards............... 670 670
Net operating loss carryforwards.................. 30,937 27,362
Other............................................. 163 256
---- -------- ----- --------
Total deferred tax assets................. 33,153 13 29,823
Less: Valuation allowance......................... (32,729) (13) (29,699)
---- -------- ----- --------
Net deferred tax assets........................... 424 124
Deferred tax liabilities:
Depreciation...................................... 424 124
---- -------- ----- --------
Total deferred tax liabilities............ 424 124
---- -------- ----- --------
Net deferred tax asset/liability.................... $ 0 $ 0 $ 0
==== ======== ===== ========
</TABLE>
The Company's valuation allowance increased by approximately $3,017,000 to
$32,729,000 as of December 31, 1996 due principally to the increase in the net
operating losses.
The reconciliation of income taxes computed at the U.S. federal statutory
tax rate to income tax expense is:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax (benefit) at U.S. statutory rates................. $(2,757) $(4,429) $(2,390)
State income taxes, net of federal benefit............ (278) (487) (195)
Valuation allowance................................... 3,017 4,315 3,014
Other................................................. 18 601 (429)
------- ------- -------
$ 0 $ 0 $ 0
======= ======= =======
</TABLE>
NOTE I -- CONTINGENCIES
The Company is involved in various lawsuits and proceedings arising in the
normal course of business. In the opinion of management of the Company, the
ultimate outcome of these lawsuits and proceedings will not have a material
effect on the financial position, results of operations or cash flows of the
Company.
NOTE J -- RELATED PARTY TRANSACTIONS
A company (the "Related Company") whose president is a Director of the
Company acted as a placement agent in connection with the sale by the Company of
shares of Series One Convertible Preferred Stock and subordinated notes and the
entering into of the bank credit facility.
The Related Company has been engaged to provide investment banking
functions for which it receives an annual fee of $105,000, subject to cost of
living adjustments. This agreement will terminate if the Related Company ceases
to control a majority of the Series One Convertible Preferred Stock (or Common
Stock
F-14
<PAGE> 106
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issued upon conversion thereof) or owns less than 20% of the Company's fully
diluted shares of Common Stock. At December 31, 1996, investment banking and
other fees accrued but unpaid were $288,565.
In conjunction with the purchase of Series A and Series A-2 Preferred Stock
and the issuance of subordinated note from 1990 to 1992, the Related Company was
issued warrants to purchase 167,696 shares of the Company's Common Stock.
NOTE K -- RENTALS
Rental expense for the fiscal years 1996, 1995 and 1994 was approximately
$2,383,000, $3,062,000 and $3,236,000, respectively.
Future minimum annual payments under non-cancelable operating leases for
office space and transmitter sites, as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
AMOUNT
---------------
(IN THOUSANDS)
<S> <C>
1997......................................................... $ 1,894
1998......................................................... 1,625
1999......................................................... 1,451
2000......................................................... 857
2001......................................................... 680
Thereafter................................................... 2,039
-------
$ 8,546
=======
</TABLE>
Certain leases are subject to increases in taxes, operating and other
expenses.
NOTE L -- EMPLOYEE BENEFIT PLAN
The Company has a 401(K) plan covering substantially all of its employees.
All employees who have completed ninety days of service are eligible to
participate. Employees may contribute 1% to 4% of compensation to the plan on an
after-tax basis and also defer additional amounts of compensation in 1%
increments on a pre-tax basis, subject to limits established by the Internal
Revenue Code. The Company matched 100% of after-tax and 25% of pre-tax
contributions with shares of its common stock until March 15, 1996, after which
matching contributions were paid in cash. The total cost of the plan amounted to
$43,900, $69,400 and $124,800 in 1996, 1995 and 1994, respectively.
F-15
<PAGE> 107
APPENDIX A
COMPOSITE AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
PAGE AMERICA GROUP, INC.,
PAGE AMERICA OF NEW YORK, INC.
PAGE AMERICA OF ILLINOIS, INC.
PAGE AMERICA COMMUNICATIONS OF INDIANA, INC.
PAGE AMERICA OF PENNSYLVANIA, INC.
AND
METROCALL, INC.
DATED AS OF JANUARY 30, 1997 AND
AMENDED ON MARCH 28, 1997
A-1
<PAGE> 108
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
DEFINITIONS....................................................................... A-4
ARTICLE 2
PURCHASE AND SALE OF ASSETS....................................................... A-6
2.1 Conveyance of Assets....................................................... A-6
2.2 Excluded Assets............................................................ A-7
2.3 Liabilities................................................................ A-7
2.4 Excluded Liabilities....................................................... A-7
2.5 Parent and Stockholder Action.............................................. A-8
2.6 Proxy Statement and Registration Statement................................. A-8
ARTICLE 3
CLOSING........................................................................... A-9
3.1 Determination of Closing Date.............................................. A-9
3.2 Time and Place of Closing.................................................. A-10
3.3 Closing Documents.......................................................... A-10
ARTICLE 4
PURCHASE PRICE, METHOD OF PAYMENT, ALLOCATION OF PURCHASE PRICE................... A-10
4.1 Purchase Price for Assets.................................................. A-10
4.2 Post-Closing Allocation of the Purchase Price.............................. A-11
4.3 Adjustments to the Purchase Price.......................................... A-12
4.4 Payment of Post-Closing Purchase Price Adjustments......................... A-13
4.5 Escrow Agreement........................................................... A-13
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.................................................... A-13
5.1 Representations and Warranties of the Sellers.............................. A-13
5.2 Representations and Warranties of the Buyer................................ A-18
ARTICLE 6
CONDUCT PRIOR TO CLOSING.......................................................... A-20
6.1 Filing of Assignment Applications.......................................... A-20
6.2 Antitrust Laws and the Sellers............................................. A-20
6.3 Antitrust Laws and the Buyer............................................... A-20
6.4 Access to Information Concerning Sellers' Business......................... A-21
6.5 Confidentiality............................................................ A-21
6.6 Control of the Sellers' Business........................................... A-21
6.7 The Sellers' Pre-Closing Covenants......................................... A-22
6.8 The Buyer's Pre-Closing Covenants.......................................... A-23
6.9 No Solicitation of Offers.................................................. A-23
6.10 Risk of Loss............................................................... A-23
ARTICLE 7
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS............................. A-24
7.1 Offer of Employment........................................................ A-24
7.2 Wage and Withholding Reporting Obligations................................. A-24
ARTICLE 8
CONDITIONS PRECEDENT.............................................................. A-24
8.1 Conditions Precedent to Obligations of Parties............................. A-24
8.2 Conditions Precedent to Obligations of the Buyer........................... A-25
8.3 Conditions Precedent to the Obligations of the Sellers..................... A-26
8.4 Waiver of Conditions....................................................... A-26
</TABLE>
A-2
<PAGE> 109
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 9
TERMINATION AND DEFAULT........................................................... A-27
9.1 General.................................................................... A-27
9.2 Procedure Upon Termination................................................. A-28
9.3 Effect of Termination...................................................... A-28
ARTICLE 10
POST-CLOSING TRANSACTIONS......................................................... A-28
10.1 Transition................................................................. A-28
10.2 Access To Books and Records................................................ A-28
10.3 Assignment and Further Assurances.......................................... A-28
10.4 Confidentiality of Customer Lists.......................................... A-28
ARTICLE 11
INDEMNIFICATION AND SURVIVAL...................................................... A-29
11.1 Indemnification by the Sellers............................................. A-29
11.2 Indemnification by the Buyer............................................... A-29
11.3 Claims for Indemnification................................................. A-30
11.4 Defense by Indemnifying Party.............................................. A-30
11.5 Manner of Indemnification.................................................. A-30
11.6 Survival of Representations and Warranties................................. A-31
ARTICLE 12
MISCELLANEOUS..................................................................... A-31
12.1 Brokers.................................................................... A-31
12.2 Notices.................................................................... A-31
12.3 Expenses of Transfer....................................................... A-32
12.4 Assignment................................................................. A-32
12.5 Counterparts............................................................... A-32
12.6 Entire Agreement........................................................... A-32
12.7 Governing Law.............................................................. A-32
12.8 Headings................................................................... A-33
12.9 Severability............................................................... A-33
12.10 Modification and Amendment................................................. A-33
12.11 Waiver..................................................................... A-33
12.12 Parties Obligated and Benefited............................................ A-33
12.13 Attorneys' Fees............................................................ A-33
12.14 Rights to Specific Performance............................................. A-33
12.15 Actions.................................................................... A-33
12.16 Terms...................................................................... A-33
12.17 Construction............................................................... A-34
12.18 Buyer Stockholder Approval of Certain Matters.............................. A-34
12.19 Transfers of Series B Preferred Shares..................................... A-34
</TABLE>
A-3
<PAGE> 110
COMPOSITE AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this "Agreement"),
dated as of January 30, 1997, as amended by Amendment dated as of March ,
1997, by and among PAGE AMERICA GROUP, INC., a New York corporation, PAGE
AMERICA OF NEW YORK, INC., a New York corporation, PAGE AMERICA OF ILLINOIS,
INC., an Illinois corporation, PAGE AMERICA COMMUNICATIONS OF INDIANA, INC., an
Indiana corporation, PAGE AMERICA OF PENNSYLVANIA, INC., a Pennsylvania
corporation (collectively the "Sellers" and individually a "Seller"), and
METROCALL, INC., a Delaware corporation (the "Buyer").
WITNESSETH:
Page America Group, Inc. (the "Parent") owns all of the issued and
outstanding shares of stock of each of the other Sellers. Sellers are engaged in
the radio paging business. Buyer wishes to purchase, and Sellers wish to sell,
substantially all of Sellers' assets and properties as hereinafter described
relating to the Sellers' Business.
The Buyer and the Sellers entered into a certain Asset Purchase agreement
dated as of April 22, 1996 (the "Initial Agreement"). Buyer and Sellers have
agreed to amend the Initial Agreement in certain respects including, inter alia,
the Seller's agreement to reduce the cash portion of the purchase price and in
lieu thereof to acquire equity securities of the Buyer as part of the
consideration for the Seller's assets. Buyers and Sellers desire to amend and
restate their agreement as set forth herein.
In order to satisfy a condition to the Buyer entering into this Agreement
and incurring the obligations set forth herein, certain stockholders of Parent
have entered into a Stockholders' Agreement (the "Stockholders' Agreement") with
the Buyer and the Parent pursuant to which such stockholders have agreed to vote
their shares of Parent stock (the "Shares") and grant the Buyer irrevocable
proxies with respect to the voting of the Shares in favor of the transactions
contemplated by this Agreement, and to grant the Buyer an option to purchase the
Shares.
In consideration of the foregoing and of the covenants, agreements,
representations and warranties hereinafter contained, and intending to be
legally bound, the Sellers and the Buyer hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 Accounting Terms. Accounting terms used herein and not otherwise
defined shall be construed in accordance with generally accepted accounting
principles ("GAAP"), consistently applied.
1.2 Affiliate means, as to a Seller, any entity that is controlled by,
under common control with, or controlling the Seller.
1.3 Acquisition Proposal has the meaning given that term in Section 6.9
hereof.
1.4 Assets means the Assets as such term is defined in Article 2 hereof.
1.5 Assignment Applications means the applications to be jointly prepared
by the Sellers and the Buyer and filed with the FCC and/or any PUC requesting
its written consent to the assignment or transfer of control of the Licenses
from the Sellers to the Buyer.
1.6 Closing means the consummation of the sale and purchase of the Assets
in accordance herewith by the assignment and conveyance thereof by the Sellers
to the Buyer, and the payment by the Buyer to the Sellers of the portion of the
Purchase Price to be paid at the Closing.
1.7 Closing Date means the date and time on which the Closing occurs, as
provided by Section 3.1.
A-4
<PAGE> 111
1.8 Confidential Information means all data and information which the
Sellers and their agents and representatives make available to the Buyer, its
agents, or representatives in accordance with this Agreement prior to Closing
and which: (a) is not information which is a matter of public knowledge or which
has heretofore been or is hereafter made available, without any requirement of
confidentiality, with the Sellers' consent to third parties other than the
Buyer, its agents, or representatives, or filed as public information with any
governmental authority other than as a result of a breach of the covenant set
forth in Section 6.5 hereof; and (b) is proprietary information relating to the
Sellers' Business or the Transaction.
1.9 DOJ means the United States Department of Justice.
1.10 Environmental Laws. Environmental laws shall mean the Resource
Conservation and Recovery Act of 1976, U.S.C. sec.sec. 6901-6987, as amended by
the Hazardous and Solid Waste Amendments of 1984, the Compensation and Liability
Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. sec.sec. 9601-9657, the Hazardous Materials Transportation Act of 1975,
49 U.S.C. sec.sec. 1801-1812, the Toxic Substances Control Act, the Clean Air
Act, 42 U.S.C. sec.sec. 7401 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. sec.sec. 136 et seq., the Clean Water Act, 33 U.S.C.
sec.sec. 1251 et seq., the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. sec.sec. et seq., and any substantially similar
state or local environmental laws.
1.11 Excluded Assets has the meaning given that term in Section 2.2
hereof.
1.12 FCC means the Federal Communications Commission.
1.13 Final Order means an action by the FCC or any PUC asserting authority
over this transaction granting its consent and approval to the assignment or
transfer of control of the Licenses or the Transaction that has not been
reversed, stayed, enjoined, set aside, annulled or suspended and with respect to
which no action, request for stay, petition for review or rehearing,
reconsideration or appeal is pending, and as to which the time for filing any
request, petition, or appeal has expired and the time for agency action to set
aside its consent on its own motion has expired.
1.14 Financial Statements has the meaning given that term in Section
5.1.10 of this Agreement.
1.15 FTC means the Federal Trade Commission.
1.16 Hazardous Substance means any pollutant, contaminant, chemical,
industrial, toxic, hazardous, or noxious substances or waste which is regulated
by any governmental authority under any Environmental Law.
1.17 Liabilities means all debts, claims, liabilities, obligations,
damages, and expenses of the Sellers of every kind and nature, whether known,
unknown, contingent, absolute, determined, indeterminable, or otherwise.
1.18 Licenses means and includes with respect to the Sellers' Business all
licenses, permits, franchises and authorizations issued by the FCC and/or any
PUC, and/or other relevant government agencies (including pending applications
for any of the foregoing), for the construction or operation of the Sellers'
Business, including all renewals and extensions thereof and all additional
licenses, permits, franchises, and authorizations obtained or applied for by the
Sellers from the date of this Agreement to the Closing Date.
1.19 Lien means any mortgage, pledge, security interest, encumbrance,
lien, claim or charge of any kind.
1.20 Material Adverse Effect or Material Adverse Change means any change
or effect that is, or is reasonably likely to be, materially adverse to the
business, financial condition, assets, liabilities or results of operations of
the Sellers' Business, other than a change in national economic conditions or
which affects the paging industry generally.
1.21 Person means an individual, corporation, association, partnership,
joint venture, joint stock company, trust, estate, limited liability company,
limited liability partnership, governmental entity, or other entity or
organization.
A-5
<PAGE> 112
1.22 Pro Forma Service Revenue means for any calendar month, the Sellers'
total paging operations service revenue to the extent that such revenue has been
derived in the ordinary course of business consistent with Sellers' past
business practices, consisting of (a) service revenue, (b) service
revenue-agents and (c) other revenue for such period, each such item to be
determined consistently with such items shown on the Financial Statements for
the fiscal year ended December 31, 1995.
1.23 Pro Forma Service Revenue Threshold means, for any month, Pro Forma
Service Revenue equal to (a) $1,567,233 minus (b) $100,000 times the number of
months elapsed from and including January 1997 through the calendar month
immediately prior to the date of determination.
1.24 PUC means a Public Utilities Commission, or any substantially similar
state regulatory agency of any state which exercises jurisdiction over the
Sellers or the Sellers' Business.
1.25 Real Property means all Assets consisting of interests in real
property, including, without limitation, appurtenances, improvements, and
fixtures located on such real property, leasehold interests therein and any
other interests in real property.
1.26 Sellers' Business means the radio paging and related businesses of
the Sellers, the principal places of business of which are in the New York City
and Chicago metropolitan areas, and the branch offices as set forth in Schedule
1.26, attached hereto.
1.27 Subscribers means units in service for which Sellers receive or
charge a monthly or recurring fee and for which service has not been permanently
terminated by Sellers. The term Subscriber shall exclude units in service
permanently terminated by Sellers for non-payment, those for which a notice of
cancellation has been received by the Sellers from a customer and those units in
service with a delinquent balance (not in reasonable dispute) for services
previously rendered which balance is more than one hundred and twenty (120) days
past due.
1.28 To a Sellers' Knowledge or To the Knowledge of the Sellers with
respect to a fact or matter shall mean knowledge of any executive officer of any
of the Sellers. For such purposes, such persons shall be conclusively deemed to
have knowledge of any fact or matter that would have or should have come to the
attention of such persons in the course of discharging their duties in a
reasonable and prudent manner consistent with sound business practice.
1.29 Transaction means the assignment of the Licenses and the sale of the
Assets subject to the obligations and conditions set forth herein.
1.30 Working Capital Deficit shall mean, as of a date, the amount by which
(i) consolidated current assets of Sellers (including accounts receivable net of
reserves for uncollectible accounts) excluding (A) cash and cash equivalents of
the Sellers and (B) any escrowed monies from the July 28, 1995 asset sale to
Paging Network of Florida, Inc., is less than (ii) the consolidated current
liabilities (excluding indebtedness for borrowed money described on Schedule
1.30, but including all amounts necessary to satisfy those Liens listed in the
attachment to Schedule 5.1.5 in full) of the Sellers. Any liabilities included
in the calculation of the Working Capital Deficit shall be deemed Assumed
Liabilities.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Conveyance of Assets.
In exchange for the consideration specified herein and upon the terms and
subject to the conditions set forth in this Agreement, on the Closing Date, the
Buyer will purchase from the Sellers and the Sellers will sell, convey,
transfer, assign, and deliver up to the Buyer all of Sellers' right, title and
interest in all assets, properties and rights of the Sellers, of every type and
description, real, personal and mixed, tangible and intangible, known or
unknown, fixed or not fixed, choate or inchoate, accrued, absolute, contingent
or otherwise, wherever located and whether or not reflected on the books and
records of the Sellers, and used or
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held for use in connection with the Sellers' Business at any time prior to the
date hereof, together with additional assets acquired in the ordinary course of
business from the date hereof to the Closing Date (all such assets, properties
and rights are hereinafter collectively referred to as the "Assets"). A list of
such Assets having a value in excess of $1,000 is attached hereto as Schedule
2.1 and includes, without limitation: (a) all capitalized equipment and other
fixed assets used in the Sellers' Business; (b) the corporate logos, trade
names, trademarks, copyrights, customer lists and goodwill of the Sellers and
any other intellectual property owned by or licensed to the Sellers; (c) the
Licenses; (d) all accounts receivable of the Sellers; (e) contract rights; (f)
all items of inventory and supplies owned by the Sellers; (g) the Real Property;
and (h) books and records (whether in hard copy or computerized) kept in the
ordinary course and reasonably necessary for the continued conduct of the
Sellers' Business, other than minute books and similar official corporate
records.
2.2 Excluded Assets.
Notwithstanding Section 2.1 above, the Sellers are not selling,
transferring, or conveying to the Buyer any of the following, all of which are
hereinafter referred to as "Excluded Assets":
(a) cash and cash equivalents;
(b) assets related to employee benefit plans;
(c) accounting books and records;
(d) the Purchase Price payable pursuant to this Agreement;
(e) the rights of the Sellers under this Agreement;
(f) stock, minute books and corporate seals of the Sellers; and
(g) assets relating to Sellers' former paging operations in California
and Florida, including, but not limited to, real property owned in Florida
and amounts due to Sellers in connection with the sale of the California
and Florida paging operations.
2.3 Liabilities.
On and after the Closing Date, the Buyer shall assume only those
Liabilities of Sellers incurred in the ordinary course of business, relating to
contracts assumed by Buyer, those Liabilities set forth in Schedule 2.3 attached
hereto and any other Liabilities included in the calculation of the Working
Capital Deficit (the "Assumed Liabilities").
2.4 Excluded Liabilities.
Except for the Assumed Liabilities specifically set forth in Section 2.3,
the Buyer shall not be required to assume, pay, fulfill, perform or otherwise
discharge any liabilities or obligations of the Sellers. Without limiting the
generality of the foregoing and except for the Assumed Liabilities, the Buyer
shall not assume or be liable for and the Sellers shall indemnify the Buyer
against and hold the Buyer harmless from any of the following liabilities or
obligations (herein referred to as "Excluded Liabilities"):
(a) any of the Sellers' liabilities or obligations under this
Agreement and the other agreements with the Buyer contemplated hereby (it
is understood that this Section 2.4(a) is not intended to expand or alter
the parties' respective rights under such other agreements.);
(b) any of the Sellers' liabilities or obligations for expenses or
fees incident to or arising out of the negotiation, preparation, approval,
or authorization of this Agreement or the Initial Agreement or the
consummation (or preparation for the consummation) of the transactions
contemplated hereby, including without limitation, brokers', attorneys' and
accountants' fees;
(c) any liability or obligation of the Sellers, at any time, prior to
the Closing, with respect to federal, state, local or foreign taxes; and
any liability for interest, penalties or additions to any of such taxes
(except prorated taxes);
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(d) any liabilities or obligations in connection with any facilities
formerly used by the Sellers' Business which are not included in the
Assets;
(e) any obligations or liabilities which relate to any group health
plan, bonus, retirement, retiree, disability, pension, profit sharing,
stock bonus, thrift, severance, incentive, deferred or other compensation,
welfare benefit, or other plan, program or arrangement with respect to any
employee, former employee or beneficiary of such employee or former
employee, of the Sellers or any person that, together with the Sellers,
would be treated as a single employer under Section 414 of the Internal
Revenue Code;
(f) any liability or obligation of the Sellers which relates to the
Excluded Assets;
(g) any liability or obligation arising out of the operation of the
Sellers' Business before Closing, including, but not limited to, any fine,
forfeiture or other penalty imposed by the FCC for any non-compliance by
the Sellers with the terms of the Licenses or with any FCC rule or
regulation and all items listed on Schedule 5.1.16;
(h) all costs and damages arising out of the litigation described on
Schedule 5.1.7;
(i) any liability or obligation relating to the any and all Liens
resulting from the NEC America Leasing contract (Sellers shall satisfy any
and all such Liens in full and obtain a release thereof either prior to or
at Closing); and
(j) any other liability or obligation of the Sellers not specifically
assumed by the Buyer under Section 2.3 hereof.
2.5 Parent and Stockholder Action.
(a) The Parent, certain stockholders of the Parent and the Buyer have
entered into the Stockholders' Agreement set forth as Exhibit 2.5(a).
(b) The Parent hereby represents and warrants that the Board of Directors
of the Parent, at a meeting duly called and held, has, with the affirmative vote
of at least 66 2/3% of the members of the Board of Directors of the Parent, (i)
determined that this Agreement and the transactions contemplated hereby are fair
to and in the best interests of the stockholders of the Sellers, (ii) approved
this Agreement and the transactions contemplated hereby, and (iii) resolved to
recommend that the stockholders of the Parent approve and adopt this Agreement.
