<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 1997.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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.
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 (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) 830,333 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 the same
may be 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) 830,333 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
SHARES OF METROCALL COMMON STOCK, $.01 PAR VALUE PER SHARE
SHARES OF METROCALL COMMON STOCK EQUIVALENT CONVERTIBLE PREFERRED STOCK
AND 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 the same may be 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) 830,333 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 38.2% 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 January 31, 1997, the last reported sale price of a share of
Metrocall Common Stock on the NNM was $5 7/8.
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 13 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 Annual Report on Form 10-K for the year ended December
31, 1995;
2. Metrocall's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
3. Metrocall's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996;
4. Metrocall's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996;
5. Metrocall's Proxy Statement for the Annual Meeting of Shareholders
held on May 1, 1996;
6. Metrocall's Current Report on Form 8-K filed on May 20, 1996;
7. Metrocall's Current Report on Form 8-K filed on July 31, 1996;
8. Metrocall's Current Report on Form 8-K filed on August 13, 1996;
9. Metrocall's Current Report on Form 8-K filed on September 13, 1996
and amended on October 1, 1996;
10. Metrocall's Current Report on Form 8-K filed on November 7, 1996;
11. Metrocall's Current Report on Form 8-K filed on November 15, 1996;
12. Metrocall's Current Report on Form 8-K filed on November 21, 1996;
13. Metrocall's Current Report on Form 8-K filed on January 9, 1997;
and
14. Metrocall's Current Report on Form 8-K filed on January 27, 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.
--------
<S> <C>
Summary............................................................................ 1
The Parties...................................................................... 1
Page America.................................................................. 1
Metrocall..................................................................... 1
The Special Meeting.............................................................. 1
Risk Factors..................................................................... 2
The Acquisition Agreement........................................................ 2
The Acquisition.................................................................. 3
Page America's Plan of Liquidation............................................... 4
Conditions to the Acquisition.................................................... 4
Closing Date..................................................................... 4
Recommendations of the Page America Board of Directors........................... 4
Listing.......................................................................... 5
Escrow of Cash Consideration..................................................... 5
Registration Rights Agreement.................................................... 5
Opinion of Page America's Financial Advisor...................................... 5
Regulatory Approvals............................................................. 5
Dissenters' Rights............................................................... 5
Accounting Treatment............................................................. 6
Certain Federal Income Tax Consequences.......................................... 6
Market Price and Dividends....................................................... 6
Summary Historical Consolidated Financial Data................................... 8
Summary Unaudited Pro Forma Condensed Combined Financial Data.................... 10
Comparative Unaudited Per Share Data............................................. 12
Risk Factors....................................................................... 13
No Assurance of Distribution to Page America's Shareholders...................... 13
Substantial Indebtedness of Metrocall............................................ 13
Challenges of Business Integration............................................... 13
Possible Impact of Competition and Technological Change.......................... 14
History of Net Losses............................................................ 15
Subscriber Turnover.............................................................. 15
Potential for Change in Regulatory Environment................................... 15
Reliance on Key Personnel........................................................ 15
Conversion and Redemption of Series B Preferred Stock and Common Stock
Equivalents................................................................... 15
No Trading Market for Common Stock Equivalents and Series B Preferred Stock;
Restrictions on Transfer...................................................... 16
Other Rights of the Series B Preferred Stock..................................... 16
No Anticipated Stockholder Distributions......................................... 16
Possible Volatility of Stock Price; Shares Eligible for Future Sale.............. 16
Concentration of Ownership....................................................... 17
Anti-Takeover and Other Provisions............................................... 17
Potential Conflicts of Interest.................................................. 18
Forward-Looking Statements....................................................... 18
The Special Meeting................................................................ 19
General.......................................................................... 19
Purpose of the Special Meeting................................................... 19
</TABLE>
iii
<PAGE> 9
<TABLE>
<CAPTION>
PAGE NO.