(c) The Parent shall, promptly after the date of this Agreement, take all
action necessary in accordance with New York Law, Federal law and the Parent's
Certificate of Incorporation and By-Laws to convene a meeting of the Parent's
stockholders to approve and adopt this Agreement. The Parent shall use its
reasonable efforts to solicit from stockholders of the Parent proxies in favor
of the approval and adoption of this Agreement.
(d) The Parent has received the oral opinion of Daniels & Associates (the
"Seller's Financial Advisor"), to the effect that the consideration to be
received by the Sellers pursuant to this Agreement is fair to the Sellers from a
financial point of view (the "Fairness Opinion"). The Parent will deliver to the
Buyer a copy of the written Fairness Opinion to be delivered by the Seller's
Financial Advisor in connection with the stockholders meeting referred to in
Section 2.5(c) above.
2.6 Proxy Statement and Registration Statement.
(a) The information with respect to the Sellers and their officers and
directors (i) to be contained in the definitive Proxy Statement to be furnished
to the stockholders of the Parent and which will form a part of the Buyer's
Registration Statement on Form S-4 (the "Registration Statement") to be filed
with the Securities and Exchange Commission and will constitute a prospectus of
the Buyer with respect to the Metrocall Common Stock, CSEs and Metrocall Series
B Preferred Shares to be issued to the Sellers (the "Proxy Statement"), or (ii)
to be contained in the Registration Statement will not, on the respective dates
on which (x) the Proxy Statement is first mailed to stockholders of the Parent
or on the date of the stockholders'
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meeting referred to in Section 2.5 (in the case of the Proxy Statement), (y) the
Registration Statement becomes effective (in the case of the Registration
Statement), and (z) in the case of the Proxy Statement and the Registration
Statement, as such Proxy Statement or Registration Statement is then amended or
supplemented, at the Closing Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. When the Registration Statement or
any post-effective amendment thereto shall become effective and when the Proxy
Statement or any amendment or supplement thereto shall be mailed, and at the
time of the meeting and at the Closing Date, the Proxy Statement will comply as
to form with all applicable laws including the provisions of the Securities Act
of 1933, as amended ("Securities Act") and the Securities Exchange Act of 1934,
as amended ("Exchange Act") and the rules and regulations promulgated
thereunder. If at any time prior to the Closing Date any event with respect to
the Sellers, their officers and directors should occur which is or should be
described in an amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, the Sellers shall promptly so inform the Buyer and such
event shall be so described in an amendment or supplement to the Proxy Statement
and such information in such amendment or supplement will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The information with respect to the Buyer and its officers and
directors and its Subsidiaries (i) to be contained in the definitive Proxy
Statement to be furnished to the stockholders of the Parent and which will form
a part of the Registration Statement to be filed with the Securities and
Exchange Commission and will constitute a prospectus of the Buyer with respect
to the Metrocall Common Stock, CSEs and Metrocall Series B Preferred Shares to
be issued to the Sellers or (ii) to be contained in the Registration Statement
will not, on the respective dates on which (x) the Proxy Statement is first
mailed to stockholders of the Parent or on the date of the stockholders' meeting
referred to in Section 2.5 (in the case of the Proxy Statement), (y) the
Registration Statement becomes effective (in the case of the Registration
Statement), and (z) in the case of the Proxy Statement and the Registration
Statement, as such Proxy Statement or Registration Statement is then amended or
supplemented at the Closing Date, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. When the Proxy Statement or any
amendment or supplement thereto shall be mailed, and at the time of the meeting
and the Closing Date, the Registration Statement and the Proxy Statement will
comply as to form with the provisions of all applicable law, including the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder. If at any time prior to the Closing Date any event with respect to
the Buyer or its officers and directors should occur which is or should be
described in an amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, the Buyer shall promptly so inform the Sellers and such
event shall be so described in an amendment or supplement to the Proxy Statement
or the Registration Statement, and such information in such amendment or
supplement will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE 3
CLOSING
3.1 Determination of Closing Date.
Subject to the satisfaction or waiver of the conditions set forth in
Article 8, the date of the Closing (the "Closing Date") shall occur on the first
day of the first calendar month after the later to occur of: (a) the consents of
the FCC and any required PUC to the Assignment Applications becoming Final
Orders, or (b) if applicable, the expiration of the waiting period pertaining to
the purchase of the Assets under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "Antitrust Improvements Act"); provided that if
either of the foregoing occurs on or after the twenty-fifth (25th) day of a
calendar month and it is not possible to close on the first day of the next
calendar month, then the Closing shall be held as soon as
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practicable after the end of such calendar month with an effective date as of
the first day of the next calendar month. In no event shall the Closing Date
occur later than July 1, 1997. The parties may mutually agree to waive the
requirement that any FCC or PUC consent shall have become a Final Order. If
Closing does not occur on or before July 1, 1997, this Agreement shall be
terminable in accordance with the provisions set forth in Article 9 hereof.
3.2 Time and Place of Closing.
The Closing shall take place at the offices of Wilmer, Cutler & Pickering,
2445 M Street, N.W. Washington, D.C. 20037 at 10:00 a.m. on the Closing Date or
at such other place agreed to by the Sellers and the Buyer. The physical
presence of any party or their representatives shall not be a required condition
of the Closing if such party has performed all acts and delivered to an escrow
agent all items and documents necessary for the Closing, together with written
instructions of the party which permit such escrow agent to complete the
obligations of the party in connection with the Closing.
3.3 Closing Documents.
The Sellers shall sell the Assets by delivering to the Buyer at the Closing
appropriately executed assignments, bills of sale, endorsements, releases,
termination statements, consents and other documents and instruments of transfer
necessary to transfer to the Buyer good and marketable title to the Assets,
except as set forth in Schedule 5.1.11, free and clear of all Excluded
Liabilities (the "Closing Documents"). Likewise, the Buyer shall purchase the
Assets by delivery to the Sellers at the place and time of Closing, payments as
provided herein, and all other documents necessary to carry out the Buyer's
obligations hereunder including the assumption of the Assumed Liabilities as
provided herein.
ARTICLE 4
PURCHASE PRICE, METHOD OF PAYMENT,
ALLOCATION OF PURCHASE PRICE
4.1 Purchase Price for Assets.
(a) Subject to and upon the conditions set forth herein, the Buyer shall
pay to the Sellers (i) cash consideration in the amount of Twenty-Five Million
Dollars ($25,000,000) minus an amount equal to the unpaid purchase price of any
pagers delivered to the Sellers pursuant to the letter agreement dated March 4,
1997 plus interest that has accrued and is unpaid as of the Closing Date (the
"Cash Consideration"); (ii) 1,500 shares of Series B Junior Convertible
Preferred Stock of the Buyer ("Metrocall Series B Preferred Shares"), the terms
of which are set forth in the Certificate of Designation, Number, Powers,
Preferences and Relative, Participating and Other Rights of Series B Junior
Convertible Preferred Stock (the "Certificate of Designation") attached as
Exhibit 4.1(a) hereto; (iii) 762,960 shares of the Buyer's common stock
("Metrocall Common Stock") and (iv) the number of Shares of Metrocall Common
Stock (or Common Stock Equivalents, as defined below) having a Share Value (as
defined below) equal to Fifteen Million Dollars ($15,000,000) as adjusted as
specified in Section 4.4(a); provided, that in the event the total number of
shares of Metrocall Common Stock issued or issuable upon conversion of Common
Stock Equivalents issued pursuant to this item (iv) exceeds 4,000,000, then the
Buyer shall pay pursuant to this item (iv) 4,000,000 shares of Metrocall Common
Stock (or Common Stock Equivalents) plus that number of Metrocall Series B
Preferred Shares having a Stated Value (as defined in the Certificate of
Designation) equal to the difference between $15,000,000 as adjusted as
specified in Section 4.4(a) and the aggregate Share Value of 4,000,000 Metrocall
Common Stock or Common Stock Equivalents (items (i), (ii), (iii) and (iv)
collectively the "Purchase Price").
(b) The Purchase Price shall be payable as follows:
(i) At the Closing, the Buyer shall pay the Cash Consideration by wire
transfer of immediately available funds to an account designated by Parent;
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(ii) At the Closing, that portion of the Purchase Price represented by
the number of shares of Metrocall Common Stock, or Common Stock
Equivalents, having a Share Value of Four Million Dollars ($4,000,000)
shall be placed in escrow as provided by the Escrow Agreement (as defined
in Section 4.5);
(iii) At the Closing, the Buyer will issue to Sellers the Metrocall
Series B Preferred Shares and all shares of Metrocall Common Stock or
Common Stock Equivalents that are not placed in escrow pursuant to Section
4.1(b)(ii). The portion of the Purchase Price payable in Metrocall Common
Stock or Common Stock Equivalents shall be subject to such further
adjustments as are specified in Sections 4.3 and 4.4.
(iv) Notwithstanding the foregoing, the Buyer will have the option to
pay cash at Closing in lieu of some or all of the Purchase Price specified
in Sections 4.1(a)(ii), (iii) or (iv). The Buyer may substitute cash for
Metrocall Series B Preferred Shares, at a rate equal to the Stated Value of
such shares, and for Metrocall Common Stock, and/or Common Stock
Equivalents at a rate equal to the Share Value.
(c) In the event that at the Closing Date the number of shares of Metrocall
Common Stock authorized under the Buyer's Certificate of Incorporation and
unissued or not reserved for other purposes ("Available Shares") is less than
the number of shares of Metrocall Common Stock determined pursuant to Section
4.1(a)(iv), then the Buyer shall issue that number of fractional shares of a
series of preferred stock having the terms described in Exhibit 4.1(c) ("Common
Stock Equivalents") equal to the excess of the number of shares of Metrocall
Common Stock determined pursuant to Section 4.1(a)(iv) over the number of
Available Shares. For purposes of the Purchase Price, the Share Value of each
Common Stock Equivalent shall be equal to the Share Value of a share of
Metrocall Common Stock.
(d) For purposes of this Agreement,
(i) the term "Share Value" shall mean the average of the Closing
Prices of Metrocall Common Stock for the 10 Trading Days prior to the
Closing Date.
(ii) the term "Closing Price," on any Trading Day, shall mean the last
reported sale price, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, for Metrocall Common Stock.
(iii) the term "Trading Day" shall mean (A) a day on which Metrocall
Common Stock is traded on the principal stock exchange on which the Common
Stock has been listed, or (B) if Metrocall Common Stock is not listed on
any stock exchange, a day on which Metrocall Common Stock is traded in the
over-the-counter market, as reported by the Nasdaq National Market System,
or (C) if Metrocall Common Stock is not listed on any stock exchange or
traded on the Nasdaq National Market System, a day on which Metrocall
Common Stock is traded in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or
agency succeeding to its functions of reporting prices).
4.2 Post-Closing Allocation of the Purchase Price.
Buyer shall prepare, and Buyer and Sellers shall agree to, the allocation
of the Purchase Price among the Assets to be purchased hereunder in accordance
with the procedures set forth in Schedule 4.2 hereof, which schedule shall be
prepared and approved by Buyer and Sellers prior to the Closing Date. Such
allocations shall be finalized as of the Closing Date subject to adjustment to
take account of any post-closing Purchase Price adjustments. Each of Buyer and
Sellers shall (a) be bound by such allocations for purposes of determining any
taxes, (b) prepare and file its tax returns on a basis consistent with such
allocations, and (c) shall take no position inconsistent with such allocations,
in any proceeding before any taxing authority or otherwise. In the event such
allocations are disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other party hereto of such dispute and any
resolution thereof.
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4.3 Adjustments to the Purchase Price.
(a) The Purchase Price shall be subject to adjustment as follows:
(i) The Purchase Price shall be decreased by the amount, if any, by
which the Working Capital Deficit exceeds $2,347,165 as of the Closing Date
and shall be increased by the amount, if any, by which the Working Capital
Deficit is less than $2,347,165 as of the Closing Date (the "Working
Capital Adjustment").
(ii) The Purchase Price shall be decreased by an amount equal to the
product of (A) the shortfall (if any) between (1) Pro Forma Service Revenue
for the month immediately prior to the Closing Date and (2) the Pro Forma
Service Revenue Threshold for the month immediately prior to the Closing
Date, and (B) 35.16 (the "Operating Adjustment").
(b) Not less than five (5) days prior to the Closing Date, the Sellers
shall prepare and deliver to the Buyer the following documents, certified by
Parent's chief financial officer: (i) an unaudited consolidated balance sheet of
the Sellers (the "Preliminary Closing Balance Sheet") as of the last day of the
calendar month ended not more than thirty-one (31) days prior to the Closing
Date (the "Preliminary Adjustment Date"); (ii) a calculation of the Working
Capital Adjustment as of such date (the "Preliminary Working Capital
Adjustment"); (iii) unaudited consolidated statements of operations for the
month ended on the Preliminary Adjustment Date (the "Preliminary Closing
Operating Statements"), which shall include statements of the Pro Forma Service
Revenue as of such date (the "Preliminary Pro Forma Service Revenue"); and (iv)
a calculation of the Operating Adjustment, if any, that would be required under
Section 4.3(a)(ii) if the Preliminary Pro Forma Service Revenue were the Pro
Forma Service Revenue for the month ended immediately prior to the Closing Date
(the "Preliminary Operating Adjustment").
(c) Within sixty (60) days after the Closing Date, the Sellers shall
prepare and deliver to the Buyer the following documents, certified by Parent's
chief financial officer: (i) an unaudited consolidated balance sheet of the
Sellers (the "Closing Balance Sheet") as of the last day of the calendar month
ended immediately prior to the Closing Date (the "Final Adjustment Date"); (ii)
a calculation of the Working Capital Adjustment as of such date (the "Final
Working Capital Adjustment"); (iii) unaudited consolidated statements of
operations for the month ended on the Final Adjustment Date (the "Closing
Operating Statements"), which shall include statements of the Pro Forma Service
Revenue as of such date (the "Final Pro Forma Service Revenue") and (iv) a
calculation of the Operating Adjustment under Section 4.3(a)(ii) based on the
Closing Operating Statements (the "Final Operating Adjustment").
(d) The Preliminary Balance Sheet, the Closing Balance Sheet, the
Preliminary Operating Statements, and the Closing Operating Statements shall be
prepared in accordance with the books and records of the Sellers, and shall be
prepared on a basis consistent with the Audited Financial Statements, including
GAAP, consistently applied, except for variations identified in Schedule 5.1.10.
(e)(i) The Closing Operating Statements shall be final and binding on the
parties unless the Buyer objects, by giving written notice within 45 days after
the Buyer's receipt of the Closing Operating Statements, to any items in the
Closing Operating Statements or the computation of the Final Pro Forma Service
Revenue or the calculation of the Final Operating Adjustment. The Closing
Balance Sheet shall be final and binding on the parties unless Buyer objects, by
giving written notice within 45 days after the Buyer's receipt of the Closing
Balance Sheet, to any items in the Closing Balance Sheet or the calculation of
the Final Working Capital Adjustment. Prior to the expiration of such 45 day
period, the Buyer shall have the right to cause its accountants to conduct
procedures specified by the Buyer with respect to the accounts and records of
the Sellers in order to verify the Sellers' calculations.
(ii) In the event of a dispute, Buyer and Sellers will use their reasonable
efforts to resolve any such dispute. If Buyer and Sellers do not resolve any
such dispute within 30 days after receipt by Sellers of Buyer's written notice
of dispute, the Buyer and Sellers shall, within five (5) business days, submit
any such unresolved dispute to the Washington, D.C. office of a mutually
acceptable big six accounting firm (the "Accountant") which firm shall, within
thirty (30) days of such submission, resolve such remaining dispute and such
resolution shall be binding and conclusive upon the parties. The fees and
expenses of the Accountant
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shall be shared equally by Buyer and Sellers. If issues in dispute are submitted
to the Accountant for resolution, each party will furnish to the Accountant such
work papers and other documents and information relating to the disputed issues
as the Accountant may request and are available to that party, and each party
will be afforded the opportunity to present to the Accountant any material
relating to the determination and to discuss the determination with the
Accountant.
4.4 Payment of Post-Closing Purchase Price Adjustments.
(a) At Closing, the portion of the Purchase Price payable in Metrocall
Common Stock or Common Stock Equivalents (as valued by the Share Value) to the
Sellers pursuant to Section 4.1(a)(iv) will be increased or reduced by the
amount of the Preliminary Working Capital Adjustment and will be reduced by the
amount, if any, of the Preliminary Operating Adjustment. The net amount of such
adjustments is referred to herein as the "Preliminary Purchase Price Adjustment"
(b) After the final determination of the Final Working Capital Adjustment
and the Final Operating Adjustment pursuant to Section 4.3(e)(ii), the
difference, if any, between the net amount of such adjustments (the "Final
Purchase Price Adjustment") and the Preliminary Purchase Price Adjustment shall
be paid by party owing such amount to the other by the fifth day following such
final determination. Payment shall be made by wire transfer of immediately
available funds and shall be accompanied by accrued interest from the Closing
Date to the date of payment at an annual rate equal to the Prime Rate. The term
"Prime Rate" means the rate published in the "Money Rates" column of The Wall
Street Journal as a guide to the Prime Rate, which is currently defined as the
base rate on corporate loans posted by at least 75% of the nation's 30 largest
banks. If a range is published, the average rate shall be the Prime Rate. The
Prime Rate will increase or decrease each time and as of the date the Prime Rate
changes.
4.5 Escrow Agreement.
At the Closing, the Sellers and the Buyer shall enter into the Escrow
Agreement in the form set forth as Exhibit 4.5 (the "Escrow Agreement").
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Sellers.
As of the date of the Initial Agreement and as of the Closing Date (unless
another date or period of time is specifically stated herein for a
representation or warranty), the Sellers jointly and severally represent and
warrant to the Buyer as follows:
5.1.1 Qualification of the Sellers. Each of the Sellers is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of incorporation. Each of the Sellers has all requisite corporate
power and authority to own and operate the Sellers' Business as it currently is
being conducted, to own and lease the properties and assets owned or leased by
it and to enter into this Agreement and perform the obligations hereunder. Each
of the Sellers is licensed or qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be
qualified would not have a Material Adverse Effect.
5.1.2 Authorization and Validity of Agreement. The execution, delivery
and performance by the Sellers of this Agreement, the Closing Documents, and the
other agreements, certificates, documents, and instruments contemplated hereby
or referred to herein and the consummation by it of the Transaction contemplated
hereby have been duly authorized by all necessary corporate action of the
Sellers, subject to approval by Sellers' stockholders as required under New York
law. This Agreement has been duly executed and delivered by each of the Sellers
and, assuming the due authorization, execution, and delivery hereof by the
Buyer, is a legal, valid and binding obligation of each of the Sellers,
enforceable against each Seller, in
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accordance with its terms, except as and to the extent such enforceability may
be subject to bankruptcy or similar laws affecting creditors rights.
5.1.3 No Violation of Law; No Approvals or Notices Required; No Conflict
with Instruments to which the Sellers are Party. Each of the Sellers is
currently in compliance in all material respects with all laws, rules,
regulations, ordinances, decrees, judgments, and orders (collectively, "Laws")
applicable to the operation of its Business and the ownership of its assets,
except where noncompliance would not have a Material Adverse Effect. Except as
disclosed on Schedule 5.1.3, the execution, delivery and performance by the
Sellers of this Agreement and the consummation by them of the Transaction
contemplated hereby: (i) will not violate (with or without the giving of notice
or lapse of time or both) any Law applicable to the Sellers or the Sellers'
Business; (ii) will not be in conflict with, or result in the breach of, or
constitute a default under, or cause acceleration of the maturity of amounts
outstanding or other obligations pursuant to, or require the consent of or give
rise to any rights of first refusal of any third party under, any agreement or
other instrument to which any Seller is a party or by which such Seller's
properties or business is bound or affected; (iii) will not require any consent
or approval of, or filing or notice to, any governmental or regulatory authority
under any Law applicable to the Sellers or the Sellers' Business, except for (a)
the Assignment Applications, (b) filing under the Antitrust Improvements Act,
(c) any consent, approval, filing or notice that would not, if not given or
made, individually or in the aggregate, have a Material Adverse Effect and (d)
filings required pursuant to the Exchange Act; (iv) will not result in the
creation of any Liens except Permitted Liens (as such term is defined in Section
5.1.5) upon any of the Assets, which Liens, in the aggregate with all other such
Liens so created, would have a Material Adverse Effect; and (v) will not violate
any provision of the charter or bylaws of any Seller.
5.1.4 Licenses, Compliance with Law.
(a) The Sellers are the holders of the Licenses listed in Schedule
5.1.4(a). The Licenses so listed constitute all of the Licenses issued or
required by the FCC, any PUC, and all material Licenses and other authorizations
issued by any other governmental agency that are required for and/or used in the
operation of the Sellers' Business as currently operated. Each of the Licenses
is in full force and effect and, except as disclosed in Schedule 5.1.4(a), the
Sellers are in compliance in all material respects with the terms and
requirements thereof and all FCC, PUC and other governmental regulations
pertaining thereto. There is not pending or, to the Sellers' knowledge,
threatened, any action, investigation, complaint or other proceeding by or
before the FCC, any PUC or any other governmental agency to revoke, cancel,
suspend, modify or refuse to renew, or otherwise relating to, any of the
Licenses (except such actions, investigations, complaints, or other proceedings
which relate to the paging industry generally and do not relate to any specific
License). There is not issued, pending or, to the Sellers' knowledge,
threatened, any notice of violation or complaint by the FCC, any PUC or any
other governmental agency against the Sellers with respect to the Sellers'
Business or the Transaction contemplated hereby.
(b) Accurate and complete copies of all of the Licenses will be delivered
to the Buyer within five (5) business days after the execution of this
Agreement. Accurate and complete copies of all of the Licenses granted by the
FCC and any PUC after the date hereof and prior to Closing, will be delivered to
the Buyer by the Sellers prior to the Closing Date. All of the Licenses
previously delivered to the Buyer contain and, upon delivery to the Buyer as
provided above, the Licenses granted by the FCC and any PUC after the date
hereof and prior to Closing will contain no defect which would cause a Material
Adverse Effect. However, Sellers acknowledge that the Licenses most recently
issued by the FCC contain some inaccuracies. Seller shall promptly file with the
FCC requests for the correction of the Licenses, and shall use their best effort
to obtain corrected Licenses prior to Closing. Upon filing of such requests with
the FCC, Sellers shall provide date-stamped copies of same to Buyer.
(c) The Sellers have complied with, and are in compliance with, all
federal, state, county, and local laws, regulations, and orders that are
applicable to the Sellers' Business, including, but not limited to, the rules
and regulations of the FCC, the FAA, and the states and municipalities in which
the Sellers' Business is located, and has timely filed with the proper
authorities all statements and reports required by the laws, regulations,
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and orders to which the Sellers and the Sellers' Business are subject, except
where noncompliance would not have a Material Adverse Effect.