----
<S> <C>
Record Date; Vote Required....................................................... 19
Voting and Revocation of Proxies................................................. 19
Solicitation of Proxies.......................................................... 20
The Acquisition.................................................................... 21
General.......................................................................... 21
Background of the Acquisition.................................................... 21
Reasons of the Page America Board of Directors; Factors Considered............... 23
Opinion of Page America's Financial Advisor...................................... 24
Accounting Treatment............................................................. 26
Regulatory Approvals............................................................. 26
Antitrust..................................................................... 26
FCC........................................................................... 27
The Acquisition Agreement........................................................ 27
Representations and Warranties................................................ 27
Possible Adjustments in the Stock Consideration............................... 27
Certain Covenants............................................................. 28
Consideration of Other Proposals.............................................. 28
Other Conditions to the Acquisition........................................... 29
Indemnification............................................................... 29
Amendment, Waiver and Termination............................................. 29
Listing.......................................................................... 30
Conflicts of Interest............................................................ 30
Interest of Management in the Acquisition........................................ 30
Escrow of Consideration.......................................................... 31
Registration Rights Agreements................................................... 31
Stockholders Agreement........................................................... 31
Consequences under Federal Securities Laws....................................... 32
Plan of Liquidation................................................................ 33
General.......................................................................... 33
Assets and Liabilities of Page America after the Acquisition..................... 33
Liabilities................................................................... 33
Assets........................................................................ 34
Implementation of the Plan of Liquidation........................................ 34
Certain Federal Income Tax Consequences.......................................... 36
Federal Income Tax Treatment of Holders of Series One Preferred Stock......... 36
Federal Income Tax Treatment of Holders of Page America Common Stock.......... 36
Dissenters' Rights of Page America Shareholders.................................... 37
Description of Metrocall Capital Stock............................................. 40
Common Stock..................................................................... 40
Series A Preferred Stock......................................................... 41
Series B Preferred Stock......................................................... 43
Common Stock Equivalents......................................................... 43
Warrants......................................................................... 44
Indexed Variable Common Rights ("VCRs").......................................... 44
Comparison of Shareholder Rights................................................... 44
Business of Page America........................................................... 50
General.......................................................................... 50
Sale of California and Florida Operations........................................ 50
</TABLE>
iv
<PAGE> 10
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Restructuring of Debt............................................................ 50
Background of the Paging Industry................................................ 51
Business Strategy................................................................ 51
Paging Services.................................................................. 52
Technical Facilities............................................................. 54
Marketing........................................................................ 54
Regulation....................................................................... 55
Competition...................................................................... 57
Employees........................................................................ 57
Properties....................................................................... 57
Legal Proceedings................................................................ 58
Selected Consolidated Historical Financial and Statistical Data of Page
America....................................................................... 59
Management's Discussion and Analysis of Financial Condition and Results of
Operations
of Page America............................................................... 60
Results of Operations......................................................... 60
Nine Months Ended September 30, 1996 Compared with Nine Months Ended September
30, 1995..................................................................... 60
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994....... 61
Year Ended December 31, 1994 Compared with Year Ended December 31, 1993....... 62
Liquidity and Capital Resources............................................... 63
Inflation and Changing Prices................................................. 64
Directors and Executive Officers of Page America................................. 64
Executive Compensation........................................................... 65
Agreements....................................................................... 65
Stock Option Grants and Exercises................................................ 66
Security Ownership of Certain Beneficial Owners and Management................... 67
Certain Relationships and Related Transactions................................... 68
Management of Metrocall............................................................ 69
Pro Forma Combined Financial Data.................................................. 72
Notes to Unaudited Pro Forma Condensed Combined Financial Statements............... 76
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 September 30, 1996, Page America provided paging services to approximately
216,000 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
September 30, 1996, approximately 74 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 1,405,933 pagers in service at September 30, 1996, 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 six
operating regions: (i) the Northeast (Massachusetts through Delaware); (ii) the
Mid-Atlantic (Maryland and the Washington, D.C. metropolitan area); (iii) the
Southeast (Virginia and Florida); (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, and would constitute the fifth
largest paging company in the United States. 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.
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
1
<PAGE> 12
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 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
2
<PAGE> 13
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) 830,333 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"). 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
shareholders of 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"). 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 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 38.2% 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
3
<PAGE> 14
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
specified amounts.