5.1.5 Title to Properties, Liens and Encumbrances. Except as disclosed on
Schedule 5.1.11, the Sellers are the true and lawful owner of the Assets, have
good and marketable title to the Real Property interests described in Schedule
2.1 (for those properties which, as indicated on Schedule 2.1, are owned by the
Sellers), hold by valid and subsisting lease or license those Real Property
interests described on Schedule 5.1.11 that are not indicated on such Schedule
to be owned by Sellers, have good and marketable title to all of the other
Assets (subject, with respect to the Licenses, to procuring the consent of the
FCC and, if applicable, any PUC to the transfer or assignment of such Licenses
as described in clause (iii)(a) of Section 5.1.3) in each case, free and clear
of any Lien other than (a) Liens for taxes not yet delinquent, (b) Liens set
forth in Schedule 5.1.5, (c) purchase money security interests securing
liabilities that will be Assumed Liabilities after the Closing, and (d) Liens
and defects in title that are not, in the aggregate, material to the Sellers'
Business (the Liens identified in clauses (a), (c) and (d) above being herein
referred to as "Permitted Liens"). Subject to obtaining the approval of the
stockholders of the Sellers and the necessary consents described on Schedule
5.1.3, the Sellers have all necessary power and authority to sell the Assets to
the Buyer free and clear of all Liens other than the Permitted Liens. Upon
delivery to the Buyer of the Closing Documents, on the Closing Date, the Sellers
will transfer good title to the Assets free and clear of any Liens, equities,
covenants, and restrictions other than Permitted Liens which have been disclosed
to the Buyer.
5.1.6 Taxes. With respect to the sales, excise or use taxes, property
taxes, income taxes, state and federal income tax withholding, social security,
and unemployment compensation taxes and all other taxes relating to the
operation of the Sellers' Business prior to Closing, the Sellers have filed, or
shall have filed, on or before the Closing Date, proper and timely tax returns
with respect thereto except only for such returns as shall be final returns for
the last tax period for each such tax, which returns shall be filed by the
Sellers on or before their respective due dates, as extended. All taxes, fees,
and assessments of whatever nature due and payable by the Sellers have been
paid, except such amounts (i) as are being contested diligently and in good
faith and are not in the aggregate material to the Sellers' Business and (ii) as
relate to final returns described in the preceding sentence, which shall be paid
by the Sellers. Except as set forth on Schedule 5.1.6, there are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, local, or foreign income tax return for any period, and
except as set forth on Schedule 5.1.6, there are no tax audits pending.
5.1.7 Litigation. Except as described in Schedule 5.1.7, there is no
litigation, claim, action, suit, proceeding or governmental investigation
pending or, to the Sellers' Knowledge, threatened against the Sellers which (i)
could reasonably be expected to have, individually or in the aggregate with all
such other litigation, claims, actions, suits, proceedings and governmental
investigations, a Material Adverse Effect or (ii) seeks to restrain or enjoin
the consummation of the Transaction. The Sellers are not in violation of any
term of any judgment, decree, injunction or order outstanding against them,
which violation could reasonably be expected to have, individually or in the
aggregate with all such other violations, a Material Adverse Effect.
5.1.8 Insurance. The Sellers maintain adequate insurance with respect to
the Business, and the Sellers are in compliance with all material requirements
and provisions thereof.
5.1.9 Condition of System. All antennas, pager equipment, facilities and
installations that are included in the Assets have in all material respects been
constructed, completed and maintained in a proper manner, are in all material
respects operable.
5.1.10 Financial Statements. Attached hereto as Schedule 5.1.10 are true
and complete copies of the audited consolidated balance sheets of the Sellers as
at December 31, 1994 and 1995 and the related consolidated statements of
operations and cash flows for each of the fiscal years in the three fiscal-year
period ending December 31, 1995 and the unaudited consolidated balance sheets of
the Sellers as at September 30, 1996 and the related consolidated statements of
operations and cash flows for the nine-month period ending September 30, 1996
(collectively, including the notes thereto, the "Financial Statements"). The
Financial Statements have been prepared in accordance with the books and records
of the Sellers and present fairly the financial position and the results of
operations and cash flows of the Sellers (subject, in the case of unaudited
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Financial Statements, to normal year-end audit adjustments) as of the dates or
for the periods set forth therein. The Financial Statements have been prepared
in accordance with GAAP, consistently applied, except for the material
variations set forth on Schedule 5.1.10. From the date of execution of this
Agreement until the Closing, Sellers shall provide Buyer no later than thirty
(30) business days after the first day of each calendar month, an unaudited
consolidated balance sheet of the Sellers as of the last day of the preceding
calendar month, and unaudited consolidated statements of operations for the
period ended on such date. Sellers shall also provide Buyer with copies of all
quarterly financial statements filed by Parent with the Securities and Exchange
Commission.
5.1.11 Interests in Real Property. Except as set forth on Schedule
5.1.11, the Sellers do not have fee simple title to any Real Property. Schedule
5.1.11 attached hereto comprises a true and complete list and a brief
description of all Real Property leased or otherwise used by the Sellers which
is material to the Sellers' Business, including all structures thereon. Except
as otherwise disclosed on Schedule 5.1.11, the Sellers have valid leasehold
interests in the Real Property leased by the Sellers and, with respect to other
Real Property not leased by the Sellers, the Sellers have the right to use all
such other Real Property which is material to the Sellers' Business pursuant to
the easements, licenses, rights-of-way or other rights described on Schedule
5.1.11. The documents listed on Schedule 5.1.11 by the Sellers (the Sellers'
rights to which will be conveyed to the Buyer at the Closing as part of the
Assets and which have been made available to the Buyer for review prior to the
date hereof) as evidence of each lease of Real Property constitute the entire
agreement with the landlord in question. All easements, rights-of-way and other
rights appurtenant to, or which are necessary for the Sellers' current (through
the Closing Date) use of, any Real Property which is material to the Sellers'
Business are valid and in full force and effect, and the Sellers have not
received any notice with respect to the termination or breach of any of such
rights. Each parcel of Real Property which is material to the Sellers' Business,
any improvements constructed thereon and their current use conform in all
material respects to (a) all applicable legal requirements, including zoning
requirements and the Americans with Disabilities Act, and (b) all restrictive
covenants, if any, or other encumbrances affecting all or part of such parcel.
5.1.12 Interest in Personal Property. Schedule 2.1 contains a true and
complete list and brief description of all capitalized inventory, equipment,
machinery, and furniture, and other personal property of the Sellers, which
comprises in all material respects all personal property presently used by the
Sellers in the ordinary course of business, all such personal property is free
and clear of title defects, Liens (other than Permitted Liens and those Liens
described in Schedule 5.1.5) and objections, of any nature whatsoever, and the
Sellers have good and marketable title thereto. The Sellers' interest in all
other personal property used in the ordinary course of the Sellers' Business
which is material to the Seller's Business will be conveyed to the Buyer when
the Buyer takes possession of the Assets upon the Closing. All such inventory,
equipment, machinery, furniture and other personal property described in this
Section 5.1.12 are in safe, fully operable condition in all material respects,
normal wear and tear excepted.
5.1.13 Environmental Matters/Representations and Warranties.
(a) The Sellers' Business has been operated by the Sellers in compliance
with all Environmental Laws, except for any noncompliance which would not result
individually or in the aggregate in a Material Adverse Effect. Neither the
Sellers nor, to the Sellers' knowledge, any third party has generated, released,
stored, used, treated, handled, discharged or disposed of any Hazardous
Substances at, on, under, in or about, or in any other manner materially
affecting any Real Property, transported any Hazardous Substances to or from any
Real Property in violation of an Environmental Law or discharged any Hazardous
Substances from any Real Property into any body of water in violation of an
Environmental Law. To the Sellers' knowledge, no release of Hazardous Substances
outside the Real Property has entered or threatens to enter the Real Property.
To the Sellers' knowledge, no claim or investigation by the United States
Environmental Protection Agency or a similar state agency, based on
Environmental Laws which relate to any Real Property or any operation on the
Real Property, (i) is currently pending against or with respect to the Sellers
or (ii) to the Sellers' Knowledge, is threatened.
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(b) To the Sellers' knowledge, (i) no underground storage tanks are
currently located on any of the Real Property, (ii) no Real Property has been
used since the property was leased by the Sellers as a gasoline service station
or any other facility for storing, pumping, dispensing, or producing gasoline or
any other petroleum products or waste.
(c) The Sellers will provide the Buyer with complete and correct copies of
(i) any environmental assessments the Sellers has obtained with respect to any
of its paging transmitter sites, (ii) all notices or other materials in the
Sellers' possession that were received from any governmental authority having
the power to administer or enforce any Environmental Laws relating to current or
past ownership, use or operation of Real Property or activities at the Real
Property and (iii) all materials in the Sellers' possession relating to any
claims, allegations, or actions by any private third party under any
Environmental Law which would materially affect this Agreement.
5.1.14 Contracts. Schedule 5.1.14 attached hereto describes all material
contracts in effect on the date of the Initial Agreement, oral or written, to
which any Seller is a party and which (i) relate to a reseller contract
involving more than 250 paging units or a direct contract involving more than 50
paging units, (ii) involve the payment of more than $15,000, (iii) have a
duration of more than one year after the Closing Date, (iv) are financing
documents, or (v) are not for the purchase, sale or license of goods or services
in the ordinary course of business consistent with past practice. True and
complete copies of all such contracts have been provided to the Buyer. None of
the Sellers nor, to the Sellers' knowledge, any other party to any such contract
is in material default in the performance of, or is not in compliance with any
material provision of any such contract relating to the Sellers' Business. The
Sellers have no intention, and no knowledge of any intention by any other party,
not to perform its obligations under any such contract.
5.1.15 Transferability of Contract Rights. Except as set forth on
Schedule 5.1.15, the Sellers have the right to assign all material leases,
accounts receivable, and other contractual rights of the Sellers set forth on
Schedules 5.1.11 and 5.1.14. Except as set forth on Schedule 5.1.15, neither the
assignment of such rights nor the consummation of the Transaction contemplated
by this Agreement would give any party to a contract listed on Schedule 5.1.14
the right to terminate or alter the terms of such contract. The Sellers shall
use reasonable efforts to obtain, on or before the Closing Date, the right to
assign the items set forth on Schedule 5.1.15.
5.1.16 Personnel Benefits; Bonuses. Schedule 5.1.16 attached hereto
comprises a complete and correct list of: (a) all contractual employment, bonus,
welfare benefit (as that term is defined in the Employee Retirement Income
Security Act ("ERISA")), percentage compensation, contracts or agreements with
directors, officers, shareholders or employees, collective bargaining or
consulting agreements, to which any Seller is a party or is subject, (b) the
names and current compensation rates and planned increases in compensation for
1996 of all salaried employees of the Sellers who are eligible to become
Transferred Employees pursuant to Article 7 hereof, (c) the wage rates for the
non-salaried employees of the Sellers by classification, and (d) all group
insurance programs in effect for employees of the Sellers. Schedule 5.1.16 sets
forth a listing of all bonuses paid to management employees of the Sellers in
calendar year 1995 who are eligible to become Transferred Employees hereunder
and all bonuses in excess of $1,000 per individual paid to other employees of
the Sellers in calendar year 1995 who are eligible to become Transferred
Employees hereunder.
5.1.17 Assets.
(a) The Assets (as set forth in Section 2.1) include all assets and
properties necessary to operate the Sellers' Business in all material respects
in the manner it has been operated prior to the date hereof and prior to the
Closing Date.
(b) The Sellers shall deliver to the Buyer, on or before the Closing Date,
a true and complete list of the Subscribers and the number and type (digital,
alpha, etc.) of pagers in service on the Sellers' system as of the Closing Date.
All of such pagers shall be operating pursuant to valid and binding rental
and/or service agreements with the Sellers or their agents and representatives.
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5.1.18 Transactions with Affiliates. Except as set forth on Schedule
5.1.18, since January 1, 1993, there have been no transactions, contracts,
understanding or agreements ("Affiliated Transactions") of any kind between the
Sellers and any Affiliate of the Sellers.
5.1.19 Absence of Certain Changes or Events. From December 31, 1995 to
the date of the Initial Agreement, except as disclosed in the Financial
Statements, or as otherwise consented to in writing by the Buyer, the Sellers'
Business has been operated only in the ordinary course (except as expressly
contemplated by this Agreement), and there has not been any:
(a) Material Adverse Change;
(b) sale, assignment or transfer, other than in the ordinary course of
business and consistent with past practice, of any of the Assets, which
Assets are material individually or in the aggregate to the Sellers;
(c) acquisition by merger, consolidation with, purchase of
substantially all of the assets or capital stock of, or any other
acquisition of any material assets or business of, any corporation,
partnership, association or other business organization or division
thereof;
(d) change in accounting methods or practices by the Sellers, except
as required by GAAP;
(e) entry into, or termination, amendment or modification of, any
contract, agreement, commitment, transaction, License, permit or other
instrument (including, without limitation, any borrowing, capital
expenditure, capital contribution or capital financing) which is or was
material to the Sellers' Business;
(f) any action taken by any Seller that, if taken after the date
hereof, would constitute a breach of any of the covenants set forth in
Section 6.7; or
(g) agreement by any Seller to do any of the foregoing.
5.1.20 Metrocall Stock. It is understood that the shares of Metrocall
Common Stock, the Metrocall Series B Preferred Shares, and Common Stock
Equivalents, if any, to be delivered to the Sellers pursuant to this Agreement
are being registered on Form S-4 prior to the Closing for purposes of the
transactions hereunder, pursuant to the Securities Act. Notwithstanding the
foregoing, the Sellers are acquiring such Metrocall Common Stock, Metrocall
Series B Preferred Shares, and Common Stock Equivalents, if any, hereunder
without a present intention of resale or distribution in violation of the
Securities Act, and shall not sell or otherwise transfer such shares except when
such sale or transfer is made in compliance with the Securities Act and all
applicable state laws.
5.2 Representations and Warranties of the Buyer.
As of the date of the Initial Agreement and as of the Closing Date (unless
another date or period of time for a representation or warranty is specifically
stated herein), the Buyer represents and warrants to the Sellers as set forth
below:
5.2.1 Qualification of the Buyer. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has all requisite corporate power and authority to own and
operate its business as it currently is being conducted, to own and lease the
properties and assets owned or leased by it and to enter into this Agreement and
perform the obligations hereunder. The Buyer is licensed or qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary.
5.2.2 Authorization and Validity of Agreement. The execution, delivery
and performance by the Buyer of this Agreement, the Closing Documents, and the
other agreements, certificates, documents, and instruments contemplated hereby
or referred to herein and the consummation by it of the Transaction contemplated
hereby have been duly authorized by all necessary corporate action of the Buyer.
This Agreement has been duly executed and delivered by the Buyer and, assuming
the due authorization,
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execution, and delivery hereof by the Sellers, is a legal, valid and binding
obligation of the Sellers, enforceable against the Buyer, in accordance with its
terms, except as and to the extent such enforceability may be subject to
bankruptcy or similar laws affecting creditors rights.
5.2.3 No Violation of Law; No Approvals or Notices Required; No Conflict
with Instruments to which the Buyer is a Party. The Buyer has complied with and
is currently in compliance in all material respects with all laws, rules,
regulations, ordinances, decrees, judgments, and orders (collectively, "Laws")
applicable to the operation of its business and the ownership of its assets. The
execution, delivery and performance by the Buyer of this Agreement and the
consummation by it of the Transaction contemplated hereby: (i) will not violate
(with or without the giving of notice or lapse of time or both) any Law
applicable to the Buyer or its business; (ii) will not be in conflict with, or
result in the breach of, or constitute a default under, or cause acceleration of
the maturity of amounts outstanding or other obligations pursuant to, or require
the consent of or give rise to any rights of first refusal of any third party
under, any agreement or other instrument to which the Buyer is a party or by
which its properties or business is bound or affected; (iii) will not require
any consent or approval of, or filing or notice to, any governmental or
regulatory authority under any Law applicable to the Buyer or its business,
except for (a) the Assignment Applications and other notice filings at the PUC's
in the states as set forth on Schedule 5.1.3 hereof, (b) filing under the
Antitrust Improvements Act, and (c) any consent, approval, filing or notice that
would not, if not given or made, individually or in the aggregate, have a
material adverse effect on the Buyer's business; and (iv) will not violate any
provision of the charter or bylaws of the Buyer.
5.2.4 Litigation. There is no litigation, claim, action, suit, proceeding
or governmental investigation pending or, to the Buyer's knowledge, threatened
against the Buyer which (i) could reasonably be expected to have, individually
or in the aggregate with all such other litigation, claims, actions, suits,
proceedings and governmental investigations, a material adverse effect on the
Buyer's business or (ii) seeks to restrain or enjoin the consummation of the
Transaction. The Buyer is not in violation of any term of any judgment, decree,
injunction or order outstanding against it, which violation could reasonably be
expected to have, individually or in the aggregate with all such other
violations, a material adverse effect on the Buyer's business.
5.2.5 Qualification. The Buyer is fully qualified under the
Communications Act of 1934, as amended, and all FCC rules and regulations, to be
the licensee of the Sellers' Business. The Buyer has not taken, and will not
take, any knowing or voluntary action to render the Buyer disqualified under the
FCC's rules and regulations to purchase the Assets on the Closing Date. There
are no actions pending or, to the Buyer's knowledge, threatened against the
Buyer or any director or officer of the Buyer that challenge the qualifications
of the Buyer to hold the Licenses.
5.2.6 Financial Capabilities. The Buyer has the financial ability to
consummate the Transaction, and has uncommitted cash or cash equivalents or
commitments from financial institutions or its shareholders for funds in amounts
equal to or greater than the Cash Consideration.
5.2.7 Capital Stock of Buyer. As of the date of this Agreement, the duly
authorized capital stock of Buyer consists of 33,500,000 shares of Common Stock,
par value $.01 per share, and 1,000,000 shares of Preferred Stock, par value
$.01 per share. As of January 15, 1997, 159,600 shares of Preferred Stock were
issued and outstanding and 24,521,135 shares of Common Stock were issued and
outstanding. Schedule 5.2.7 to this Agreement sets forth all shares of Metrocall
Common Stock which are reserved by Buyer (the "Reserved Shares") for issuance
pursuant to existing contractual obligations, including shares reserved for
issuance under Buyer's employee benefit plans, warrants or other rights to
subscribe for or purchase or otherwise acquire any share of capital stock (or
securities directly or indirectly convertible into or exchangeable or
exercisable for shares of capital stock) of the Buyer.
5.2.8 Financial Statements and Reports. Buyer has furnished to the
Sellers copies of (i) the Buyer's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, (ii) the Buyers Quarterly Report on Form 10-Q for the
nine months ended September 30, 1996, and (iii) all other reports, statements
and registration statements filed by the Buyer with the Securities and Exchange
Commission since September 30, 1996 (collectively, the "SEC Filings"). The SEC
Filings were prepared and filed in accordance with the rules and regulations of
the SEC. As of their respective dates, the SEC Filings did not contain any
untrue statement
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of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Buyer included in the SEC Filings were prepared in accordance with
generally accepted United States accounting principles as in effect from time to
time applied on a consistent basis (except as otherwise noted in such financial
statements) and present fairly the consolidated financial condition, results of
operations and cash flows of Buyer as of the dates and for the periods
indicated, subject, in the case of interim financial statements, to normal year
end audit adjustments. Since September 30, 1995, (a) the Buyer has conducted its
business in a manner generally consistent with prior practice and in the
ordinary course, (b) there has not been any adverse change in the business,
operations or financial condition of the Buyer which could reasonably be
expected to result in a material adverse change in the Buyer taken as a whole
and (c) there has not been any damage, destruction or loss affecting the
business, assets, properties or rights of the Buyer which could reasonably be
expected to result in a material change in the Buyer taken as a whole.
5.2.9 Stock of Metrocall. The Metrocall Series B Preferred Shares and the
Metrocall Common Stock and Common Stock Equivalents, if any, to be issued to
Sellers pursuant to this Agreement, when so issued, will be duly and validly
authorized and issued, fully paid and non-assessable and the Sellers will
acquire good and valid title thereto, free and clear of any preemptive rights or
Liens created by Buyer, subject to any required prior notice of issuance being
given to the Nasdaq Stock Market.
ARTICLE 6
CONDUCT PRIOR TO CLOSING
6.1 Filing of Assignment Applications.
As soon as practicable, the Buyer and the Sellers shall join in and file
the Assignment Applications with the FCC, any PUC and any similar applications
required by other agencies. The parties will cooperate and use best efforts to
prosecute such applications diligently and expeditiously to a favorable
conclusion. The Sellers and the Buyer mutually agree to provide, in a timely
manner, whatever additional information the FCC, any PUC or other agency may
request in processing such applications.
6.2 Antitrust Laws and the Sellers.
The Sellers will, or will cause their "ultimate parent" to, timely and
promptly make all filings which are required under the Antitrust Improvements
Act. The Sellers will furnish to the Buyer such information and assistance as
the Buyer may reasonably request in connection with its preparation of necessary
filings or submissions to any governmental agency, including, without
limitation, any filings necessary under the provisions of the Antitrust
Improvements Act. The Sellers will supply the Buyer with a copy of any
correspondence, filing or communication (or memorandum setting forth the
substance thereof) between the Sellers or their "ultimate parent" or their
respective representatives, on the one hand, and the FTC, the DOJ or any other
governmental agency or authority or members of their respective staffs, on the
other hand, with respect to this Agreement or the Transaction contemplated
hereby to the extent that any such correspondence, filing, communication or
memorandum is required by the Buyer to meet its obligations under the Antitrust
Improvements Act.
6.3 Antitrust Laws and the Buyer.
The Buyer will, or will cause its "ultimate parent" to, timely and promptly
make all filings which are required under the Antitrust Improvements Act. The
Buyer will furnish to the Sellers such information and assistance as the Sellers
may reasonably request in connection with its preparation of necessary filings
or submissions to any governmental agency, including, without limitation, any
filings necessary under the provisions of the Antitrust Improvements Act. The
Buyer will supply the Sellers with a copy of any correspondence, filing or
communication (or memorandum setting forth the substance thereof) between the
Buyer or its "ultimate parent" or their respective representatives, on the one
hand, and the FTC, the DOJ or any other governmental agency or authority or
members of their respective staffs, on the other hand, with
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respect to this Agreement or the Transaction contemplated hereby to the extent
that any such correspondence, filing, communication or memorandum is required by
the Sellers to meet their obligations under the Antitrust Improvements Act.
6.4 Access to Information Concerning Sellers' Business.
Prior to the Closing Date, the Sellers shall, upon reasonable request,
afford to the Buyer, its counsel, accountants and other authorized
representatives, reasonable access during normal business hours to all plants,
properties, books, accounts, contracts, documents, and records of the Sellers to
the extent they relate to the Sellers' Business, the Assets or the Transaction
in order that they may have the opportunity to make such reasonable
investigations as they shall desire to make of the affairs of the Sellers'
Business. The Sellers will furnish to the Buyer such existing data and
information concerning the Sellers' Business, finances and properties that the
Buyer may reasonably request and such additional existing financial, operating
data and billing information as the Buyer shall from time to time reasonably
request to facilitate the efficient transfer of billing and other accounting and
management functions. Prior to Closing, the Sellers will afford the Buyer with
reasonable access to the vendors, employees, and officers of the Sellers and
will otherwise cooperate in all measures reasonably necessary to ensure the
uninterrupted continuation of the business under Buyer's control after the
Closing, provided that the Buyer will give the Sellers reasonable notice prior
to the Buyer's contacting any vendor, employee, or officer. At the request of
the Buyer for a period of two years after the Closing Date, the Sellers shall
provide to the Buyer any historical financial information requested by the Buyer
concerning the Sellers and in the possession of the Sellers, and shall cooperate
with the Buyer and assist the Buyer, at the Buyer's reasonable request and at
the Buyer's expense, in preparing any such financial information that is not in
the possession of the Seller, in each case to permit the Buyer (or an affiliate
of the Buyer) to meet any requirements that are or may become applicable to the
Buyer (or such affiliate) under the Exchange Act and the rules and regulations
promulgated under such acts, and/or any other Law.