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,
all of Page America's liabilities, Page America shall transfer all of its
remaining assets, including the transfer in kind of any shares of Metrocall
Common Stock then owned by Page America, to its shareholders in accordance with
their respective rights and interests (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)
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 must
seek the agreement of its bank lenders, holders of subordinated notes and other
creditors in order to discharge its liabilities. In addition, the Acquisition
will require the consent of Page America's bank lenders to the Acquisition and
to the release of their liens on Page America's assets. There can be no
assurance that any such consents or agreements will be received. 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 agreements reached with Page America's creditors
and holders of Series One Preferred Stock and 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."
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
4
<PAGE> 15
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."
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."
ESCROW OF CONSIDERATION
Metrocall Common Stock or Common Stock Equivalents issued to Page America
having a share value of $4 million will be held in escrow 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."
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."
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 moved for 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
5
<PAGE> 16
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 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 8/16
Third Quarter............................................ 11 6 1/4 NA NA
Fourth Quarter........................................... 7 1/8 3 13/16 NA NA
1997
First Quarter (through January 31, 1997)................. $ 7 1/2 $ 5 1/8 NA NA
</TABLE>
6
<PAGE> 17
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 January 31, 1997 was $5 7/8. Because the market
price of Metrocall Common Stock is subject to fluctuation, the market value of
that portion of the stock consideration consisting of 830,333 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.
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.
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.
7
<PAGE> 18
METROCALL, INC.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT UNIT, PER UNIT AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------- ----------------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA(1):
Service, rent and maintenance
revenues........................... $29,140 $30,996 $33,111 $ 49,716 $ 92,160 $ 68,867 $ 79,453
Product sales........................ 4,101 4,196 4,549 8,139 18,699 12,547 19,155
------- ------- ------- ------- -------- ------- -------
Total revenues............... 33,241 35,192 37,660 57,855 110,859 81,414 98,608
Net book value of products sold...... (3,319) (3,439) (4,130) (6,962) (15,527) (10,593) (15,546)
------- ------- ------- ------- -------- ------- -------
Net revenues................. 29,922 31,753 33,530 50,893 95,332 70,821 83,062
Operating expenses before
depreciation and amortization(2)... 19,770 20,683 27,438 34,741 69,611 49,103 62,658
Depreciation and amortization........ 6,695 6,594 6,525 13,829 31,504 21,062 40,385
------- ------- ------- ------- -------- ------- -------
Income (loss) from operations........ 3,457 4,476 (433) 2,323 (5,783) 656 (19,981)
Interest and other income
(expense).......................... 2,105 1,212 77 161 2,011 16 2,760
Interest expense..................... (4,101) (2,631) (1,331) (3,726) (12,533) (8,240) (13,596)
Minority interest in loss of
investments........................ -- -- -- -- -- -- (2,422)
------- ------- ------- ------- -------- ------- -------
Income (loss) before income tax
benefit (provision) and
extraordinary item................. 1,461 3,057 (1,687) (1,242) (16,305) (7,568) (33,239)
Income tax benefit (provision)....... (12) (69) (59) 152 595 469 279
------- ------- ------- ------- -------- ------- -------
Income (loss) before extraordinary
item............................... 1,449 2,988 (1,746) (1,090) (15,710) (7,099) (32,960)
Extraordinary item(3)................ -- -- (439) (1,309) (4,392) -- --
------- ------- ------- ------- -------- ------- -------
Net income (loss)............ $ 1,449 $ 2,988 $(2,185) $ (2,399) $(20,102) $ (7,099) $ (32,960)
======= ======= ======= ======= ======== ======= =======
Net income (loss) per common share:
Loss per common share before
extraordinary item............... $ (0.14) $ (1.34) $ (0.67) $ (2.23)
Extraordinary item, net of income
tax benefit...................... (0.16) (0.38) -- --
------- -------- ------- -------
Net loss per common share.......... $ (0.30) $ (1.72) $ (0.67) $ (2.23)
======= ======== ======= =======
OPERATING AND OTHER DATA:
Units in service (end of period)..... 193,051 201,397 247,716 755,546 944,013 881,270 1,405,933
EBITDA(4)............................ $10,152 $11,070 $10,923 $ 16,152 $ 27,771 $ 21,718 $ 20,404
EBITDA margin(5)..................... 33.9% 34.9% 32.6% 31.7% 29.1% 30.7% 24.6%
ARPU(6).............................. $ 13.07 $ 13.10 $ 12.29 $ 10.53 $ 9.15 $ 9.39 $ 7.86
Average monthly operating expense per
unit(7)............................ $ 8.87 $ 8.74 $ 8.39 $ 7.36 $ 6.71 $ 6.69 $ 6.20
Units in service per employee (end of
period)............................ 692 730 716 1,007 1,047 1,104 1,320
Capital expenditures................. $ 4,863 $ 3,918 $13,561 $ 19,091 $ 44,058 $ 24,910 $ 58,482
Cash dividends or distributions(8)... -- $11,824 $14,115 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............ $ 882 $ 1,700 $ 1,014 $ 2,773 $123,574 $ 10,243
Total assets......................... 56,429 26,180 33,857 200,580 340,614 412,503
Total long-term debt................. 47,694 31,143 12,102 104,846 154,055 221,923
Total stockholders' equity
(deficit).......................... 2,929 (11,374) 13,729 68,136 155,238 132,363
</TABLE>
- ---------------
(1) 1994 and 1996 include the results of operations of acquired companies from
their respective acquisition dates.
(2) Includes the impact of non-recurring charges for the forgiveness of certain
shareholder notes receivable of approximately $4.8 million in 1993, and
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 Metrocall refinanced balances outstanding under its
then existing credit facilities. As a result of these refinancings Metrocall
recorded extraordinary items of approximately $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.
(4) EBITDA (earnings before interest, taxes, depreciation and amortization) is a
standard measure of financial performance in the paging industry, but 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 generally accepted accounting principles
("GAAP"). EBITDA excludes non-recurring charges for the forgiveness of
certain shareholder 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) net revenues.
(6) ARPU (average monthly recurring revenue per unit) is calculated by dividing
(a) monthly service, rent and maintenance revenues for the period by (b) the
average number of units in service for the period.
(7) Average monthly operating expense per unit is calculated by dividing (a)
total operating expenses before depreciation and amortization for the period
by (b) the average number of units in service for the period. Operating
expenses exclude non-recurring charges for the forgiveness of certain
shareholder notes receivable of approximately $4.8 million in 1993 and
approximately $2.0 million incurred as part of a management reorganization
charge in 1995.
(8) Distributions made in 1992 and 1993 occurred while Metrocall was a
Subchapter S corporation.
8
<PAGE> 19
PAGE AMERICA GROUP, INC.
<TABLE>
<CAPTION>
NINE-MONTH NINE MONTHS ENDED
PERIOD ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ----------------------------------------------- --------------------
1991 1992 1993 1994(4) 1995(2) 1995 1996
------------ -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PAGER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:(1)
Total revenues........................ $ 25,209 $ 32,805 $ 30,257 $ 37,258 $ 29,107 $ 23,224 $ 17,142
Operating Expenses:
Cost of service and sales........... 3,018 3,296 4,253 5,709 4,363 3,426 2,667
Selling............................. 5,501 6,544 4,879 6,842 6,066 4,682 3,075
General and administrative.......... 6,219 8,940 8,688 10,653 8,923 7,216 4,933
Technical........................... 2,507 3,455 3,343 4,685 4,262 3,411 2,459
Depreciation, amortization and
write-off of intangibles.......... 6,066 9,519 9,793 10,817 8,585 6,265 3,988
-------- -------- -------- -------- -------- -------- --------
Operating profit (loss)............... 1,898 1,051 (699) (1,448) (3,092) (1,776) 20
Interest expense...................... 4,952 4,783 4,032 5,102 6,263 4,796 4,712
Other expenses........................ 1,053 1,957 1,814 478 3,738 3,740 435
Extraordinary gain(5)................. -- 7,156 -- -- -- -- --
Cumulative effect of changes in
accounting principles(7)............ -- (3,960) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net loss.............................. (4,107) (2,493) (6,545) (7,028) (13,093) (10,312) (5,127)
Preferred stock dividend
requirements........................ (1,449) (2,791) (3,268) (3,023)(3) (2,863)(3) (2,148) (2,148)
-------- -------- -------- -------- -------- -------- --------
Net loss applicable to common
shares.............................. $ (5,556) $ (5,284) $ (9,813) $(10,051) $(15,956) $(12,460) $ (7,275)
======== ======== ======== ======== ======== ======== ========
Net loss per common share(6).......... $ (1.54) $ (1.40) $ (2.55) $ (1.55) $ (2.01) $ (1.58) $ (0.64)