6.5 Confidentiality.
(a) The Buyer agrees that it will, and will cause its associates,
affiliates, officers, other personnel and authorized representatives to, hold in
strictest confidence all Confidential Information, and will not, and will ensure
that such other persons do not, disclose such information to others without the
prior written consent of the Sellers; provided that the Buyer and such other
persons may provide such data and information (i) to lenders, subject to the
same requirements of confidentiality as set forth in this Agreement, or (ii)
which is legally required to be furnished, and provided that the Buyer or such
other person, as the case may be, notifies the Sellers in advance of its
obligation to provide such confidential information and fully cooperates with
the Sellers to protect the confidentiality of such data and information.
(b) Each Seller agrees that it will, and will cause its associates,
affiliates, officers, other personnel and authorized representatives to, hold in
strictest confidence all confidential information related to the Buyer's
business, and will not, and will ensure that such other persons do not, disclose
such information to others without the prior written consent of the Buyer;
provided that such Seller and such other persons may provide such data and
information which is legally required to be furnished, and provided that such
Seller or such other person, as the case may be, notifies the Buyer in advance
of its obligation to provide such confidential information and fully cooperates
with the Buyer to protect the confidentiality of such data and information.
(c) Notwithstanding the foregoing provisions of this Section 6.5, the
parties have agreed that any press release or public announcement with respect
to the Transaction will be issued at such time after the execution of the
Agreement and in such manner as the Buyer shall determine after notice to the
Sellers, subject to compliance with all applicable Laws.
6.6 Control of the Sellers' Business.
The Transaction contemplated by this Agreement shall not be consummated
until the Closing Date. Between the date of this Agreement and the Closing Date,
the Buyer and its employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct, the conduct
or
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operation of the Sellers' Business, and notwithstanding any other provision of
this Agreement, such operation and conduct shall be the sole responsibility, and
in the complete discretion, of the Sellers; provided, however, that this Section
6.6 shall not limit the specific rights and obligations of the Buyer and the
Sellers set forth in this Agreement, none of which are intended to confer
control of the Sellers or of the Sellers' Business to the Buyer.
6.7 The Sellers' Pre-Closing Covenants.
Except as otherwise consented to in writing by the Buyer, each Seller
covenants that, throughout the period commencing on the date hereof and ending
on the Closing Date, it shall:
(a) conduct the Sellers' Business only in the ordinary course;
(b) maintain and keep its material properties, machinery and equipment
used in the Sellers' Business in the same condition in all material
respects as at present, except for ordinary wear and tear;
(c) not enter into any agreement for the purchase, sale or other
disposition, or purchase, sell or dispose of, any equipment, supplies,
inventory, investments or other assets, except for sales of inventory and
purchases of equipment, materials and supplies in the ordinary course of
business consistent with past business practices;
(d) consistent with its past business practices, perform all its
material obligations under material contracts, leases and documents
relating to or affecting the Sellers' Business and, consistent with past
business practices, pay all accounts payable which become due according to
their terms prior to the Closing Date;
(e) consistent with its past business practices, use its reasonable
efforts to maintain and preserve the Sellers' Business including, but not
limited to, maintaining and preserving the Licenses and prosecuting
diligently all applications for Licenses, including any renewal
applications;
(f) comply with and perform in all material respects all obligations
and duties imposed upon it by all federal, state and local laws and all
rules, regulations and orders imposed by federal, state or local
governmental authorities;
(g) maintain its existence as a corporation validly existing and in
good standing under the laws of its state of incorporation;
(h) use its best reasonable efforts to assure, to the extent within
its control, as soon as is reasonably practicable, the satisfaction of the
conditions required to consummate the Transaction, including but not
limited to, the filing and prosecution of all requests for regulatory
approvals, and obtaining necessary third party consent;
(i) use its best reasonable efforts to obtain, as soon as practicable
after the date hereof, the approvals described in Section 8.2.6 below;
(j) at its sole cost and expense, attempt to cure all noncompliance by
the Sellers with the terms and conditions of Licenses issued by the FCC,
including such noncompliance as is set forth on Schedule 5.1.4(a), and pay
when due all costs (including attorneys' fees), damages, liabilities, fines
and penalties arising out of such noncompliance; and
(k) promptly notify the Buyer upon the Sellers' knowledge thereof of
any fact, event, circumstance, or action (i) which, if known on the date
hereof would have been required to be disclosed to the Buyer, or (ii) the
existence or occurrence of which would cause any of the Sellers'
representations or warranties not to be correct and complete in all
material respects.
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6.8 The Buyer's Pre-Closing Covenants.
Except as otherwise consented to in writing by the Sellers, the Buyer
covenants that, throughout the period commencing on the date hereof and ending
on the Closing Date, it shall:
(a) consistent with its past business practices, use its reasonable
efforts to maintain and preserve its business;
(b) maintain its existence as a corporation validly existing and in
good standing under the laws of its state of incorporation;
(c) use its best reasonable efforts to assure, to the extent within
its control, as soon as is reasonably practicable, the satisfaction of the
conditions required to consummate the Transaction contemplated in this
Agreement, including but not limited to, the filing and prosecution of all
requests for regulatory approvals, and obtaining necessary third party
consent; and
(d) use its best reasonable efforts to obtain, as soon as practicable
after the date hereof, the approvals described in Section 8.2.6 below.
6.9 No Solicitation of Offers.
Unless and until this Agreement shall have been terminated by either party
pursuant to Article 9 hereof, each Seller covenants that following the date
hereof it will not (and shall use its best efforts to ensure that none of its
stockholders, officers, directors, agents, representatives or affiliates) take
or cause, directly or indirectly, any of the following actions with any party
other than the Buyer or its designees: (i) solicit, initiate, or participate in
any negotiations, inquiries or discussions with respect to any offer or proposal
to acquire all or a significant part of the Sellers' business, assets or capital
shares whether by merger, consolidation, other business combination, purchase of
assets, tender or exchange offer or otherwise (each of the foregoing, an
"Acquisition Proposal"); (ii) disclose, in connection with an Acquisition
Proposal, any information (except to the extent that such party would be
permitted to do so under the provisions of Section 6.5 hereof) with respect to,
or otherwise cooperate in any way with, or assist or participate in, any effort
or attempt by any other Person to do or seek any of the foregoing; (iii) enter
into or execute any agreement relating to an Acquisition Proposal; or (iv) make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal other than with respect to the transactions
contemplated by this Agreement; provided however, that nothing contained herein
shall prohibit the Sellers from taking any of the actions specified above if, in
each case, its Board of Directors determines in good faith, after consultation
with legal counsel, that such action is required by the fiduciary duties of such
directors under applicable state law. Each Seller shall immediately cease and
cause to be terminated all existing discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. In the event a Seller
shall receive any Acquisition Proposal, directly or indirectly, of the type
referred to in clause (i) above, or any request for disclosure with respect to
information of the type referred to in clause (ii) above, it shall, prior to
taking any action in response thereto, inform Buyer of such fact and shall, in
any such notice to Buyer, indicate in reasonable detail the identity of the
Person making such proposal, offer, inquiry or contact and the terms and
conditions of such proposal, offer, inquiry or contact. Subject to the fiduciary
obligations of the directors and officers under applicable law, Sellers agree
not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which such Seller is a party.
Notwithstanding the foregoing, the Sellers may not enter into a definitive
agreement to transfer the Assets or any portion of the Sellers' Business to any
third party until and unless this Agreement has been terminated pursuant to
Article 9 hereof.
6.10 Risk of Loss.
The Sellers will bear the risk of loss or damage to the Assets resulting
from fire, theft, or other casualty at all times prior to Closing. If any such
loss or damage is so substantial as to prevent normal operation of any material
portion of the Sellers' Business or the replacement or restoration of the lost
or damaged material Asset within 30 days after the occurrence of the event
resulting in such loss or damage, the Sellers will immediately notify the Buyer
and the Buyer, at any time within 10 days after receipt of such notice, may
elect
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by written notice to the Sellers either (a) to waive such defect and proceed
toward consummation of the acquisition of the Assets in accordance with the
terms hereof, or (b) terminate this Agreement. If the Buyer elects to so
terminate this Agreement, the Buyer and the Sellers will be discharged of any
and all obligations hereunder, except those under Section 6.5 and Article 9
hereof. If the Buyer elects to consummate the Transaction contemplated by this
Agreement, there will be no separate adjustment in the Purchase Price related to
such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
the Sellers to the Buyer, or the rights to such proceeds will be assigned by the
Sellers to the Buyer and the Sellers will pay to the Buyer (or the Buyer may
withhold from the Purchase Price) an amount equal to any deductible amount
charged to the Sellers against the proceeds due for such loss.
ARTICLE 7
COVENANTS RELATING TO EMPLOYMENT
AND EMPLOYEE MATTERS
7.1 Offer of Employment.
The Buyer shall make an offer of ongoing employment to such persons
selected by the Buyer on or before the Closing Date. Such offer shall be for
comparable employment and shall be effective as of the Closing Date under
substantially the same compensation arrangements including benefits (but
excluding pension plans) and with job duties located within a reasonable
commuting distance of the work location to which each person was assigned prior
to the Closing Date. Employees of the Sellers who accept said offer and become
employees of the Buyer are hereinafter referred to as "Transferred Employees."
Included among the Buyer's Employee Benefit Plans shall be a "group health plan"
as defined in Section 5000(b)(1) of the Internal Revenue Code, which plan shall
contain no exclusion or limitation with respect to any preexisting condition of
any Transferred Employee or Transferred Employee's spouse or dependents provided
that such Transferred Employee has been enrolled in the Sellers' group health
plan. For purposes of the preceding sentence, the phrase "exclusion or
limitation with respect to any preexisting condition" shall have the same
meaning as in Section 602(2)(D) of ERISA, except that an "exclusion or
limitation with respect to any preexisting condition" which is currently
applicable to such Transferred Employee or his or her spouse or dependents need
not be considered by the Buyer an "exclusion or limitation with respect to any
preexisting condition" for such purposes.
7.2 Wage and Withholding Reporting Obligations.
The Sellers and the Buyer agree that, pursuant to the "Alternative
Procedure" provided in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753,
with respect to filing and furnishing forms W-2, W-3, and 941, (a) the Sellers
and the Buyer shall each report on a predecessor-successor basis as set forth
therein, (b) the Sellers shall be relieved from furnishing Forms W-2 to the
Transferred Employees, and (c) the Buyer shall assume the obligations of the
Sellers to furnish Forms W-2 to the Transferred Employees (without regard to the
actual length of employment with the Buyer) for the full calendar year in which
the Closing occurs. The Sellers shall fully cooperate with the Buyer to allow it
to fulfill its obligations hereunder.
ARTICLE 8
CONDITIONS PRECEDENT
8.1 Conditions Precedent to Obligations of Parties.
The respective obligations of the Buyer, on the one hand, and the Sellers,
on the other, to consummate the Transaction to be consummated at Closing are
subject to the satisfaction, at or prior to the Closing Date, of each of the
following conditions:
8.1.1 No Injunction, Etc. No preliminary or permanent injunction or other
order shall have been issued by any federal or state court of competent
jurisdiction in the United States or by any United States
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federal or state governmental or regulatory body nor any statute, rule,
regulation or executive order promulgated or enacted by any United States
federal or state governmental authority which restrains, enjoins or otherwise
prohibits the Transaction contemplated hereby and shall remain in effect.
8.1.2 FCC and Other Approvals. The FCC, and if required, any PUC, shall
have granted its consent and approval to the assignment or transfer of the
Licenses from Sellers to the Buyer. This condition shall be deemed to be
satisfied once all such consents and approvals have become Final Orders.
8.1.3 Antitrust Improvements Act. Any waiting period under the Antitrust
Improvements Act applicable to the consummation of the Transaction contemplated
hereby shall have expired.
8.1.4 No Proceeding or Litigation. No suit, action or proceeding before
any court or any governmental or regulatory authority shall have been commenced
and be pending by any governmental or regulatory authority, no investigation by
any governmental or regulatory authority shall have been commenced and be
pending, against any of the parties hereto or any of their affiliates,
associates, officers or directors seeking to restrain, prevent or change in any
material respect the Transaction contemplated hereby or seeking material damages
in connection with any such Transaction.
8.2 Conditions Precedent to Obligations of the Buyer.
In addition to the conditions set forth in Section 8.1, the obligations of
the Buyer to consummate the Transaction to be consummated at the Closing are
subject to the satisfaction, at or prior to the Closing Date, of each of the
additional conditions set forth below:
8.2.1 Accuracy of Representations and Warranties. The representations and
warranties of the Sellers contained herein or any certificate delivered pursuant
to this Agreement shall be deemed made again at Closing and shall be true in all
material respects as though made on and as of the Closing Date. Notwithstanding
anything to the contrary contained in this Agreement, the Buyer and the Sellers
agree that the Buyer shall not terminate this Agreement or elect not to close
the Transaction if a Material Adverse Change shall have occurred.
8.2.2 Performance of Agreements. Each of the Sellers shall have performed
in all material respects, all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this Agreement,
to be performed or complied with by it prior to or at the Closing Date.
8.2.3 Certificates. The Buyer shall have received a certificate from each
Seller, dated the Closing Date, signed by the President or any authorized Vice
President of such Seller, to the effect that, to the best of the knowledge,
information and belief of such officer, the conditions specified in Section
8.2.1 and Section 8.2.2 have been satisfied.
8.2.4 Opinion of Counsel for the Sellers. The Buyer shall have received
an opinion of the Sellers' counsel and the Sellers' FCC Counsel, in each case
dated the Closing Date, addressed to the Buyer and in each case in a form
customary for transactions of the nature contemplated by this Agreement.
8.2.5 Other Deliveries. The Sellers shall have delivered to the Buyer at
the Closing the following:
(a) a certificate of incumbency for the officers executing documents
on behalf of the Sellers and certified copies of the resolutions duly
adopted by the directors of each of the Sellers, and signed by the
Secretary or Assistant Secretary, each authorizing the Transaction
contemplated by this Agreement;
(b) a certificate of the Secretary or Assistant Secretary certifying
the resolutions referred to in Section 8.2.5(a) have not been rescinded,
modified, or withdrawn and that such resolutions are in full force and
effect as of the Closing Date;
(c) accurate and complete copies of all Licenses listed on Schedule
5.1.4(b) and all Licenses acquired after the date hereof and prior to the
Closing;
(d) evidence satisfactory to Buyer of the release of any and all Liens
not constituting Permitted Liens; and
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(e) such further certificates and documents evidencing consummation by
the Sellers of the transactions contemplated hereby as the Buyer shall
reasonably request.
8.2.6 Consents and Filings. The Sellers shall have made each of the
notice filings described in clause (iii)(a) of Section 5.1.3.
8.3 Conditions Precedent to the Obligations of the Sellers.
In addition to the conditions set forth in Section 8.1, the obligations of
the Sellers to consummate the Transaction to be consummated at the Closing are
subject to the satisfaction, at or prior to the Closing Date, of each of the
additional conditions set forth below.
8.3.1 Accuracy of Representations and Warranties. The representations and
warranties of the Buyer contained herein shall be deemed made again at Closing
and shall be true at and as of the Closing Date.
8.3.2 Performance of Agreements. The Buyer shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement, to be
performed or complied with by it prior to or at the Closing Date.
8.3.3 Payment of Purchase Price. The Sellers shall have received
satisfactory evidence of payment of the Purchase Price at Closing in accordance
with Section 4.1.
8.3.4 Opinion of Counsel for the Buyer. The Sellers shall have received
an opinion of the Buyer's Counsel, dated the Closing Date, in a form customary
for transactions of the nature contemplated by this Agreement.
8.3.5 Other Deliveries. The Buyer shall have delivered to the Sellers at
the Closing the following:
(a) a certificate of incumbency for the officers executing the
documents on behalf of the Buyer and certified copies of the resolutions
duly adopted by the directors of the Buyer, and signed by the Secretary or
Assistant Secretary, each authorizing the Transaction contemplated by this
Agreement;
(b) a certificate of the Secretary or Assistant Secretary certifying
that the resolutions referred to in Section 8.3.5(a) have not been
rescinded, modified or withdrawn and that such resolutions are in full
force and effect as of the Closing Date; and
(c) such further certificates and documents evidencing the
consummation by the Buyer of the transactions contemplated hereby as the
Sellers shall reasonably request.
8.3.6 Registration Rights Agreements. (a) The Buyer shall have entered
into a Registration Rights Agreement substantially in the form of Exhibit
8.3.6(a) with the Parent and the stockholders of Parent that are parties to the
Stockholders' Agreement described in Section 2.5(a) of this Agreement.
(b) The Buyer and Sellers shall have entered into a Registration Rights
Agreement substantially in the form of Exhibit 8.3.6(b).
8.3.7 Stockholder Approval. This Agreement and the Transaction shall have
been approved by the stockholders of Parent in accordance with New York law.
8.4 Waiver of Conditions.
The Buyer, in its discretion, may waive, in whole or in part, at or prior
to the Closing Date, the failure of satisfaction of any of the conditions
precedent to its obligations set forth herein. The Sellers may, in their
discretion, waive, in whole or in part, at or prior to the Closing Date, the
failure of satisfaction of any of the conditions precedent to its obligations
set forth herein. No such waiver by the Buyer or the Sellers shall be effective
unless made in writing.
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ARTICLE 9
TERMINATION AND DEFAULT
9.1 General.
This Agreement may be terminated and the Transaction contemplated hereby
may be abandoned at any time, but not later than the Closing Date, as set forth
below.
9.1.1 Mutual Consent. This Agreement may be terminated by the mutual
consent of the Buyer and the Sellers.
9.1.2 Order or Decree. This Agreement may be terminated by the Sellers or
the Buyer, if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree, ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Transaction contemplated hereby (including, but not limited to, FCC denial of
the Assignment Applications) and such order, decree, ruling or other action
shall have become final and nonappealable.
9.1.3 Failure of Conditions.
(a) The Agreement may be terminated by the Sellers upon five (5) days
written notice to the Buyer, in the event that any of the conditions
precedent to the Sellers' obligations set forth in Section 8.1 and Section
8.3 with respect to the Buyer are not satisfied at or during the respective
times therein indicated (other than by reason of the material breach by
such terminating party of any of its representations, warranties,
covenants, or agreements set forth herein) and such conditions are not
either (i) cured by the Buyer within five (5) days after the Sellers give
the Buyer such notice, or (ii) waived by the Sellers at or prior to the
Closing Date.
(b) This Agreement may be terminated by the Buyer upon five (5) days
written notice to the Sellers, in the event that any of the conditions
precedent to the Buyer's obligations set forth in Section 8.1 and Section
8.2 with respect to the Sellers are not satisfied at or during the
respective times therein indicated (other than by reason of the material
breach by such terminating party of any of its representations, warranties,
covenants, or agreements set forth herein) and such conditions are not
either (i) cured by the Sellers within five (5) days after the Buyer gives
the Sellers such notice, or (ii) waived by the Buyer at or prior to the
Closing Date.
9.1.4 Casualty Loss. This Agreement may be terminated by the Buyer as set
forth in Section 6.10.
9.1.5 Pre-Closing Breach. This Agreement may be terminated by the Buyer
or Sellers as set forth in Section 11.3(b)
9.1.6 Acquisition Proposal; Break-Up Fee.
(a) Parent may terminate this Agreement upon five (5) days written
notice to Buyer, if Parent receives an Acquisition Proposal that is
financially superior to the transactions contemplated hereby and is
reasonably capable of being financed (as determined in each case in good
faith by the Parent's board of directors after consultation with the
Parent's financial advisers). Prior to any such termination however,
Sellers agree to negotiate in good faith with Buyer to make such
adjustments in the terms and conditions of this Agreement so as to enable
Buyer to match or better the Acquisition Proposal.
(b) If Parent exercises its termination rights under this Section
9.1.6, upon the closing of the transactions contemplated by an Acquisition
Proposal, Parent shall pay Buyer, out of the resulting proceeds, a
"break-up" fee of $4 million, plus $2 million for all fees and expenses
incurred by Buyer in connection with this Agreement in cash by wire
transfer. Such payment shall be made at the date of closing of the
Acquisition Proposal transactions. If the transactions contemplated by such
Acquisition Proposal fail to close for any reason, Sellers shall, within
thirty (30) days of termination or abandonment of the Acquisition Proposal
transactions, enter into an agreement with Buyer to consummate a
transaction on substantially the same terms as are contained in this
Agreement.
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9.1.7 Outside Date. This Agreement may be terminated by either Sellers or
Buyer if the Closing shall not have occurred on or prior to July 1, 1997;
provided, however, that no party may exercise its rights under this Section
9.1.7 if such party is in material breach or default under this Agreement.
9.2 Procedure Upon Termination.
In the event of the termination and abandonment of this Agreement, written
notice thereof shall promptly be given to the other parties hereto and this
Agreement shall terminate, all further obligations of the parties hereunder to
satisfy the conditions precedent to the Closing shall terminate, and the
Transaction contemplated hereby shall be abandoned without further action by any
of the parties hereto except that Section 6.5 (Confidentiality) shall survive
such termination or abandonment.
9.3 Effect of Termination.
Nothing in this Article 9 shall relieve any party hereto of any liability
for breach of this Agreement.
ARTICLE 10
POST-CLOSING TRANSACTIONS
10.1 Transition.
The Sellers shall cooperate with the Buyer and agree to use their best
efforts to assist the Buyer in a smooth transition of the ownership of the
Assets on the Closing Date, including the preservation of the continued services
of the employees of the Sellers that the Buyer wishes to retain and the
preservation for the Buyer of the goodwill of the Sellers' suppliers, customers
and others having business relations with the Sellers.
10.2 Access To Books and Records.
After the Closing, the Sellers shall allow representatives of the Buyer
reasonable opportunity from time to time during normal business hours to inspect
and copy records which pertain to the operation of the Sellers' Business prior
to the Closing Date and which are not transferred to the Buyer hereunder. After
the Closing, the Buyer shall allow representatives of the Sellers reasonable
opportunity from time to time during normal business hours to inspect and copy
records which pertain to the operation of the Sellers' Business prior to the
Closing Date and which are transferred to the Buyer hereunder.
10.3 Assignment and Further Assurances.
To the extent that all real property interests, contractual rights and
other Assets used in the Sellers' Business are not effectually transferred at
Closing to the Buyer, the Sellers will take all reasonably necessary action to
effectuate such assignments. In the event the Sellers are unable to obtain any
consent to assignment or otherwise are not reasonably able to effectuate such
assignments (including, but not limited to, the assignment of those contracts
listed on Schedule 5.1.15), the Sellers shall take reasonable action necessary
to give the Buyer the substantial benefit of such property interests,
contractual rights, or other Assets.