======== ======== ======== ======== ======== ======== ========
Weighted average shares outstanding... 3,609 3,774 3,847 6,464 7,936 7,897 11,309
OTHER DATA:
Pagers in service at end of period.... 223,000 228,000 305,000 311,000 221,000 221,000 216,000
Capital expenditures, net of book
value of pagers sold (excluding
acquisitions)....................... $ 5,707 $ 4,296 $ 2,630 $ 5,365 $ 3,300 $ 2,774 $ 2,295
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------- SEPTEMBER 30,
1991 1992(5) 1993(4) 1994(3) 1995(2)(3) 1996 (2)
-------- -------- -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficiency)....................... $ (9,996) $(10,242) $ (2,053) $ (9,541) $(52,444) $ (56,713)
Total assets....................................... 67,623 58,755 75,193 70,229 44,003 42,006
Long-term debt, less current maturities............ 58,499 48,269 57,850 56,953 69 46
Series A, A-2 and B Preferred Stock................ 10,799 17,063 -- -- -- --
Accumulated deficit................................ (54,281) (59,365) (68,980) (78,989) (94,945) (102,220)
Shareholders' equity (deficit)..................... (16,688) (21,402) 9,096 439 (11,222) (17,047)
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) for
the nine-month period ended December 31, 1991 and for the years ended
December 31, 1992, 1993, 1994 and 1995 and the nine-month periods ended
September 30, 1995 and 1996 was $8.0 million, $10.6 million, $9.1 million,
$9.4 million, $5.5 million, $4.5 million, and $4.0 million, respectively.
EBITDA is a standard measure of financial performance in the paging industry
but should not be construed as an alternative to operating income or cash
flows from operating activities as determined in accordance with generally
accepted accounting principles. EBITDA is also the operating measure by
which Page America's financial covenants are calculated under the Page
America Credit Facility.
(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 providing, among other things, for an accelerated maturity date of
December 29, 1995 and its Subordinated Notes were modified to provide for a
final maturity of six months thereafter. Such debt, which was classified as
long term at December 31, 1994, is in default and is classified as a current
liability at December 31, 1995 and September 30, 1996.
(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. 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. See Notes C and E of
Notes to Consolidated Financial Statements.
(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.
9
<PAGE> 20
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following summary unaudited pro forma condensed combined statements of
operations data of Metrocall for the year ended December 31, 1995 and for the
nine-month period ended September 30, 1996 give effect to the acquisition of
Parkway Paging, Inc. (the "Parkway Acquisition"), Satellite Paging and Message
Network (the "Satellite Acquisition"), and A+ Network, Inc. (the "A+ Network
Acquisition") by Metrocall (collectively, the "Recent Acquisitions") under the
heading "Pro Forma Recent Acquisitions," and also give 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, 1995. See "Recent
Developments Regarding Metrocall -- Recent Acquisitions." The unaudited pro
forma condensed combined balance sheet data under the heading "Pro Forma
Combined Company and Recent Acquisitions" give effect to the acquisition of Page
America and the Recent Acquisitions as if each of the business combinations had
occurred on September 30, 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.