10.4 Confidentiality of Customer Lists.
All documents and computer files containing the names and addresses of the
paging customers of the Sellers shall become Buyer's property as of the Closing,
and all copies thereof shall be turned over to the Buyer, and shall not be
retained or used in whole or part by the Sellers, or any of their affiliates
after the Closing.
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ARTICLE 11
INDEMNIFICATION AND SURVIVAL
11.1 Indemnification by the Sellers.
The Sellers shall, jointly and severally, indemnify and hold harmless the
Buyer from and against any and all claims, losses, damages, liabilities and
expenses (including, without limitation, settlement costs and any legal,
accounting and other expenses for investigating or defending any actions or
threatened actions), net of income tax benefits and insurance proceeds, if any
("Damages"), incurred by the Buyer, in connection with each and all of the
following:
(a) Any breach of any representation or warranty made by Sellers in
this Agreement (unless waived in writing by the Buyer prior to the
Closing);
(b) The breach of any covenant, agreement or obligation of the Sellers
contained in this Agreement or any other certificate or document delivered
pursuant to this Agreement (unless waived in writing by the Buyer prior to
the Closing);
(c) Claims arising out of the operation of the Sellers' Business
before Closing;
(d) Costs and damages arising out of that those pending tax
assessments/audits described on Schedule 5.1.6 and that litigation
described on Schedule 5.1.7;
(e) The failure of the Sellers to obtain the protection afforded by
compliance with the notification requirements of the Bulk Sales Laws in
force in the jurisdictions in which such laws may be applicable to the
Sellers or the Transaction contemplated by this Agreement. The Sellers
covenant and agree to pay and discharge, in due course, all claims of
creditors which may be asserted against the Buyer by reason of such
noncompliance, to the extent, and in the respective dollar amounts, if any,
that such liabilities or obligations are not assumed by the Buyer under
this Agreement; and the Sellers shall indemnify the Buyer against and hold
it harmless with respect to any losses suffered by the Buyer by reason of
the failure of the Sellers to pay or discharge such claims;
(f) Costs (including reasonable attorneys' fees), damages,
liabilities, fines and penalties arising out of any noncompliance by the
Sellers with the terms and conditions of Licenses issued by the FCC,
including such noncompliance as is set forth on Schedule 5.1.4(a); and
(g) any Excluded Liability.
Notwithstanding the foregoing, the Buyer shall not be entitled to
indemnification hereunder until such time as the amount of Damages incurred by
the Buyer exceeds $50,000, at which time the Buyer shall be entitled to
indemnification for all Damages in excess of $50,000, provided however that the
foregoing shall not apply to determination of, or adjustments to, the Purchase
Price set forth in Article 4 or to the Sellers' indemnification obligations set
forth in Section 11.1(d) .
11.2 Indemnification by the Buyer.
The Buyer shall indemnify and hold harmless the Sellers from and against
any and all Damages incurred by the Sellers, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by the Buyer in
this Agreement (unless waived in writing by the Sellers prior to the
Closing);
(b) The breach of any covenant, agreement or obligation of the Buyer
contained in this Agreement or any other instrument contemplated by this
Agreement (unless waived in writing by the Sellers prior to the Closing);
(c) any claim arising out of the operation of the Assets after
Closing; and
(d) any Assumed Liabilities.
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11.3 Claims for Indemnification.
(a) If prior to the Closing Date the Buyer obtains actual knowledge of the
breach of any representation, warranty or covenant made by the Sellers in this
Agreement, which breach shall, in Buyer's good faith estimation, cost less than
$500,000 to cure, then the Buyer shall promptly notify the Sellers thereof in
writing. If such breach is capable of being cured, the Sellers shall attempt to
cure the same at Sellers' sole cost and expense. If the Sellers are unable to
cure the same after reasonable and diligent efforts, or if the same is not
capable of being cured, Buyer shall consummate the Agreement, and be entitled to
seek indemnification for any Damages suffered pursuant to Section 11.1 hereof.
(b) If prior to the Closing Date the Buyer obtains actual knowledge of the
breach of any representation, warranty or covenant made by the Sellers in this
Agreement, which breach shall, in Buyer's good faith estimation, cost $500,000
or more to cure, then the Buyer shall promptly notify the Sellers thereof in
writing. If such breach is capable of being cured, the Sellers, in their sole
discretion, may attempt to cure the same at Sellers' sole cost and expense. If
the Sellers are unable or unwilling to cure the same, or if the same is not
capable of being cured, Sellers or Buyer (if such party is not in material
breach or default under this Agreement) may elect to terminate this Agreement
upon five (5) days written notice. Buyer shall in either instance retain all its
remedies for such breach. If neither Buyer nor Sellers elect to terminate the
Agreement notwithstanding such breach, Buyer shall be entitled to seek
indemnification for any Damages suffered as a result of such breach, except as
set forth in Section 6.10.
(c) In no event shall Sellers' liability for indemnification exceed the
Purchase Price.
(d) Whenever any claim shall arise for indemnification hereunder, the party
entitled to indemnification (the "indemnified party") shall promptly notify the
other party (the "indemnifying party") of the claim and, when known, the facts
constituting the basis for such claim. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the indemnifying party shall
specify, if known, the amount of the liability arising therefrom. The
indemnified party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder, without the prior written
consent of the indemnifying party (which shall not be unreasonably withheld)
unless suit shall have been entered against it and the indemnifying party shall
not have taken control of such suit after notification thereof as provided in
this Section 11.3.
11.4 Defense by Indemnifying Party.
In connection with any claim giving rise to a right of indemnification
hereunder resulting from or arising out of any claim or legal proceeding by a
person who is not a party to this Agreement, the indemnifying party at its sole
cost and expense may, upon written notice to the indemnified party assume the
defense of any such claim or legal proceeding if it acknowledges to the
indemnified party in writing its obligations to indemnify the indemnified party
with respect to all elements of such claim. The indemnified party shall be
entitled to participate in (but not control) the defense of any such action,
with its counsel and at its own expense. If the indemnifying party does not
assume the defense of any such claim or litigation resulting therefrom, (a) the
indemnified party may defend against such claim or litigation, in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the indemnifying party, on such
terms as the indemnified party may deem appropriate, and (b) the indemnifying
party shall be entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense. If the indemnifying party
thereafter seeks to question the manner in which the indemnified party defended
such third party claim or the amount or nature of any such settlement, the
indemnifying party shall have the burden to prove by a preponderance of the
evidence that the indemnified party did not defend or settle such third party
claim in a reasonably prudent manner.
11.5 Manner of Indemnification.
Subject to Section 11.4 above, the obligations of the indemnifying party
hereunder shall be effected by payment of cash or delivery of a certified or
cashier's check in the amount of the indemnification liability. If the Buyer is
the indemnified party under this Article 11, the Buyer shall recover the amount
of its Damages
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from the escrowed funds in accordance with the terms of the Escrow Agreement
before seeking any recovery from the Sellers, and the Buyer and the Sellers
shall promptly execute and deliver to the Escrow Agent written instructions
directing the Escrow Agent to disburse to the Buyer a portion of the escrowed
funds in the amount of the Buyer's Damages.
11.6 Survival of Representations and Warranties.
All covenants and obligations to be performed after the Closing Date
contained in this Agreement or in any other certificate or document delivered
pursuant to this Agreement shall survive the Closing. All representations and
warranties contained in this Agreement or in any other certificate or document
delivered pursuant to this Agreement shall survive the Closing for a period of
eighteen (18) months. The waiver of any condition, other than as provided by
Section 8.4, based upon the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, reimbursement, or other remedy based upon
such representations, warranties, covenants or obligations.
ARTICLE 12
MISCELLANEOUS
12.1 Brokers.
Except as disclosed on Schedule 12.1, the Transaction has been and shall be
carried on by the Buyer directly with the Sellers and in such manner as not to
give rise to any valid claims against the Sellers or the Buyer for a brokerage
commission, finder's fee or other like payment and each party agrees to
indemnify and hold the other harmless from and against any claims for brokerage
commissions or finder's fees insofar as such claims shall be alleged to be based
upon arrangements or agreements made by the indemnifying party or in its behalf.
Such indemnity shall include the cost of reasonable counsel fees in connection
with the defense of any such claims.
12.2 Notices.
Except as otherwise provided, all notices which are permitted or required
under this Agreement shall be in writing and shall be deemed given when
delivered personally, by fax, telex or telegram, or if sent by mail, five (5)
business days after being mailed by registered or certified mail, postage
prepaid, or by such other method (including air courier) which provides for a
signed receipt upon delivery, addressed as follows, or to such other person or
address as may be designated by notice to the other party:
If to the Buyer, to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly
Chief Financial Officer and Treasurer
Fax Number: (703) 768-9625
with a copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering,
2445 M Street, N.W.
Washington, D.C. 20037
Attn: George P. Stamas or Thomas W. White
Fax Number: (202) 663-6363
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or if to the Sellers, to:
Bariston Associates, Inc.
One International Place
Boston, Massachusetts 02110
Attn: David A. Barry
Fax Number: (617) 330-8951
with a copy (which shall not constitute notice) to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attn: Martin H. Neidell
Fax Number: 212-806-6006
12.3 Expenses of Transfer.
Buyer and Sellers shall share equally all transfer, documentary,
recordation, sales or other taxes or fees assessed or levied in connection with
the sale of the Assets, regardless of whether Sellers or Buyer is obligated for
collection and remittance of the Transaction Taxes. The Sellers shall cooperate
with the Buyer in the filing for any such available exemptions. The Sellers and
the Buyer shall share equally the filing fees, if any, required by the FCC or
any PUC. The Buyer shall pay the filing fee relating to any filing required in
accordance with the Antitrust Improvements Act. All other expenses incurred in
connection with the negotiation, preparation, execution, and performance of this
Agreement shall be paid by the party incurring such expenses.
12.4 Assignment.
This Agreement and the Transaction contemplated herein may not be assigned
or otherwise transferred, in whole or in part, by operation of law or otherwise
without the prior written consent of the other party; provided however that the
Buyer may assign any or all of its rights to purchase the Assets under this
Agreement to a subsidiary of the Buyer but such assignment shall not release,
affect or reduce in any way the Buyer's obligations to the Sellers hereunder.
12.5 Counterparts.
This Agreement may be executed in two or more counterparts, each of which
when so executed and delivered, shall be an original instrument, but such
counterparts together shall constitute a single agreement.
12.6 Entire Agreement.
This Agreement, including all schedules and exhibits hereto, and all
certificates and documents executed and delivered in connection with this
Agreement, when executed and delivered, constitute the entire agreement of the
parties, superseding and extinguishing all prior agreements (including the
Initial Agreement) and understandings, representations and warranties, relating
to the subject matter hereof, except for the Confidentiality Agreement dated
January 5, 1996 between the Buyer and Daniels & Associates L.P., on behalf of
the Sellers, which shall remain in full force and effect (the "Confidentiality
Agreement"). To the extent that any of the terms of the Confidentiality
Agreement conflict with this Agreement, the terms of this Agreement shall
supersede and control.
12.7 Governing Law.
This Agreement and the rights and obligations of the parties hereunder
shall be governed by the substantive laws of the State of Delaware applicable to
contracts made and to be performed therein, without reference to the principles
of conflicts of laws.
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12.8 Headings.
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
12.9 Severability.
Any provision of this Agreement which is invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability, provided that
such invalidity or unenforceability does not deny any party the material
benefits of the transaction for which it has bargained, such invalidity or
unenforceability shall not affect in any way the remaining provisions hereof.
12.10 Modification and Amendment.
This Agreement may not be modified or amended except by written agreement
specifically referring to this Agreement and signed by the parties hereto.
12.11 Waiver.
No waiver of a breach or default hereunder shall be considered valid unless
in writing and signed by the party giving such waiver, and no such waiver shall
be deemed a waiver of any subsequent breach or default of the same or similar
nature.
12.12 Parties Obligated and Benefited.
Subject to the limitations set forth below, this Agreement will be binding
upon the parties hereto and their respective assignees and successors in
interest and will inure solely to the benefit of such parties and their
respective assigns and successors in interest, and no other person will be
entitled to any of the benefits conferred by this Agreement.
12.13 Attorneys' Fees.
In the event of any action or suit based upon or arising out of any alleged
breach by any party of any representation, warranty, covenant, or agreement
contained in this Agreement, the prevailing party will be entitled to recover
reasonable attorneys' fees and other costs of such action or suit from the other
party.
12.14 Rights to Specific Performance.
The Sellers acknowledge that the unique nature of the Assets to be
purchased by the Buyer pursuant to this Agreement renders money damages an
inadequate remedy for the breach by the Sellers of their obligations under this
Agreement, and the Sellers agree that in the event of such breach, the Buyer
will upon proper action instituted by it, be entitled to a decree of specific
performance of this Agreement in lieu of any monetary damages for such breach.
12.15 Actions.
The parties will execute and deliver to the other, from time to time at or
after the Closing, for no additional consideration and at no additional cost to
the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably necessary
to give full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
12.16 Terms.
Terms used with initial capital letters will have the meanings specified,
applicable to both singular and plural forms, for all purposes of this
Agreement. The word "include" and derivatives of that word are used in this
Agreement in an illustrative sense rather than limiting sense.
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12.17 Construction.
This Agreement has been negotiated by the parties and their respective
legal counsel, and legal or equitable principles that might require the
construction of this Agreement or any provision of this Agreement against the
party drafting will not apply in any construction or interpretation of this
Agreement.
12.18 Buyer Stockholder Approval of Certain Matters.
The Buyer's board of directors has adopted resolutions (1) recommending
that the provisions of Section 5 of the Certificate of Designation regarding
conversion of the Metrocall Series B Preferred Shares into Metrocall Common
Stock be approved by the shareholders of the Buyer, and directing that such
proposal be submitted to the holders of Metrocall Common Stock for a vote at the
next meeting of shareholders of the Buyer in accordance with applicable Delaware
law; and (2) approving an amendment to the Buyer's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 33,500,000
shares to 60,000,000 shares, directing that such amendment be presented to the
holders of Common Stock for a vote at the next meeting of shareholders of the
Buyer in accordance with applicable Delaware law and recommending that the
holders of Common Stock approve the amendment (the "Stockholder Proposals"). The
Buyer will take all action reasonably necessary or appropriate to solicit and
obtain proxies and votes in favor of the Stockholder Proposals from the holders
of the requisite percentage of Metrocall Common Stock. The Buyer will use
reasonable best efforts to obtain from the stockholders of Buyer listed on
Schedule 12.18 attached hereto an agreement, by an instrument, in form and
substance satisfactory to the Sellers, to vote all the capital stock of Buyer
owned by them in favor of the Stockholder Proposals. Prior to the approval of
the second Stockholder Proposal described above, Buyer agrees not to increase
the number of Reserved Shares or to issue any shares of capital stock (except
from the Reserved Shares) other than pursuant to this Agreement. As soon as
practicable after the approval of the second Stockholder Proposal by the holders
of the Common Stock, the Buyer will reserve not less than 3,500,000 shares of
Common Stock for issuance upon conversion of the Metrocall Series B Preferred
Shares and will cause any Common Stock Equivalents to be converted to Common
Stock.
Section 12.19 Transfers of Series B Preferred Shares.
The Sellers may not transfer any of the Series B Preferred Shares received
as part of the Purchase Price, except that the Sellers may transfer shares of
Series B Preferred Shares to other persons or entities ("Permitted Transferees")
if each such Permitted Transferee meets the following conditions: 1) the
Permitted Transferee agrees to be bound by the provisions of Exhibit 12.19 and
the Registration Rights Agreement described in Section 8.3.6(b) by an instrument
satisfactory in form and substance to the Buyer, and 2) after such transfer, the
total number of beneficial owners of Metrocall Series B Preferred Shares (as
defined in Rule 13d-3 under the Exchange Act), does not exceed 10. In order to
facilitate compliance with this restriction, the Sellers will, prior to
effecting any transfer, provide to the Buyer such information as the Buyer shall
reasonably request as to the identity of the proposed transferee, and the Buyer
will provide the Permitted Transferee with such information as the Permitted
Transferee reasonably requests regarding the number of beneficial owners of
Metrocall Series B Preferred Shares.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the Buyer, the Parent, and the Sellers has
caused this Agreement to be executed under seal individually or by its duly
authorized representatives, officers or agents on the date first written above.
<TABLE>
<S> <C>
WITNESS: METROCALL, INC., a Delaware corporation,
Buyer
- --------------------------------------------- By: /s/ Vincent D. Kelly (SEAL)
--------------------------------------------
Its: Chief Financial Officer
---------------------------------------------
PAGE AMERICA GROUP, INC., a New York
corporation
- --------------------------------------------- By: /s/ David A. Barry (SEAL)
--------------------------------------------
Its: Chairman
---------------------------------------------
PAGE AMERICA OF NEW YORK, INC., a New York
corporation
- --------------------------------------------- By: /s/ David A. Barry (SEAL)
--------------------------------------------
Its: Chairman
---------------------------------------------
PAGE AMERICA OF ILLINOIS, INC., an Illinois
corporation
- --------------------------------------------- By: /s/ David A. Barry (SEAL)
--------------------------------------------
Its: Chairman
---------------------------------------------
PAGE AMERICA COMMUNICATIONS OF INDIANA, INC.,
an Indiana corporation
- --------------------------------------------- By: /s/ David A. Barry (SEAL)
--------------------------------------------
Its: Chairman
---------------------------------------------
PAGE AMERICA OF PENNSYLVANIA, INC., a
Pennsylvania corporation
- --------------------------------------------- By: /s/ David A. Barry (SEAL)
--------------------------------------------
Its: Chairman
---------------------------------------------
</TABLE>
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APPENDIX B
PAGE AMERICA GROUP, INC.
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
This Plan of Complete Liquidation and Dissolution (the "Plan") of Page
America Group, Inc. ("the "Corporation") provides for the transfer of
substantially all of the assets and certain of the liabilities of the
Corporation to Metrocall, Inc., a Delaware corporation ("Metrocall") in
consideration of the issuance by Metrocall to the Corporation of cash and
various of its securities followed by the complete liquidation and voluntary
dissolution of the Corporation pursuant to the New York Business Corporation Law
(the "BCL").
The Plan shall become effective on the date on which the Plan is approved
by the affirmative vote of the holders of at least two-thirds of the votes
entitled to be voted thereon by all shareholders of the Corporation. Upon the
approval of the Plan by the shareholders, the officers of the Corporation are
authorized and directed to wind up the affairs of the Corporation in the manner
provided in the BCL by collecting all sums due to the Corporation, converting
into cash all assets of the Corporation not to be distributed in kind to the
shareholders, paying or providing for the liabilities of the Corporation
(including any taxes and the expenses of liquidating and dissolving the
Corporation) and doing, or causing to be done, all such other action as may be
necessary or appropriate in order to carry out the Plan, including, but not
limited to, the following:
1. In connection with the liquidation and dissolution of the
Corporation pursuant to the Plan, the Corporation shall enter into and
effect the transactions contemplated by the proposed Amended and Restated
Asset Purchase Agreement (the "Acquisition Agreement") between the
Corporation and Metrocall, pursuant to which substantially all the assets
of the Corporation will be purchased by Metrocall.
2. Upon the closing of the transactions contemplated by the
Acquisition Agreement, and, thereafter, the Corporation shall continue in
existence for the sole purpose of winding up the affairs of the Corporation
in accordance with the Plan and shall not engage in any business activities
other than activities related to the implementation of the Plan. From and
after such time, the directors and officers of the Corporation as of such
date shall continue in office solely for the foregoing purposes.
3. Within 30 days after the effective date of the Plan, the proper
officers of the Corporation shall execute and file Form 966 with the
Internal Revenue Service in accordance with the instructions to Form 966.
4. Upon approval of the Plan by the shareholders and the closing of
the transactions contemplated by the Acquisition Agreement, the proper
officers of the Corporation shall take all such actions as they, or any of
them, deem necessary, advisable, convenient or proper to (a) collect all
sums due to the Corporation and convert into cash all assets of the
Corporation that are not to be distributed in kind to its shareholders, and
(b) settle, pay and discharge, or otherwise provide for, all of the
remaining liabilities of the Corporation, including the costs and expenses
incurred in carrying out the Plan, and, in connection therewith, the
officers of the Corporation, or any of them, are hereby authorized, inter
alia, to deliver securities of Metrocall received by the Corporation
pursuant to the Acquisition Agreement in payment of such liabilities and/or
to sell any or all of such securities of Metrocall and apply the proceeds
of the sale of such securities to the payment of such liabilities.
5. After all of the liabilities of the Corporation have been settled
and discharged, or otherwise provided for, the proper officers of the
Corporation shall distribute to the shareholders of the Corporation, in
complete cancellation and redemption of all outstanding shares of the
Corporation's capital stock, all remaining assets of the Corporation,
either in cash or in kind as such officers shall determine, in accordance
with their respective rights and preferences under the BCL, the Articles of
Incorporation of the Corporation and any instruments governing the rights
of the shareholders upon the liquidation of the Corporation, after giving
to each holder of any outstanding convertible security, option and/or
warrant
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such notice and opportunity to convert such convertible security or
exercise such option or warrant as shall be required pursuant to the terms
of the instruments under which convertible securities, options and warrants
were issued and are outstanding; provided, however, that the Corporation
may retain any assets as may be reasonably necessary to satisfy claims,
including unascertained, contingent, conditional or unmatured liabilities
or expenses, and as are specifically set aside for such purpose.
6. Promptly after the liquidation and winding up of the Corporation,
the proper officers of the Corporation are hereby authorized to execute and
file all documents required by the BCL, including Articles of Dissolution
with the New York Department of State. The proper officers of the
Corporation shall also take all such other action as shall be necessary or
appropriate to cause the Corporation to withdraw from all other
jurisdictions in which it is qualified to do business.
7. The Plan shall be terminated by the Board of Directors promptly if
the closing under the Acquisition Agreement does not occur.
8. The directors and officers of the Corporation shall carry out and
consummate the Plan and shall have power to adopt all resolutions, execute
all documents, file all papers and take all other action they deem
necessary, desirable, convenient or proper for the purpose of effecting the
collection and sale of the Corporation's properties and assets, the
settlement and discharge of the Corporation's liabilities and the complete
liquidation and dissolution of the Corporation in accordance with the Plan.
9. The Board of Directors, in the exercise of their discretion, are
authorized to convey, assign and transfer the assets of the Corporation to
a liquidating trust pursuant to which the directors of the Corporation will
be the Trustees, with the beneficiaries thereof to be the creditors and
shareholders of the Corporation. Adoption of the Plan hereby constitutes
the authority of the Board of Directors to create such a liquidating trust.
10. The Plan is subject to the terms and provisions of any definitive
forbearance agreement entered into by the Corporation and the holders of
its Subordinated Notes.
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APPENDIX C
SECTIONS 623 AND 910 OF THE NEW YORK BUSINESS CORPORATION LAW
Section 623. Procedure to enforce shareholder's right to receive payment for
shares
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall
file with the corporation a written notice of such election, stating his name
and residence address, the number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any shareholder who
elects to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under paragraph (g)
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease
to have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
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(f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix
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the fair value of their shares. If, in the case of merger or consolidation,
the surviving or new corporation is a foreign corporation without an office
in this state, such proceeding shall be brought in the county where the
office of the domestic corporation, whose shares are to be valued, was
located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall
have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in such proceeding upon each
dissenting shareholder who is a resident of this state in the manner
provided by law for the service of a summons, and upon each nonresident
dissenting shareholder either by registered mail and publication, or in
such other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the
shares, which, for the purposes of this section, shall be the fair value as
of the close of business on the day prior to the shareholders'
authorization date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the shareholder's
right to receive payment for shares and its effects on the corporation and
its shareholders, the concepts and methods then customary in the relevant
securities and financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall determine the
fair value of the shares without a jury and without referral to an
appraiser or referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the shares
whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice law
and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action
was consummated to the date of payment. In determining the rate of
interest, the court shall consider all relevant factors, including the rate
of interest which the corporation would have had to pay to borrow money
during the pendency of the proceeding. If the court finds that the refusal
of any shareholder to accept the corporate offer of payment for his shares
was arbitrary, vexatious or otherwise not in good faith, no interest shall
be allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts
employed by it. Notwithstanding the foregoing, the court may, in its
discretion, apportion and assess all or any part of the costs, expenses and
fees incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was arbitrary,
vexatious or otherwise not in good faith. The court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by any or all of the dissenting shareholders who are parties to
the proceeding against the corporation if the court finds any of the
following: (A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that no offer
or required advance payment was made by the corporation; (C) that the
corporation failed to institute the special proceeding within the period
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specified therefor; or (D) that the action of the corporation in complying
with its obligations as provided in this section was arbitrary, vexatious
or otherwise not in good faith. In making any determination as provided in
clause (A), the court may consider the dollar amount or the percentage, or
both, by which the fair value of the shares as determined exceeds the
corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be
due him, upon surrender of the certificates for any such shares represented
by certificates. (i) Shares acquired by the corporation upon the payment of
the agreed value therefor or of the amount due under the final order, as
provided in this section, shall become treasury shares or be cancelled as
provided in section 515 (Reacquired shares), except that, in the case of a
merger or consolidation, they may be held and disposed of as the plan of
merger or consolidation may otherwise provide.
(j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option: (1)
Withdraw his notice of election, which shall in such event be deemed withdrawn
with the written consent of the corporation; or (2) Retain his status as a
claimant against the corporation and, if it is liquidated, be subordinated to
the rights of creditors of the corporation, but have rights superior to the
non-dissenting shareholders, and if it is not liquidated, retain his right to be
paid for his shares, which right the corporation shall be obliged to satisfy
when the restrictions of this paragraph do not apply. (3) The dissenting
shareholder shall exercise such option under subparagraph (1) or (2) by written
notice filed with the corporation within thirty days after the corporation has
given him written notice that payment for his shares cannot be made because of
the restrictions of this paragraph. If the dissenting shareholder fails to
exercise such option as provided, the corporation shall exercise the option by
written notice given to him within twenty days after the expiration of such
period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in
the manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
Section 910. Right of shareholder to receive payment for shares upon merger or
consolidation, or sale, lease, exchange or other disposition of
assets, or share exchange
(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right to receive
payment for shares), have the right to receive payment of the fair value of his
shares and the other rights and benefits provided by such section, in the
following cases:
(1) Any shareholder entitled to vote who does not assent to the taking
of an action specified in subparagraphs (A), (B) and (C).
(A) Any plan of merger or consolidation to which the corporation is
a party; except that the right to receive payment of the fair value of
his shares shall not be available: (i) To a shareholder of the parent
corporation in a merger authorized by section 905 (Merger of parent and
subsidiary corporations), or paragraph (c) of section 907 (Merger or
consolidation of domestic and foreign corporations); and (ii) To a
shareholder of the surviving corporation in a merger authorized by this
article, other than a merger specified in subparagraph (i), unless such
merger effects one or more of the changes specified in subparagraph
(b)(6) of section 806 (Provisions as to certain proceedings) in the
rights of the shares held by such shareholder.
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<PAGE> 148
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires
shareholder approval under section 909 (Sale, lease, exchange or other
disposition of assets) other than a transaction wholly for cash where
the shareholders' approval thereof is conditioned upon the dissolution
of the corporation and the distribution of substantially all of its net
assets to the shareholders in accordance with their respective interests
within one year after the date of such transaction.
(C) Any share exchange authorized by section 913 in which the
corporation is participating as a subject corporation; except that the
right to receive payment of the fair value of his shares shall not be
available to a shareholder whose shares have not been acquired in the
exchange.
(2) Any shareholder of the subsidiary corporation in a merger
authorized by section 905 or paragraph (c) of section 907, or in a share
exchange authorized by paragraph (g) of section 913, who files with the
corporation a written notice of election to dissent as provided in
paragraph (c) of section 623.
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APPENDIX D
(DRAFT)
April , 1997
Page America Group, Inc.
c/o Bariston Associates, Inc.
One International Place
Boston, Massachusetts 02110
Attention: Board of Directors
Gentlemen:
Page America Group, Inc. ("Page America") and Metrocall, Inc. ("Metrocall")
propose to enter into an Amended and Restated Asset Purchase Agreement dated as
of January 30, 1997 (the "Agreement"), providing for the acquisition (the
"Acquisition") by Metrocall of substantially all of the assets and the
assumption of certain of the liabilities of Page America in consideration for
(a) $25 million in cash, (b) 1,500 shares of Series B Junior Convertible
Preferred Stock of Metrocall having a value upon liquidation or conversion of
$15 million, (c) shares of Common Stock of Metrocall, and (d) shares of Common
Stock of Metrocall or other equity securities valued at $15 million, subject to
adjustment based on changes in Page America's working capital deficit as defined
in the Joint Proxy Statement/Prospectus of Page America and Metrocall and
decreases in service revenues below specified thresholds. The Acquisition is
expected to be considered at a special meeting of the shareholders of Page
America and, if approved, is expected to be consummated shortly thereafter.
Prior to our engagement to render a fairness opinion to Page America, we
were separately engaged by Page America as a financial representative to
identify and solicit prospects which were qualified and interested in a purchase
or merger transaction with Page America, and we will receive a fee if the
proposed Acquisition by Metrocall is consummated. In addition, in the past,
Daniels has advised Metrocall regarding other possible acquisitions and has
received fees from Metrocall relating to Daniels' services. However, Daniels is
not entitled to receive any fees from Metrocall in connection with the
Acquisition. Daniels does not believe that these relationships in any way affect
its ability to fairly and impartially render the opinion set forth herein.
You have asked us whether or not, in our opinion, the aggregate
consideration to be received by Page America from Metrocall for the assets being
sold in the proposed Acquisition is fair to Page America from a financial point
of view.
In arriving at the opinion set forth below, we have, among other things,
done the following:
(1) Reviewed the Joint Proxy Statement/Prospectus of Page America and
Metrocall and the related Registration Statement;
(2) Reviewed Page America's and Metrocall's respective annual reports
and audited financial statements and related financial information for the
three fiscal years ended December 31, 1996, and the most recently available
related unaudited financial information of each company;
(3) Reviewed certain information relating to the business, earnings,
cash flow, assets and prospects of Page America and Metrocall, furnished to
us by Page America and Metrocall, respectively.
(4) Conducted discussions with members of senior management of Page
America and Metrocall regarding the business and prospects of Page America
and Metrocall, respectively;
(5) Reviewed minutes of meetings of the Board of Directors of Page
America at which the proposed Acquisition was discussed;
(6) Compared the results of operations of Page America with those of
certain companies which we deemed to be reasonably similar to Page America;
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<PAGE> 150
Board of Directors
April , 1997
Page 2
(7) Compared the proposed financial terms of the Acquisition
contemplated by the Agreement with the terms of certain other mergers and
acquisitions which we deemed to be relevant;
(8) Reviewed a copy of the initial Asset Purchase Agreement, dated as
of April 22, 1996, as well as a copy of the Agreement, including all
exhibits and addendums thereto; and
(9) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary for purposes of our opinion.
In preparing our opinion, we have relied on the accuracy and completeness
of all financial and other information supplied or otherwise made available to
us by Page America and/or Metrocall. We have not independently verified such
information and/or made or obtained any independent evaluation or appraisal of
the assets of Page America or Metrocall. This opinion does not constitute a
recommendation to any of the shareholders of Page America as to how such
shareholders should vote on the proposed Acquisition. This opinion does not
address the relative merits of the Acquisition as compared with any other
transactions submitted to Page America or discussed by the Board of Directors of
Page America as alternatives to the Acquisition, or the decision of the Board of
Directors to proceed with the Acquisition. This opinion is based on market,
economic, financial and other conditions as they existed and could be evaluated
as of this date.
In rendering this opinion, we have not been engaged to act as an agent or
fiduciary of, and, to the extent permitted by law, the Board of Directors has
expressly waived any duties or liabilities we may otherwise be deemed to have
had to Page America's shareholders or any other third party.
On the basis of and subject to the foregoing, we are of the opinion that,
as of this date, the aggregate consideration to be received by Page America from
Metrocall for the assets being sold in the Acquisition is fair to Page America
from a financial point of view.
We hereby consent to the mention of our name in the Registration Statement
on Form S-4 of Metrocall, and the inclusion of this opinion in the Joint Proxy
Statement/Prospectus of Page America and Metrocall constituting a part thereof.
Very truly yours,
DANIELS & ASSOCIATES, L.P.
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<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
Delaware corporation to indemnify any person who was or is, 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 such corporation) by reason of the fact that
such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, such person had no reasonable cause to believe his conduct was
unlawful. A Delaware corporation may indemnify such persons against expenses
(including attorneys' fees) in actions brought by or in the right of the
corporation to procure a judgment in its favor under the same conditions, except
that no indemnification is permitted in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless and to the extent the Court of Chancery of the State of Delaware or the
court in which such action or suit was brought shall determine upon application
that, in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the Court of Chancery or
other such court shall deem proper. To the extent such person has been
successful on the merits or otherwise in defense of any action referred to
above, or in defense of any claim, issue or matter therein, the corporation must
indemnify such person against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. The indemnification
and advancement of expenses provided for in, or granted pursuant to, Section 145
is not 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.
Section 145 also provides that a corporation may maintain insurance against
liabilities for which indemnification is not expressly provided by the statute.
Section 6 of the Metrocall Amended and Restated Certificate of
Incorporation provides for indemnification of the directors, officers, employees
and agents of Metrocall to the full extent currently permitted by the DGCL.
In addition, the Metrocall Amended and Restated Certificate of
Incorporation, as permitted by Section 102(b) of the DGCL, limits directors'
liability to Metrocall and its stockholders by eliminating liability in damages
for breach of fiduciary duty. Section 5.5 of the Metrocall Amended and Restated
Certificate of Incorporation provides that neither Metrocall nor its
stockholders may recover damages from Metrocall directors for breach of their
fiduciary duties in the performance of their duties as directors of Metrocall.
As limited by Section 102(b), this provision cannot, however, have the effect of
indemnifying any director of Metrocall in the case of liability (i) for a breach
of the director's duty of loyalty, (ii) for acts of omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the DGCL or (iv) for any transactions for which the
director derived an improper personal benefit.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<S> <C> <C>
2.1 Asset Purchase Agreement by and among Page America Group, Inc., Page America
of New York, Inc., Page America of Illinois, Inc., Page America
Communications of Indiana, Inc. Page America of Pennsylvania, Inc. and
Metrocall, Inc. dated as of April 22, 1996.(a)
2.2 Amended and Restated Asset Purchase Agreement by and among Page America
Group, Inc., Page America of New York, Inc., Page America of Illinois, Inc.,
Page America Communications of Indiana, Inc., Page America of Pennsylvania,
Inc. and Metrocall, Inc. dated as of January 30, 1997.*
4.1 Form of Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Metrocall, Inc. Series
B Junior Convertible Preferred Stock.
4.2 Form of Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Metrocall, Inc. Common
Stock Equivalent Convertible Preferred Stock
5.1 Opinion of Wilmer, Cutler & Pickering as to the legality of the securities
being registered.+
8.1 Opinion of Stroock & Stroock & Lavan LLP re tax matters+
10.1 Credit Agreement dated as of December 30, 1993 by and among Page America
Group, Inc., its subsidiaries and NationsBank of Texas, N.A., Canadian
Imperial Bank of Commerce, Fleet National Bank and State Street Bank and
Trust Company, as amended.(b)
10.2 Amended and Restated Loan Agreement among Metrocall, Inc., the
Toronto-Dominion Bank and the First National Bank of Boston, with
Toronto-Dominion Bank as "Documentation Agent," the First National Bank of
Boston as "Syndication Agent," the Toronto-Dominion Bank and the First
National Bank of Boston as "Managing Agents," and Toronto-Dominion (Texas),
Inc. as "Administrative Agent."(c)
23.1 Consent of Wilmer, Cutler & Pickering (included in Exhibit 5.1).+
23.2 Consent of Arthur Andersen LLP, as independent public accountants for
Metrocall, Inc.
23.3 Consent of Arthur Andersen LLP, as independent public accountants for O.R.
Estman, Inc. and Dana Paging, Inc. dba Satellite Paging.+
23.4 Consent of Hutton, Patterson & Company, as independent public accountants
for Parkway Paging, Inc.+
23.5 Consent of Deloitte & Touche LLP, as independent accounts for A+ Network,
Inc.+
23.6 Consent of Price Waterhouse LLP, as independent accountants for Network
Paging Corporation.+
23.7 Consent of Ernst & Young LLP, as independent auditors for Page America
Group, Inc.
23.8 Consent of Daniels & Associates, L.P. as financial adviser to Page America.+
23.9 Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 8.1)+
24 Power of Attorney (included in signature pages of this Registration
Statement)*
</TABLE>
-----------------------
* Exhibit previously filed.
+ Exhibit to be filed by amendment.
(a) Incorporated by reference to Metrocall's Statement on Schedule 13D,
filed with the Commission on May 2, 1996.
(b) Incorporated by reference to Exhibits to Page America's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.
(c) Incorporated by reference to Metrocall's Registration Statement on
Form S-3, as amended (File No. 333-13123), filed with the Commission
on October 1, 1996.
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) of this Form.
(c) The exhibits required pursuant to Item 21(c) of this Form are furnished
as part of the Proxy Statement/Prospectus.
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<PAGE> 153
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by other terms of the applicable form.
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<PAGE> 154
(f) The registrant hereby undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(g) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE> 155
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Alexandria,
Commonwealth of Virginia, on April 15, 1997.
METROCALL, INC.
By: /s/ VINCENT D. KELLY
------------------------------------
Name: Vincent D. Kelly
Title: Executive Vice President and
CFO
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
- -------------------------------------- -------------------------------------- ---------------
<C> <C> <S>
* President, Chief Executive Officer and April 15, 1997
- -------------------------------------- Director (Principal Executive Officer)
WILLIAM L. COLLINS, III
/s/ VINCENT D. KELLY Executive Vice President and Chief April 15, 1997
- -------------------------------------- Financial Officer (Principal Financial
VINCENT D. KELLY and Accounting Officer)
* Chairman of the Board April 15, 1997
- --------------------------------------
RICHARD M. JOHNSTON
* Director April 15, 1997
- --------------------------------------
RONALD V. APRAHAMIAN
Director
- --------------------------------------
HARRY L. BROCK, JR.
* Director April 15, 1997
- --------------------------------------
SUZANNE S. BROCK
* Director April 15, 1997
- --------------------------------------
FRANCIS A. MARTIN, III
* Director April 15, 1997
- --------------------------------------
RYAL R. POPPA
* Director April 15, 1997
- --------------------------------------
RAY D. RUSSENBERGER
* Director April 15, 1997
- --------------------------------------
ELLIOTT H. SINGER
* Director April 15, 1997
- --------------------------------------
MICHAEL GREENE
*By: /s/ VINCENT D. KELLY
- --------------------------------------
VINCENT D. KELLY
ATTORNEY-IN-FACT
</TABLE>
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<PAGE> 156
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Asset Purchase Agreement by and among Page America Group, Inc., Page America of
New York, Inc., Page America of Illinois, Inc., Page America Communications of
Indiana, Inc. Page America of Pennsylvania, Inc. and Metrocall, Inc. dated as of
April 22, 1996.(a)
2.2 -- Amended and Restated Asset Purchase Agreement by and among Page America Group,
Inc., Page America of New York, Inc., Page America of Illinois, Inc., Page
America Communications of Indiana, Inc., Page America of Pennsylvania, Inc. and
Metrocall, Inc. dated as of January 30, 1997.*
4.1 -- Form of Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Rights of Metrocall, Inc. Series B Junior
Convertible Preferred Stock.
4.2 -- Form of Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Rights of Metrocall, Inc. Common Stock
Equivalent Convertible Preferred Stock
5.1 -- Opinion of Wilmer, Cutler & Pickering as to the legality of the securities being
registered.+
8.1 -- Opinion of Stroock & Stroock & Lavan LLP re tax matters+
10.1 -- Credit Agreement dated as of December 30, 1993 by and among Page America Group,
Inc., its subsidiaries and NationsBank of Texas, N.A., Canadian Imperial Bank of
Commerce, Fleet National Bank and State Street Bank and Trust Company, as
amended.(b)
10.2 -- Amended and Restated Loan Agreement among Metrocall, Inc., the Toronto-Dominion
Bank and the First National Bank of Boston, with Toronto-Dominion Bank as
"Documentation Agent," the First National Bank of Boston as "Syndication Agent,"
the Toronto-Dominion Bank and the First National Bank of Boston as "Managing
Agents," and Toronto-Dominion (Texas), Inc. as "Administrative Agent."(c)
23.1 -- Consent of Wilmer, Cutler & Pickering (included in Exhibit 5.1).+
23.2 -- Consent of Arthur Andersen LLP, as independent public accountants for Metrocall,
Inc.
23.3 -- Consent of Arthur Andersen LLP, as independent public accountants for O.R.
Estman, Inc. and Dana Paging, Inc. dba Satellite Paging.+
23.4 -- Consent of Hutton, Patterson & Company, as independent public accountants for
Parkway Paging, Inc.+
23.5 -- Consent of Deloitte & Touche LLP, as independent accounts for A+ Network, Inc.+
23.6 -- Consent of Price Waterhouse LLP, as independent accountants for Network Paging
Corporation.+
23.7 -- Consent of Ernst & Young LLP, as independent auditors for Page America Group,
Inc.
23.8 -- Consent of Daniels & Associates, L.P. as financial adviser to Page America.+
23.9 -- Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 8.1)+
24 -- Power of Attorney (included in signature pages of this Registration Statement)*
</TABLE>
- ---------------
* Exhibit previously filed.
+ Exhibit to be filed by amendment.
(a) Incorporated by reference to Metrocall's Statement on Schedule 13D, filed
with the Commission on May 2, 1996.
(b) Incorporated by reference to Exhibits to Page America's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
(c) Incorporated by reference to Metrocall's Registration Statement on Form S-3,
as amended (File No. 333-13123), filed with the Commission on October 1,
1996.
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK
OF
METROCALL, INC.
Metrocall, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, hereby certifies
that, pursuant to the provisions of Section 151 of the General Corporation Law
of the State of Delaware, its Board of Directors, at a meeting duly held on
January 17, 1997, adopted the following resolution:
WHEREAS, the Board of Directors of the Corporation is authorized by the
Amended and Restated Certificate of Incorporation to issue up to 1,000,000
shares of preferred stock in one or more classes or series and, in connection
with the creation of any class or series, to fix by the resolutions providing
for the issuance of shares the powers, designations, preferences and relative,
participating, optional or other rights of the class or series and the
qualifications, limitations or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to such authority, to authorize and fix the terms and provisions of a
series of preferred stock and the number of shares constituting the series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a series of
preferred stock on the terms and with the provisions herein set forth on Annex A
attached to this resolution.
--------------------------------------
Shirley B. White
Assistant Secretary
ATTEST:
- ------------------------------------------------------
Vincent D. Kelly
Chief Financial Officer
<PAGE> 2
ANNEX A
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK
The powers, designations, preferences and relative, participating, optional
or other rights of the Series B Junior Convertible Preferred Stock of Metrocall,
Inc. (the "Corporation") are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series B Junior
Convertible Preferred Stock," and shall have $0.01 par value per share. The
number of authorized shares constituting this series shall be 9,000 shares.
Shares of the Series B Convertible Preferred Stock shall have a stated value of
$10,000 per share (the "Stated Value"). The Corporation may issue fractional
shares of Series B Junior Convertible Preferred Stock.
2. DIVIDENDS.
(a) Right to Receive Dividends. Holders of the Series B Junior Convertible
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors of the Corporation (the "Board of Directors"), to the extent
permitted by the General Corporation Law of the State of Delaware, cumulative
dividends at the rate, in the form, at the times and in the manner set forth in
this Section 2. Such dividends shall accrue on any given share from the day of
issuance of such share and shall accrue from day to day whether or not earned or
declared.
(b) Form of Dividend. Any dividend payment made with respect to the Series
B Junior Convertible Preferred Stock may be made, at the sole discretion of the
Board of Directors, in cash out of funds legally available for such purpose or
by issuing the number of shares of Series B Junior Convertible Preferred Stock
equal to the amount of the dividend divided by the Stated Value. Any such
dividend payment may be made, in the sole discretion of the Board of Directors,
partially in cash and partially in shares of Series B Junior Convertible
Preferred Stock determined in accordance with the preceding formula; provided,
that, in the event that any such dividend payment is made partially in cash and
partially in shares of Series B Junior Convertible Preferred Stock, each holder
of Series B Junior Convertible Preferred Stock shall receive a ratable amount of
cash and Series B Junior Convertible Preferred Stock that is proportionate to
the amount of Series B Junior Convertible Preferred Stock held by such holder on
which such dividend is paid. All shares of Series B Junior Convertible Preferred
Stock issued as a dividend shall be fully paid and nonassessable.
(c) Dividend Rate. The dividend rate on the Series B Junior Convertible
Preferred Stock shall be 14% of the Stated Value per share per annum; provided,
that unless and until the holders of the common stock, $.01 par value of the
Corporation (the "Common Stock") approve the conversion provisions of Section 5
below, the dividend rate will increase to 17% on July 1, 1997, 18% on October 1,
1997, 19% on January 1, 1998 and 20% on April 1, 1998, and will revert to 14% at
such time as such stockholder approval is obtained.
(d) Payment of Dividends. Dividends shall be payable in arrears, when and
as declared by the Board of Directors, on May 15 and November 15 of each year
(each such semiannual payment date a "Dividend Payment Date"), except that if
any such date is a Saturday, Sunday or legal holiday then such dividend shall be
payable on the first immediately succeeding calendar day which is not a
Saturday, Sunday or legal holiday. Dividends shall accrue on each share of
Series B Junior Convertible Preferred Stock from the date of issuance of such
share, and, after payment of a dividend as required hereunder, from and after
each Dividend Payment Date based on the number of days elapsed and a 365-day
year. The dividend payable on the first Dividend Payment Date with respect to
any share of Series B Junior Convertible Preferred Stock shall be the pro rata
portion of the Dividend Rate based upon the number of days from and including
the date of issuance, up to and including such first Dividend Payment Date and a
365-day year. Each dividend shall be paid to the holders of record of shares of
the Series B Junior Convertible Preferred Stock as they appear on the books of
the Corporation on such record date, not more than 45 days nor fewer than 10
days preceding the respective Dividend Payment Date, as shall be fixed by the
Board of Directors.