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND UNITS IN SERVICE)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
HISTORICAL PRO FORMA COMPANY AND
------------------------ RECENT RECENT
METROCALL PAGE AMERICA ACQUISITIONS ACQUISITIONS
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CONDENSED COMBINED STATEMENTS OF OPERATIONS DATA:
Total revenues................................. $ 110,859 $ 29,107 $107,882 $ 243,458
Operating expenses before depreciation and
amortization(1)............................. 69,611 30,476 76,288 163,796
Loss from operations........................... (5,783) (3,092) (29,001) (39,601)
Interest and other income (expense), net....... (10,522) (10,001) (19,777) (30,836)
Benefit (provision) for income taxes........... 595 -- 3,785 4,380
Extraordinary item............................. (4,392) -- 5,321 929
Net loss....................................... (20,102) (13,093) (39,672) (65,128)
Preferred dividends............................ -- (2,863) (5,586) (7,686)
Loss attributable to common stockholders....... (20,102) (15,956) (45,258) (72,814)
Net loss from continuing operations
attributable to common stockholders......... $ (1.34) $ (2.92)
Net loss per share attributable to common
stockholders................................ $ (1.72) $ (2.89)
Weighted average common shares outstanding..... 11,668 25,221
OTHER DATA:
Units in service (end of period)............... 944,013 221,000 787,698 1,952,711
EBITDA(2)...................................... $ 27,771 $ 5,493 $ 15,831 $ 48,941
</TABLE>
- ---------------
(1) Includes the impact of non-recurring charges for severance and other
compensation costs incurred as part of Metrocall's management
reorganization charge of approximately $2.0 million in 1995.
(2) EBITDA (earnings before interest, taxes, depreciation and amortization) is a
standard measure of financial performance in the paging industry, but
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 excludes
nonrecurring charges described in Note 1 above.
10
<PAGE> 21
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND UNITS IN SERVICE)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
HISTORICAL PRO FORMA COMPANY AND
--------------------------- RECENT RECENT
METROCALL(1) PAGE AMERICA ACQUISITIONS(2) ACQUISITIONS
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
CONDENSED COMBINED STATEMENTS OF OPERATIONS
DATA:
Total revenues............................. $ 98,608 $ 17,142 $ 85,394 $ 201,144
Operating expenses before depreciation and
amortization............................ 62,658 12,072 59,306 134,036
(Loss) income from operations.............. (19,981) 20 (15,926) (39,850)
Interest and other income (expense), net... (10,836) (5,147) (10,813) (21,899)
Benefit (provision) for income taxes....... 279 -- 4,592 4,871
Net loss................................... (32,960) (5,127) (19,936) (57,089)
Preferred dividends........................ -- (2,148) (4,190) (5,765)
Net loss attributable to common
stockholders............................ (32,960) (7,275) (24,126) (62,854)
Net loss per share attributable to common
stockholders............................ $ (2.23) $ (2.23)
Weighted average common shares
outstanding............................. 14,806 28,184
OTHER DATA:
Units in service (end of period)........... 1,405,933 216,000 660,268 2,282,201
EBITDA(3).................................. $ 20,404 $ 4,008 $ 17,898 $ 42,310
CONDENSED COMBINED BALANCE SHEET DATA
(AS OF SEPTEMBER 30, 1996):
Working capital (deficit).................. $ (12,682) $(56,713) $ 17,148 $ 20,236
Total assets............................... 412,503 42,006 276,714 734,975
Long-term obligations, net of current
portion................................. 221,647 46 102,319 328,966
Total stockholders' equity (deficit)(4).... 132,363 17,047 44,663 196,906
</TABLE>
- ---------------
(1) For the nine months ended September 30, 1996, Metrocall's historical
condensed combined statements of operations data includes the results of
operations of Parkway and Satellite since their respective dates of
acquisition. At September 30, 1996, Metrocall's historical condensed
combined balance sheet and units in service data include the acquisitions
of Parkway and Satellite.
(2) Condensed combined balance sheet data includes the effect of preferred stock
issuance and debt refinancing.
(3) EBITDA (earnings before interest, taxes, depreciation and amortization) is a
standard measure of financial performance in the paging industry, but
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 $6.375 for
Metrocall Common Stock as of the closing date of the Page America
Acquisition.
11
<PAGE> 22
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:
Nine months ended September 30, 1996......... $(2.28) $(0.64) $(2.23) N/A N/A
Year ended December 31, 1995................. (3.00) (2.01) (2.92) N/A N/A
Book value per share:
September 30, 1996........................... 7.06 (1.06) 6.97 N/A N/A
</TABLE>
- ---------------
(1) Reflects the acquisitions of Parkway Paging, Satellite Paging and A+ Network
by Metrocall as though they had occurred on January 1, 1995.
(2) Reflects the pending acquisition of Page America as though it had occurred
on January 1, 1995.
(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.