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<PAGE> 3
(e) Dividend Preference. Dividends on the Series B Junior Convertible
Preferred Stock shall be payable after dividends are paid on the Series A
Convertible Preferred Stock, $.01 par value, of the Corporation (the "Series A
Preferred Stock") and before any dividends or distributions or other payments
shall be paid or set aside for payment upon the Common Stock, the variable
common rights ("VCRs") issued pursuant to the Variable Common Rights Agreement
dated November 15, 1996 between the Corporation and First Union National Bank of
Virginia as Rights Agent, or any other stock ranking on liquidation or as to
dividends or distributions junior to the Series B Junior Convertible Preferred
Stock (any such stock or VCRs, together with the Common Stock, being referred to
hereinafter as "Junior Stock"), other than a dividend, distribution or payment
paid solely in shares of Common Stock or other Junior Stock that is not
Redeemable Stock. If at any time dividends on the outstanding Series B Junior
Convertible Preferred Stock at the rate set forth herein shall not have been
paid or declared and set apart for payment with respect to all preceding and
current periods, the amount of the deficiency shall be fully paid or declared
and set apart for payment, before any dividend, distribution or payment shall be
declared or paid upon or set apart for the shares of any class of Junior Stock,
other than a dividend, distribution or payment paid solely in shares of Common
Stock or other Junior Stock that is not Redeemable Stock. The term "Redeemable
Stock" shall mean any equity security that by its terms or otherwise is required
to be redeemed for cash on or prior to the Final Redemption Date (as defined in
Section 7) or is redeemable for cash at the option of the holder thereof at any
time prior to the Final Redemption Date.
If there shall be outstanding shares of any Parity Securities, no full
dividends shall be declared or paid or set apart for payment on any such Parity
Securities for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum or additional
shares of Series B Junior Convertible Preferred Stock as permitted hereunder
sufficient for the payment thereof set apart for such payment on the Series B
Junior Convertible Preferred Stock for all dividend periods terminating on or
prior to the date of payment of such dividends; provided that in no event shall
any dividends be declared or paid in cash on Parity Securities unless dividends
in cash of not less than a ratable amount are declared and paid on Series B
Junior Convertible Preferred Stock. The term "Parity Securities" shall mean any
class or series of capital stock which is entitled to share ratably with the
Series B Junior Convertible Preferred Stock in the payment of dividends,
including accumulations, if any, and, in the event that the amounts payable
thereon on liquidation are not paid in full, are entitled to share ratably with
the Series B Junior Convertible Preferred Stock in any distribution of assets;
provided that Parity Securities shall not include any shares of Series B Junior
Convertible Preferred Stock issued as dividends pursuant to this Section 2.
If dividends on the Series B Junior Convertible Preferred Stock and on any
other series of Parity Securities are in arrears, in making any dividend payment
on account of such arrears, the Corporation shall make payments ratably (and
ratably as to cash, in-kind or other payments) upon all outstanding shares of
the Series B Junior Convertible Preferred Stock and shares of such other Parity
Securities in proportion to the respective aggregate amounts of dividends in
arrears on the Series B Junior Convertible Preferred Stock and on such other
series of Parity Securities to the date of such dividend payment.
3. LIQUIDATION PREFERENCE.
In the event of any bankruptcy, liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, each holder of Series B Junior
Convertible Preferred Stock at the time thereof shall be entitled to receive,
prior and in preference to any distribution of any of the assets or funds of the
Corporation to the holders of the Common Stock or other Junior Stock by reason
of their ownership of such stock, but after payment to holders of the Series A
Preferred Stock of any amounts to which they are entitled, an amount per share
of Series B Junior Convertible Preferred Stock equal to the Stated Value plus
any accrued and unpaid dividends to the date of liquidation. If the assets and
funds legally available for distribution among the holders of Series B Junior
Convertible Preferred Stock shall be insufficient to permit the payment to the
holders of the full aforesaid preferential amount, then the assets and funds
shall be distributed ratably among holders of Series B Junior Convertible
Preferred Stock in proportion to the number of shares of Series B Junior
Convertible Preferred Stock owned by each holder. If the assets and funds of the
Corporation available for distribution to stockholders upon any bankruptcy,
liquidation, dissolution or winding up of the affairs of the
2
<PAGE> 4
Corporation, whether voluntary or involuntary, shall be insufficient to permit
the payment to holders of the full aforesaid preferential amount and there shall
be any outstanding shares of Parity Securities, the holders of Series B Junior
Convertible Preferred Stock and the holders of such other Parity Securities
shall share ratably (and ratably as to cash or other distributions) in any
distribution of assets of the Corporation in proportion to the full respective
preferential amounts to which they are entitled.
4. VOTING RIGHTS.
The holders of the Series B Junior Convertible Preferred Stock shall have
no voting rights except as set forth in the Corporation's Amended and Restated
Certificate of Incorporation, as it may be amended or restated from time to time
(the "Certificate of Incorporation") or as provided by applicable law, and
except for the following:
(a) Changes in Organizational Documents. So long as the Series B Junior
Convertible Preferred Stock is outstanding, the Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of a
majority of the then outstanding shares of Series B Junior Convertible Preferred
Stock, voting as a single class, amend, repeal, modify or supplement (i) any
provision of the Certificate of Incorporation, the Fourth Amended and Restated
Bylaws of the Corporation, as in effect on the date on which Series B Junior
Convertible Preferred Stock is first issued by the Corporation (the "Initial
Issuance Date"), or any successor bylaws, if such amendment, repeal,
modification or supplement in any way adversely affects the powers,
designations, preferences or other rights of the Series B Junior Convertible
Preferred Stock, or (ii) this Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other Rights of Series B
Junior Convertible Preferred Stock ("Certificate of Designation").
(b) Limitation on Senior Securities. (i) So long as the Series B Junior
Convertible Preferred Stock is outstanding, the Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders of a
majority of the then outstanding shares of Series B Junior Convertible Preferred
Stock, voting as a single class, incur or issue, or permit any subsidiary of the
Corporation to incur or issue, any Senior Securities, except that the
Corporation or a subsidiary may incur or issue Senior Securities if at the time
of incurrence or issuance, the ratio of (A) Senior Securities outstanding on
such date to (B) Pro Forma Consolidated Cash Flow for the most recently ended
full fiscal quarter multiplied by four, determined on a pro forma basis as if
any such Senior Securities had been incurred or issued and the proceeds thereof
had been applied at the beginning of such fiscal quarter, would be less than 7.0
to 1.0. Notwithstanding the foregoing limitation, the Corporation may incur and,
as applicable, may permit its Subsidiaries to incur, Refinancing Debt.
(ii) For purposes of this Section,
(A) "Senior Securities" shall mean (i) all Debt, and (ii) the
shares of any classes or series of capital stock which are senior to the
Series B Junior Convertible Preferred Stock in respect of the right to
receive dividends or to participate in any distribution of assets other
than by way of dividends or which are Redeemable Stock. For the purposes
of determining any particular amount of Senior Securities described in
clause (ii) of the definition of Senior Securities, said amount shall be
the greater of the market value or the minimum amount payable by the
Corporation or any of its subsidiaries upon the redemption, purchase, or
the retirement of such Senior Securities. Notwithstanding any other
provision hereof, "Senior Securities" shall not include Series A
Preferred Stock.
(B) "Pro Forma Consolidated Cash Flow" shall mean for any period
the Corporation's Consolidated Cash Flow for such period calculated on a
pro forma basis to give effect to any Asset Disposition or acquisition
of assets not in the ordinary course of business (including acquisitions
by merger, consolidation or purchase of capital stock) during such
period or thereafter as if such Asset Disposition or acquisition had
taken place on the first day of such period.
(C) "Consolidated Cash Flow" shall mean for any period the
Corporation's Consolidated Net Income for such period plus (i) the
Corporation's Consolidated Interest Expense for such period plus (ii)
the consolidated income tax expense of the Corporation and its
consolidated subsidiaries for such period plus (iii) the consolidated
depreciation and amortization expense included in the income
3
<PAGE> 5
statement of the Corporation and its consolidated subsidiaries for such
period plus (iv) other non-cash charges reducing Consolidated Net Income
for such period (excluding any such non-cash charge to the extent that
it represents an accrual of or reserve for cash charges in any future
period), minus (v) non-cash items increasing Consolidated Net Income for
such period. Notwithstanding the foregoing, the provision for taxes on
the income or profits of and the depreciation and amortization and other
non-cash charges of any of the Corporation's consolidated subsidiaries
shall be added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the net income
of such subsidiary was included in calculating the Consolidated Net
Income of the Corporation and only if and to the extent such subsidiary
could have paid such amount at the date of determination as a dividend
to the Corporation by such subsidiary without prior governmental
approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that
subsidiary or its stockholders.
(D) "Consolidated Net Income" shall mean for any period the net
income (or loss) of the Corporation and its subsidiaries for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles ("GAAP"); provided that there shall be
excluded therefrom (i) the net income (but not the loss) of any
subsidiary which is subject to restrictions which prevent the payment of
dividends and the making of distributions (by loans, advances,
intercompany transfers or otherwise) to the Corporation except to the
extent of the amount of dividends or other distributions actually paid
to the Corporation by such subsidiary without violation of any such
restrictions, (ii) the net income (or loss) of any Person that is not a
consolidated subsidiary of the Corporation except to the extent of the
amount of dividends or other distributions actually paid to the
Corporation by such Person during any period, (iii) any gain or loss on
any Asset Disposition by the Corporation or any of its subsidiaries and
(iv) any extraordinary gain or loss.
(E) "Consolidated Interest Expense" shall mean for any period the
consolidated interest expense included in a consolidated income
statement (without deduction of interest income) of the Corporation and
its consolidated subsidiaries for such period determined in accordance
with GAAP, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of
Debt discounts; (ii) any payments of fees with respect to letters of
credit, bankers' acceptances or similar facilities; (iii) fees with
respect to interest rate swap or similar agreements or foreign currency
hedge, exchange or similar agreements, other than fees or charges
related to the acquisition or termination thereof which are not
allocable to interest expense in accordance with GAAP; and (iv) the
interest component associated with capital lease obligations.
(F) "Asset Disposition" shall mean any transfer, conveyance, sale,
lease or other disposition by the Corporation or any of its subsidiaries
(including a consolidation or merger or other sale of any such
subsidiary with, into or to another Person in a transaction in which
such subsidiary ceases to be a subsidiary, but excluding a disposition
by a subsidiary of such Person to such Person or a wholly owned
subsidiary of such Person or by such Person to a wholly owned subsidiary
of such Person, and excluding the creation of a lien, pledge or security
interest) of (i) shares of capital stock (other than directors'
qualifying shares) or other ownership interests of a subsidiary of such
Person, (ii) substantially all of the assets of such Person or any of
its Subsidiaries representing a division or line of business or (iii)
other assets or rights of such Person or any of its Subsidiaries outside
of the ordinary course of business, in any case where the consideration
received by such Person or a subsidiary of such Person or the fair
market value of the assets subject to such disposition exceeds $1
million.
(G) "Debt" shall mean (without duplication), whether recourse is to
all or a portion of the assets of the Corporation or any of its
subsidiaries, and whether or not contingent, (i) every obligation of the
Corporation or any of its subsidiaries for money borrowed, (ii) every
obligation of the Corporation or any of its subsidiaries evidenced by
bonds, debentures, notes or other similar instruments, (iii) every
reimbursement obligation of the Corporation or any of its subsidiaries
with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of the
4
<PAGE> 6
Corporation or any of its subsidiaries, (iv) every obligation of the
Corporation or any of its subsidiaries issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of the Corporation or any
of its subsidiaries, (vi) Attributable Debt of the Corporation or any of
its subsidiaries, (vii) the maximum fixed redemption or repurchase price
of Redeemable Stock (other than Series A Preferred Stock) of the
Corporation or any of its subsidiaries at the time of determination,
(viii) every obligation of the Corporation or any of its subsidiaries
secured by a lien on any asset of the Corporation or any of its
subsidiaries (whether or not such obligation is assumed by the
Corporation or any of its subsidiaries); provided, however, that, unless
such Debt constitutes Debt of the referent Person pursuant to any other
clause of this definition, the amount of such Debt shall be the lesser
of (A) the fair market value of such asset and (B) the amount of such
Debt, and (ix) every obligation of the type referred to in clauses (i)
through (viii) of the Corporation or any of its subsidiaries and all
dividends of the Corporation or any of its subsidiaries the payment of
which, in either case, the Corporation has guaranteed or for which the
Corporation is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise and provided further that none of the
following shall constitute Debt: (i) guarantees by subsidiaries of Debt
under any bank credit facility incurred by the Corporation; (ii) Debt
owed by the Corporation to any wholly owned subsidiary of the
Corporation or owed by any wholly owned subsidiary of the Corporation to
the Corporation or any other wholly owned subsidiary of the Corporation
(but only so long as such Debt is held by the Corporation or such wholly
owned subsidiary); (iii) debt arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of business,
provided that such Debt is extinguished within two business days of its
incurrence; and (iv) renewals of guarantees permitted by clause (i)
above.
For purposes of determining any particular amount of Debt under
this covenant, guarantees of (or obligations with respect to letters of
credit supporting) Debt otherwise included in the determination of such
amount shall not also be included. For the purpose of determining
compliance with this covenant, (A) in the event that an item of Debt
meets the criteria of more than one of the types of Debt described in
the above clauses, the Corporation, in its sole discretion, shall
classify such item of Debt and only be required to include the amount
and type of such Debt in one of such clauses; and (B) the amount of Debt
issued at a price which is less than the principal amount thereof shall
be equal to the amount of the liability in respect thereof determined in
accordance with GAAP.
(H) "Attributable Debt" in respect of a sale and leaseback
transaction shall mean, at the time of determination the present value
(discounted at the interest rate implicit in the lease, compounded
semiannually) of the obligation of the lessee of the property subject to
such sale and leaseback transaction for rental payments during the
remaining term of the lease included in such transaction, including any
period for which such lease has been extended or may, at the option of
the lessor, be extended or until the earliest date on which the lessee
may terminate such lease without penalty or upon payment of penalty (in
which case the rental payments shall include such penalty), after
excluding all amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water, utilities and similar
charges.
(I) "Person" shall mean an individual, partnership, corporation,
trust, unincorporated organization or other business entity, and a
government or agency or political subdivision thereof.
(J) "Refinancing Debt" shall mean (i) any Debt of the Corporation
that renews, refunds or extends any outstanding Debt of the Corporation
or a subsidiary of the Corporation which Debt was incurred in compliance
with this Certificate of Designation, and (ii) any Debt of a subsidiary
of the Corporation that renews, refunds or extends any Debt of such
Subsidiary which Debt was incurred in compliance with this Certificate
of Designation in the case of both clauses (i) and (ii) in an amount not
to exceed the outstanding principal amount of the Debt so refinanced
plus the amount of any premium required to be paid in connection with
such refinancing pursuant to the terms of the debt
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<PAGE> 7
refinanced or the amount of any premium reasonably determined by the
Corporation as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated repurchase, plus the expenses of
the Corporation incurred in connection with such refinancing.
(c) Means of Voting. The rights of the holders of Series B Junior
Convertible Preferred Stock under this Section 4 may be exercised (i) at a
meeting of the holders of shares of such Series B Junior Convertible Preferred
Stock, called for the purpose by the Corporation; or (ii) by written consent
signed by the holders of the requisite percentage of the then outstanding shares
of the Series B Junior Convertible Preferred Stock, delivered to the Secretary
or Assistant Secretary of the Corporation. Except to the extent otherwise
provided herein or to the extent that holders of a majority of the Series B
Junior Convertible Preferred Stock decide otherwise, any meeting of the holders
of Series B Junior Convertible Preferred Stock shall be conducted in accordance
with the provisions of the By-Laws of the Corporation applicable to meetings of
stockholders. In the event of a conflict or inconsistency between the By-Laws of
the Corporation and any term of this Certificate of Designation, including, but
not limited to this Section 4, the terms of this Certificate of Designation
shall prevail.
5. CONVERSION
Subject to and upon the approval of this Section 5 by the holders of the
Common Stock, Shares of Series B Junior Convertible Preferred Stock may be
converted into shares of Common Stock, on the terms and conditions set forth in
this Section 5.
(a) Optional Conversion. Beginning on each of September 1, 1997, December
1, 1997, March 1, 1998, and June 1, 1998 (each such date, a "Conversion Date"),
each holder that was issued Series B Junior Convertible Preferred Stock on the
Initial Issuance Date or upon conversion of the Corporation's Common Stock
Equivalent Preferred Stock (or, in either case, such holder's permitted
transferees) shall have right, at any time and from time to time thereafter, to
convert up to 25% of that number of shares of Series B Junior Convertible
Preferred Stock so issued to such holder plus shares of Series B Junior
Convertible 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 of the shares converted divided by the Conversion Price on the
respective Conversion Date, subject to adjustment as provided in Section 5(h).
In the event the Corporation delivers a notice of redemption of Series B Junior
Convertible Preferred Stock pursuant to Section 6(c) below, a holder of the
Series B Junior Convertible Preferred Stock may elect, by written notice
delivered within 15 business days after receipt of the notice of redemption, to
convert any or all shares of Series B Junior Convertible Preferred Stock which
are subject to the notice of redemption and are convertible on the date notice
is deemed given under Section 5(h).
(b) Conversion Price. The Conversion Price of the shares of Series B
Junior Convertible Preferred Stock convertible on each Conversion Date shall be
the average of the Closing Prices of the Common Stock of the Corporation for the
10 Trading Days prior to each such Conversion Date. For purposes of this
Certificate of Designation:
(i) the term "Closing Price," on any Trading Day, shall mean the last
reported sale price, or in case no such sale takes place on such day, the
average of the closing bid and asked prices, for the Common Stock.
(ii) the term "Trading Day" shall mean (A) a day on which the Common
Stock is traded on the principal stock exchange on which the Common Stock
has been listed, or (B) if the Common Stock is not listed on any stock
exchange, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the Nasdaq National Market System, or (C) if the
Common Stock is not listed on any stock exchange or traded on the Nasdaq
National Market System, a day on which the Common Stock is traded in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices).
(c) Common Stock. The Common Stock to be issued upon conversion hereunder
shall be fully paid and nonassessable.
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<PAGE> 8
(d) Procedures for Conversion. (i) In order to convert shares of Series B
Junior Convertible Preferred Stock into shares of Common Stock, the holder shall
surrender the certificate or certificates therefore, duly endorsed for transfer,
at any time during normal business hours, to the Corporation at its principal or
at such other office or agency then maintained by it for such purpose (the
"Payment Office"), accompanied (or preceded as required by Section 5(a)) by
written notice to the Corporation of such holder's election to convert and (if
so required by the Corporation or any conversion agent) by an instrument of
transfer, in form reasonably satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or by his duly
authorized attorney, and any cash payment required pursuant to Section
5(d)(iii). As promptly as practicable after the surrender for conversion of any
share of the Series B Junior Convertible Preferred Stock in the manner provided
in the preceding sentence, and the payment in cash of any amount required by the
provisions of Section 5(d)(iii), but in any event within three Trading Days of
such surrender for payment, the Corporation will deliver or cause to be
delivered at the Payment Office to or upon the written order of the holder of
such shares, certificates representing the number of full shares of Common Stock
issuable upon such conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares in proper
order for conversion, and all rights of the holder of such share as a holder of
such shares shall cease at such time and the person or persons in whose name or
names the certificates for such shares of Common Stock are to be issued shall be
treated for all purposes as having become the record holder or holders thereof
at such time; provided, however, that any such surrender and payment on any date
when the stock transfer books of the Corporation shall be closed shall
constitute the person or persons in whose name or names the certificates for
such shares of Common Stock are to be issued as the record holder or holders
thereof for all purposes immediately prior to the close of business on the next
succeeding day on which such stock transfer books are opened.
(ii) The Corporation shall not be required to issue fractional shares
of Common Stock upon conversion of shares of Series B Junior Convertible
Preferred Stock. At the Corporation's discretion, in the event the
Corporation determines not to issue fractional shares, in lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the
Conversion Price.
(iii) The issuance of certificates for shares of Common Stock upon
conversion shall be made without charge for any issue, stamp or other
similar tax in respect of such issuance. However, if any such certificate
is to be issued in a name other than that of the holder of record of the
shares converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid or is not
payable.
(e) Reservation of Stock Issuable Upon Conversion. Subject to the approval
of the holders of Common Stock of an amendment to the Certificate of
Incorporation to increase the number of authorized shares of Common Stock of the
Corporation to not less than 60,000,000 shares, the Corporation shall reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the shares of the Series B
Junior Convertible Preferred Stock, 3,500,000 shares of Common Stock. If at any
time the number of authorized and unissued shares of Common Stock that are
reserved for issuance upon conversion of the shares of Series B Junior
Convertible Preferred Stock, shall not be sufficient to effect the conversion of
all then outstanding shares of the Series B Junior Convertible Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, taking appropriate board action, recommending
such an increase to the holders of Common Stock, holding shareholders meetings,
soliciting votes and proxies in favor of such increase to obtain the requisite
stockholder approval and upon such approval, the Corporation shall reserve and
keep available such additional shares solely for the purpose of effecting the
conversion of the shares of the Series B Junior Convertible Preferred Stock.
(f) Notices. Any notice required by the provisions of this Certificate of
Designation to be given to the holders of shares of Series B Junior Convertible
Preferred Stock shall be deemed given five days after such
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notice is deposited in the United States mail, postage prepaid, and addressed to
each holder of record at its address appearing on the books of the Corporation,
or the next business day after such notice is delivered to a recognized
overnight courier service with next-business day delivery specified.
(g) Reorganization, Merger or Sale of the Corporation.
(i) Notwithstanding any other provision hereof, in case of (A) any
reorganization or any reclassification of the capital stock of the
Corporation or (B) any merger of the Corporation, that in any such case
results in the Common Stock being converted into other securities or
property, or the right to receive other securities or property, then
provision shall be made so that, upon consummation of such reorganization,
reclassification or merger, each share of Series B Junior Convertible
Preferred Stock which was convertible into Common Stock on the Trading Day
immediately prior to the initial announcement of the transaction or of a
proposed transaction that ultimately resulted in the transaction, shall
thereafter be convertible into the number of shares of stock or other
securities or property (including cash) to which a holder of the number of
shares of Common Stock deliverable upon conversion of such share of Series
B Junior Convertible Preferred Stock would have been entitled assuming
conversion on such Trading Day. In any case, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application of
the provisions herein set forth with respect to the rights and interests
thereafter of the holders of the Series B Junior Convertible Preferred
Stock, to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to any
shares of stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of Series B Junior
Convertible Preferred Stock.
(ii) In case of any merger, consolidation, reclassification or other
similar reorganization, to the extent the Corporation is not the surviving
entity, and the Corporation or the holders do not otherwise redeem or
convert all outstanding shares of Series B Junior Convertible Preferred
Stock, the Series B Junior Convertible Preferred Stock shall be converted
into or exchanged for and shall become shares of the surviving corporation
having, in respect of the surviving corporation, substantially the same
powers, preferences and relative participating, optional or other special
rights, and the qualifications, limitations or restrictions thereon, that
the Series B Junior Convertible Preferred Stock had immediately prior to
such transaction.
(h) Adjustments. The number of shares of Common Stock issuable upon
conversion of shares of the Series B Junior Convertible Preferred Stock that are
then outstanding and that prior to the relevant date have become convertible
into Common Stock pursuant to Section 5(a) ("Then-Convertible Shares") shall be
subject to adjustment from time to time as follows:
(i) Stock Dividends; Stock Splits; Reverse Stock Splits. In case the
Corporation shall (A) declare or pay a dividend on its outstanding Common
Stock in shares of Common Stock or make a distribution to all holders of
its outstanding Common Stock in shares of Common Stock, (B) subdivide or
reclassify its outstanding Common Stock, or (C) combine its outstanding
Common Stock into a smaller number of shares, the number of shares of
Common Stock issuable upon conversion of each Then-Convertible Share that
was convertible immediately prior to the record date for such dividend or
combination or the effective date of such subdivision or reclassification
shall be adjusted so that the holder of each such share shall thereafter be
entitled to receive the kind and number of shares of Common Stock that such
holder would have owned or have been entitled to receive after the
happening of any of the events described above, had such share been
converted in full immediately prior to the happening of such event or any
record date with respect thereto (with any record date requirement being
deemed to have been satisfied), and, in any such case, the number of shares
of Common Stock issuable upon conversion of each such share shall be
subject to further adjustments under this Section 5(h). An adjustment made
pursuant to this Section 5(h)(i) shall become effective at the record date,
if any, for such event.
(ii) Distributions to Stockholders. In case the Corporation shall
issue to holders of its Common Stock rights, options, warrants or
convertible or exchangeable securities (collectively, the "rights")
entitling them to subscribe for or purchase Common Stock at a price per
share of Common Stock (determined by dividing (A) the total amount
receivable by the Corporation in consideration of the
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<PAGE> 10
issuance of such rights plus the total consideration payable to the
Corporation upon exercise, conversion or exchange thereof, by (B) the total
number of shares of Common Stock covered by such rights) that is lower than
the Current Market Price per share of Common Stock in effect immediately
prior to such issuance, then the number of shares of Common Stock issuable
upon conversion of all Then-Convertible Shares shall be increased in a
manner determined by multiplying the number of shares of Common Stock
theretofore issuable upon the conversion of all Then-Convertible Shares by
a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such rights
plus the number of shares of Common Stock which the aggregate consideration
to be received by the Corporation in connection with such issuance (as
defined in the following sentence) would purchase at the then Current
Market Price per share of Common Stock. For purposes of this Section 5(h),
the "Current Market Price" per share of Common Stock for any date shall
mean average of the Closing Prices of the Common Stock for the 10 Trading
Days prior to such date. For purposes of this Section 5(h)(ii), the
"aggregate consideration to be received by the Corporation" in connection
with any issuance of such rights shall be deemed to be the consideration
received by the Corporation for such rights plus any consideration or
premiums stated in such rights to be paid for the shares of Common Stock
covered thereby. Any increase of the number of shares of Common Stock
issuable upon exercise of all Then-Convertible Shares made pursuant to this
Section 5.02(b) shall be allocated among such Then-Convertible Shares on a
pro rata basis.
(iii) Issuance of Common Stock at Lower Values. In case the
Corporation shall, in a transaction to which Section 5(h)(i) is
inapplicable (and, in any event, other than upon conversion of Series A
Preferred Stock, Series B Junior Convertible Preferred Stock or the
Corporation's Common Stock Equivalent Convertible Preferred Stock, or upon
exercise of any warrants or employee stock options that were outstanding on
the Initial Issuance Date or pursuant to contractual commitments to which
the Corporation was bound on the Initial Issuance Date), issue or sell
shares of Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock, at a price per share of Common Stock (determined,
in the case of rights, options, warrants or convertible or exchangeable
securities, by dividing (A) the total amount receivable by the Corporation
in consideration of the issuance and sale of such rights, options, warrants
or convertible or exchangeable securities, plus the total consideration
payable to the Corporation upon exercise, conversion or exchange thereof,
by (B) the total number of shares of Common Stock covered by such rights,
options, warrants or convertible or exchangeable securities) that is lower
(at the date of such sale or issuance) than the Current Market Price per
share of Common Stock in effect immediately prior to such sale or issuance
or for no consideration, then in each case the number of shares of Common
Stock thereafter issuable upon the conversion of the Then-Convertible
Shares shall be increased in a manner determined by multiplying the number
of shares of Common Stock theretofore issuable upon the conversion of all
Then-Convertible Shares by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately prior to the sale
or issuance, plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon conversion or exchange of
such convertible or exchangeable securities, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately prior
to the sale or issuance plus the number of shares of Common Stock which the
aggregate consideration to be received by the Corporation (as defined in
the following paragraph) in connection with such sale or issuance would
purchase at the then Current Market Price per share of Common Stock.
For the purpose of such adjustments the "aggregate consideration to be
received by the Corporation" therefor shall be deemed to be the
consideration received by the Corporation for such rights, options,
warrants or convertible or exchangeable securities plus any consideration
or premiums stated in such rights, options, warrants or convertible or
exchangeable securities to be paid for the shares of Common Stock covered
thereby.
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In case the Corporation shall issue or sell shares of Common Stock or
rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
for a consideration consisting, in whole or in part, of property other than
cash or its equivalent, then in determining the "price per share of Common
Stock" and the "consideration" receivable by or payable to the Corporation
for purposes of Sections 5(h)(ii) and 5(h)(iii), the Board of Directors of
the Corporation shall determine, in good faith, the fair value of such
property. In case the Corporation shall issue and sell rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock, together with one or more
other securities as part of a unit at a price per unit, then in determining
the "price per share of Common Stock" and the "consideration" receivable by
or payable to the Corporation for purposes of Sections 5(h)(ii) and
5(h)(iii), the Board of Directors of the Corporation shall determine, in
good faith, the fair value of the rights, options, warrants or convertible
or exchangeable securities then being sold as part of such unit.
Any increase of the number of shares of Common Stock issuable upon
conversion of Then-Convertible Shares made pursuant to this Section
5(h)(iii) shall be allocated among such Then-Convertible Shares on a pro
rata basis.
(iv) Expiration of Rights, Options and Conversion Privileges. Upon the
expiration of any rights, options, warrants or conversion or exchange
rights that have previously resulted in an adjustment under this Section
5(h), if any thereof shall not have been exercised, the number of shares of
Common Stock issuable upon conversion of Then-Convertible Shares shall be
readjusted and shall thereafter, upon any future exercise, be such as they
would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares
of Common Stock so issued were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (ii) such shares of Common Stock, if any,
were issued or sold for the consideration actually received by the
Corporation upon such exercise plus the consideration, if any, actually
received by the Corporation for issuance, sale or grant of all such rights,
options, warrants or conversion or exchange rights whether or not
exercised; provided that no such readjustment shall have the effect of
decreasing the number of shares issuable upon conversion of
Then-Convertible Shares by a number that is in excess of the amount or
number of the adjustment initially made in respect of the issuance, sale or
grant of such rights, options, warrants or conversion or exchange rights or
shall have the effect of decreasing the number of shares of Common Stock
that have been issued upon conversion of any shares of Series B Junior
Convertible Stock prior to the date of such readjustment.
(v) De minimis Adjustments. No adjustment in the number of shares of
Common Stock issuable under any Then-Convertible Shares shall be required
unless such adjustment would require an increase or decrease of at least
one percent (1%) in the number of shares of Common Stock purchasable upon a
conversion of Then-Convertible Shares; provided, that any adjustments which
by reason of this Section 5(h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest one-thousandth of a share.
(vi) Notice of Adjustment. Whenever the number of shares of Common
Stock or other stock or property issuable upon the conversion of
Then-Convertible Shares is adjusted, as herein provided, the Corporation
shall deliver to the holders thereof a certificate of a firm of independent
public accountants selected by the Board of Directors of the Corporation
(who may be the regular accountants employed by the Corporation) setting
forth the number of shares of Common Stock or other stock or property
issuable upon the conversion of each Then-Convertible Share after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made and shall promptly mail by first class mail, postage prepaid, to each
holder notice of such adjustment or adjustments.
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6. OPTIONAL REDEMPTION
(a) Redemption Price. The Corporation, at its sole option, may redeem
shares of the Series B Junior Convertible Preferred Stock, in whole or part, for
cash, at any time or from time to time, for a redemption price per share equal
to the sum of the Stated Value and any accrued and unpaid dividends on such
shares.
(b) Selection of Shares to be Redeemed. If fewer than all of the
outstanding shares of the Series B Junior Convertible Preferred Stock are to be
called for redemption, such redemption of Series B Junior Convertible Preferred
Stock will apply to shares of Series B Junior Convertible Preferred Stock in the
order they became or will become convertible pursuant to Section 5(a), i.e., if
the Corporation redeems 50% of the outstanding shares of Series B Junior
Convertible Preferred Stock, then the remaining shares of Series B Junior
Convertible Preferred Stock would not become convertible until the third and
fourth Conversion Dates (March 1, 1998 and June 1, 1998). If following a notice
of redemption pursuant to Section 6(c), holders exercise their right to convert
shares of Series B Junior Convertible Preferred Stock pursuant to Section 5(a),
then the Corporation may elect to redeem only those shares to be called for
redemption that have not been converted or may elect to redeem the full number
of shares called for redemption, subject to the order of redemption set forth in
the preceding sentence. Subject to the foregoing, the number of shares of Series
B Junior Convertible Preferred Stock called for redemption shall be redeemed
ratably from each holder of Series B Junior Convertible Preferred Stock
proportionate to the amount of Series B Junior Convertible Preferred Stock held
by each holder after giving effect to any conversion pursuant to Section 5(a).
(c) Notice of Redemptions. Notice of redemptions shall be given by first
class mail, postage prepaid, mailed not less than 20 nor more than 60 business
days prior to the redemption date or, if such notice period is not feasible in
connection with a transaction described in Section 5(g), such notice period as
is practicable in the circumstances, to each holder of record of the shares to
be redeemed, at such holder's address as the same appears on the books of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares of the Series B Junior Convertible Preferred Stock to be
redeemed and, if fewer than all of the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
place or places where certificates for such shares are to be surrendered for
payment of the redemption price; (iv) that dividends on the shares to be
redeemed will cease to accrue on the redemption date; and (v) if applicable,
that the right to convert Series B Junior Convertible Preferred Stock pursuant
to Section 5 will expire unless exercised within 15 business days after receipt
of the notice of redemption.
(d) Cessation of Dividends on Shares Redeemed. Notice having been mailed
as stated in subsection (c) above, from and after the close of business on the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the redemption price of the shares called for
redemption), dividends on the shares of the Series B Junior Convertible
Preferred Stock redeemed shall cease to accrue, and said shares shall no longer
be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid. If fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the holder thereof.
(e) Status of Redeemed or Converted Shares. Upon redemption or conversion,
any shares of the Series B Junior Convertible Preferred Stock which have been so
redeemed or converted shall be retired and thereafter have the status of
authorized but unissued shares of preferred stock, without designation as to
series until such shares are once more designated as part of a particular series
by the Board of Directors or a duly authorized committee thereof.
7. MANDATORY REDEMPTION.
On , 2009 (the "Final Redemption Date")(1), the Corporation shall
redeem from any source of funds legally available therefor, in the manner
provided in Section 6(c) above, all of the shares of the Series B Junior
Convertible Preferred Stock then outstanding at a redemption price equal to the
Stated Value per
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share, plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share to the Final Redemption Date.
8. PREEMPTIVE RIGHTS.
No shares of Series B Junior Convertible Preferred Stock shall have any
rights of preemption whatsoever as to any securities of the Corporation, or any
warrants, rights or options issued or granted with respect thereto, regardless
of how such securities or such warrants, rights or options may be designated,
issued or granted.
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(1) [Twelfth anniversary of the Initial Issuance Date]
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<PAGE> 1
Exhibit 4.2
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF
COMMON STOCK EQUIVALENT CONVERTIBLE PREFERRED STOCK
OF
METROCALL, INC.
Metrocall, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors, at a meeting
duly held on January 17, 1997, adopted the following resolution:
WHEREAS, the Board of Directors of the Corporation is
authorized by the Amended and Restated Certificate of Incorporation to issue up
to 1,000,000 shares of preferred stock in one or more classes or series and, in
connection with the creation of any class or series, to fix by the resolutions
providing for the issuance of shares the powers, designations, preferences and
relative, participating, optional or other rights of the class or series and the
qualifications, limitations or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to such authority, to authorize and fix the terms and
provisions of a series of preferred stock and the number of shares constituting
the series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized a series of preferred stock on the terms and with the provisions
herein set forth on Annex B attached to this resolution.
-------------------------------------
Shirley B. White
Assistant Secretary
ATTEST:
- --------------------------
Vincent D. Kelly
Chief Financial Officer
<PAGE> 2
ANNEX B
COMMON STOCK EQUIVALENT CONVERTIBLE PREFERRED STOCK
The powers, designations, preferences and relative,
participating, optional or other rights of the Common Stock Equivalent
Convertible Preferred Stock of Metrocall, Inc. (the "Corporation") are as
follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Common
Stock Equivalent Convertible Preferred Stock." The number of authorized shares
constituting this series shall be 4,000 shares. The Common Stock Equivalent
Convertible Preferred Stock will be issued in fractional shares equal to .001
share of preferred stock (each such fractional share, a "CSE").
2. DIVIDENDS.
Holders of the CSEs shall be entitled to receive, when and as
declared by the Board of Directors of the Corporation (the "Board of
Directors"), a dividend per CSE equal to any dividend declared and paid with
respect to a share of Common Stock of the Corporation, $.01 par value ("Common
Stock"). No dividends shall be declared or paid or set apart for payment on any
Common Stock unless dividends required by the previous sentence have been or
contemporaneously are declared and paid with respect to the CSEs.
3. LIQUIDATION PREFERENCE.
In the event of any bankruptcy, liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the CSEs will be entitled to share equally with the holders of Common Stock in
the assets and funds of the Corporation available for distibution after payments
in respect of any classes of capital stock of the Corporation entitled to
payment upon liquidation in preference to the Common Stock. Any assets or funds
available for distribution pursuant to the foregoing sentence shall be
distributed ratably in proportion to the number of CSEs or shares of Common
Stock owned by any holder of CSEs and/or Common Stock.
4. VOTING RIGHTS.
The CSEs will have no voting rights, except for the following
or as otherwise provided by law:
(a) Each CSE shall have one vote on all matters submitted to a
vote of the holders of Common Stock of the Corporation, and the CSEs and the
shares of Common Stock (and any other
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<PAGE> 3
shares of capital stock of the Corporation at the time entitled thereto) shall
vote together as one class on all matters submitted to a vote of the
stockholders of the Corporation.
(b) So long as the CSEs are outstanding, the Corporation shall
not, without first obtaining the affirmative vote or written consent of the
holders of a majority of the then-outstanding CSEs, voting as a single class,
amend, repeal, modify or supplement this Certificate of Designation, Number,
Powers, Preferences and Relative, Participating, Optional and Other Rights of
Common Stock Equivalent Convertible Preferred Stock ("Certificate of
Designation").
5. CONVERSION
(a) Automatic Conversion. (i) Subject to and upon the approval
by the stockholders of the Corporation of an amendment to the Corporation's
Amended and Restated Certificate of Incorporation increasing the number of
authorized shares of Common Stock such that, after reservation of shares for
conversion under any other series of Preferred Stock of the Corporation in
accordance with the terms thereof and for issuance pursuant to exercise of
outstanding stock options or pursuant to other contractual obligations, there
will be authorized and unissued a number of shares equal to at least the number
of CSEs outstanding ("Stockholder Approval"), each issued and outstanding CSE
will be automatically and without any further action by the holders thereof or
the Corporation, converted into one (1) share of Common Stock. Upon such
conversion, each outstanding certificate representing CSEs will be deemed to
represent the equivalent number of shares of Common Stock, subject to the right
of holders of CSEs to receive certificates representing shares of Common Stock
pursuant to Section 5(c).
(ii) In the event that the Stockholder Approval is
not obtained on or prior to June 1, 1997, each issued and outstanding CSE on
that date will be automatically and without any further action by the holders
thereof converted into that number of shares (or fractions of shares) of the
Corporation's Series B Junior Convertible Preferred Stock ("Series B Preferred
Shares") equal to the Share Value of such CSE (as defined below) of the CSE
divided by $10,000. Upon such conversion, each outstanding certificate
representing CSEs will be deemed to represent the number of Series B Preferred
Shares into which such CSE has been converted, subject to the right of holders
of CSEs to receive certificates representing Series B Preferred Shares pursuant
to Section 5(c).
(iii) For purposes of this Certificate of Designation:
(A) the term "Share Value" shall mean the
average of the Closing Prices of the Common Stock for the 10 Trading
Days prior to the date of initial issuance of CSEs.
(B) the term "Closing Price," on any Trading
Day, shall mean the last reported sale price, or in case no such sale
takes place on such day, the average of the closing bid and asked
prices, for the Common Stock.
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(C) the term "Trading Day" shall mean (1) a day
on which the Common Stock is traded on the principal stock exchange on
which the Common Stock has been listed, or (2) if the Common Stock is
not listed on any stock exchange, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the Nasdaq
National Market System, or (3) if the Common Stock is not listed on
any stock exchange or traded on the Nasdaq National Market System, a
day on which the Common Stock is traded in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of
reporting prices).
(b) Common Stock and Series B Preferred Shares. The Common
Stock and Series B Preferred Shares, as applicable, to be issued upon conversion
hereunder shall be fully paid and nonassessable.
(c) Procedures for Conversion. (i) In order to receive
certificates representing shares of Common Stock or Series B Preferred Shares,
as applicable, the holder thereof shall surrender the certificate or
certificates representing CSEs, duly endorsed for transfer, at any time during
normal business hours, to the Corporation at its principal or at such other
office or agency then maintained by it for such purpose (the "Payment Office"),
accompanied (if so required by the Corporation or any conversion agent) by an
instrument of transfer, in form reasonably satisfactory to the Corporation and
to any conversion agent, duly executed by the registered holder or by his duly
authorized attorney, and any cash payment required pursuant to Section 5(c)(ii).
As promptly as practicable after the surrender for conversion of any CSE in the
manner provided in the preceding sentence, and the payment in cash of any amount
required by the provisions of Section 5(c)(ii), the Corporation will deliver or
cause to be delivered at the Payment Office to or upon the written order of the
holder of such shares, certificates representing the number of shares of Common
Stock or Series B Preferred Shares, as applicable, issuable upon such
conversion, issued in such name or names as such holder may direct.
(ii) The issuance of certificates for shares of Common
Stock or Series B Preferred Shares, as applicable, upon conversion shall be made
without charge for any issue, stamp or other similar tax in respect of such
issuance. However, if any such certificate is to be issued in a name other than
that of the holder of record of the shares converted, the person or persons
requesting the issuance thereof shall pay to the Corporation the amount of any
tax which may be payable in respect of any transfer involved in such issuance or
shall establish to the satisfaction of the Corporation that such tax has been
paid or is not payable.
(d) Notices. Any notice required by the provisions of this
Certificate of Designation to be given to the holders of shares of CSEs shall be
deemed given five days after such notice is deposited in the United States mail,
postage prepaid, and addressed to each holder of record at its address appearing
on the books of the Corporation, or the next business day after such notice is
delivered to a recognized overnight courier service with next-business day
delivery specified.
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(e) Reorganization, Merger or Sale of the Corporation.
Notwithstanding any other provision hereof, so long as the CSEs are outstanding,
in case of (A) any reorganization or any reclassification of the capital stock
of the Corporation or (B) any merger of the Company, that in any such case
results in the Common Stock being converted into other securities or property,
or the right to receive other securities or property, then provision shall be
made so that, upon consummation of such reorganization, reclassification or
merger, each CSE shall thereafter be convertible into the number of shares of
stock or other securities or property (including cash) to which a holder of a
share of Common Stock would have been entitled assuming conversion on the record
date for such transaction.
(f) Adjustments.
(i) Stock Dividends; Stock Splits; Reverse Stock
Splits. If, while the CSEs are outstanding, the Corporation (i)
subdivides (by stock split, stock dividend or otherwise) its
outstanding shares of Common Stock into a greater number of shares or
(ii) combines (by reverse stock split, reclassification or otherwise)
its outstanding shares of Common Stock into a smaller number of shares,
each CSE shall automatically and without further action by the
Corporation or any Holder be similarly subdivided or combined, and the
Share Value shall be correspondingly adjusted. Each outstanding
certificate representing CSEs shall thenceforth be deemed to represent
that number of CSEs necessary to reflect such subdivision or
combination.
(ii) Distributions to Stockholders. In case, while
the CSEs are outstanding, the Corporation shall issue to holders of its
Common Stock rights, options, warrants or convertible or exchangeable
securities (collectively, the "rights") entitling them to subscribe for
or purchase Common Stock, then each CSE shall receive the same rights
as each share of Common Stock. No distribution of rights shall be made
unless the distributions required by the previous sentence have been or
contemporaneously are distributed with respect to the CSEs.
(iii) Notice of Adjustment. Whenever an adjustment is
made, as herein provided, the Corporation shall deliver to the holders
a certificate of a firm of independent public accountants selected by
the Board of Directors of the Corporation (who may be the regular
accountants employed by the Corporation) setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made and shall promptly mail
by first class mail, postage prepaid, to each holder notice of such
adjustment or adjustments.
(g) Status of Converted Shares. Upon conversion, all
shares of Common Stock Equivalent Convertible Preferred Stock shall be retired
and thereafter have the status of authorized but unissued shares of preferred
stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors or a duly
authorized committee thereof.
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<PAGE> 6
6. REDEMPTION
The CSEs shall not be redeemable.
7. PREEMPTIVE RIGHTS.
No shares of Common Stock Equivalent Convertible Preferred Stock shall
have any rights of preemption whatsoever as to any securities of the
Corporation, or any warrants, rights or options issued or granted with respect
thereto, regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
- 5 -
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 13, 1997
included in Metrocall, Inc.'s Form 10-K for the year ended December 31, 1996
and to all references to our Firm included in or made a part of this
registration statement filed on Form S-4.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
April 11, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated March 12, 1997 with respect to the
financial statements of Page America Group, Inc. included in the Proxy Statement
of Page America Group, Inc. that is made a part of the Amendment No. 1 to the
Registration Statement (Form S-4 No. 333-21231) and Prospectus of Metrocall,
Inc. for the registration of shares of common stock, common stock equivalent
convertible preferred stock, and Series B junior convertible preferred stock
of Metrocall, Inc.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Hackensack, New Jersey
April 11, 1997