12
<PAGE> 23
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. Upon the completion of the Acquisition,
Page America will not conduct any ongoing business operations or generate any
revenues by reason thereof. If the price of the Metrocall Common Stock declines
substantially after the Closing Date or if the 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. 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. 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 January 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 January 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 January 31, 1997 Metrocall was only able to incur
approximately $20 million of additional indebtedness based on its pro forma
operating results through September 30, 1996 (without giving effect to the
Acquisition). 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.
13
<PAGE> 24
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 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. Broadband
PCS is expected to provide new types of communications devices that will include
multi-functional portable phones and imaging devices, which may also have paging
and messaging capabilities. PCS systems may compete directly and 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
14
<PAGE> 25
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 $2.2 million, $2.4 million and $20.1
million for the years ended December 31, 1993, 1994 and 1995, respectively, and
a loss of $33.0 million for the nine months ended September 30, 1996. No
assurance can be given that losses can be reversed in the future. In addition,
at September 30, 1996, Metrocall's accumulated deficit was $79.9 million and
Metrocall had a deficit in working capital of $12.7 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.
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. 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.
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
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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
38.2% of the issued and outstanding Metrocall Common Stock as of January 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 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."
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<PAGE> 27
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 January 31, 1997, the closing price of Metrocall Common Stock
was $5.875, which was less than the book value per share on September 30, 1996
of approximately $8.24. The market price of Metrocall Common Stock may be
volatile due to, among other things, technological innovations affecting the
paging industry, Metrocall's acquisition strategy and the shares being
registered pursuant to this and other registration statements. Metrocall
currently has effective registration statements with respect to approximately
8.7 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 the
shares of Metrocall Common Stock acquired by certain affiliates of A+ Network in
the A+ Network Merger. Furthermore, in connection with the 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 39.3% 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 Fourth 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
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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
Two of the three directors of Page America control a majority of the Series
One Preferred Stock and may have a conflict of interest. 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."
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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<PAGE> 29
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)
830,333 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. 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. 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 38.2% 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." 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.
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.
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<PAGE> 32
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 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 $8,684,782,
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 $14,815,218. 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 830,333 shares of Metrocall
Common Stock which would have had a
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market value at the date of $5,397,165. Thus, the total transaction value to be
received by Page America would have been approximately $60.4 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.
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.
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
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under the terms of the Page America Credit Facility and that all amounts were
immediately due and payable under the Page America Credit Facility.
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.
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.
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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, 1995, 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.
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.
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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.
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.
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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 applied for
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 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 November 30, 1996, the Working Capital Deficit would have
been $2,252,745, and the Stock Consideration would be increased by $94,420 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
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(a) $1,567,233 minus (b) $100,000 times the number of months elapsed from and
including January 1997 through the relevant date.
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 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.
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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.
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
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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 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.
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 -- 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.
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.
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 $16,000.
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 $17,500.
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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 Metrocall Common Stock
and Common Stock Equivalents issued to Page America 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. 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 prior to such
time to satisfy claims by Metrocall for indemnification.
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.
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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> 43
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, all of Page America's
liabilities, Page America shall transfer all of its remaining assets, including
the transfer in kind of any shares of Metrocall Common Stock then owned by Page
America, to its shareholders in accordance with their respective rights and
interests (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) 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 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> 44
Liabilities
At December 31, 1996, Page America had outstanding $34,610,206 of principal
and interest under the Page America Credit Facility, $17,338,750 of principal
and interest due under the Subordinated Notes, $1,054,822 payable to the holders
of Subordinated Notes required to repurchase warrants held by them and
approximately $2.4 million of liabilities which will not be assumed by
Metrocall. In addition, Page America presently intends that it will need at
least an additional approximately $1.7 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. Page America
will have to reach agreement with its creditors in order to discharge its
liabilities. Page America is in negotiations with the holders of the debt
outstanding under the Page America Credit Facility and under the Subordinated
Notes in an attempt to resolve the payment of such liabilities. In addition, the
consent of Page America's bank lenders to the Acquisition and to the release of
their liens on Page America's assets will be required. There is no assurance
that any agreement will be reached. The consent of such holders is required in
order to consummate the Acquisition.
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. 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
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
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<PAGE> 45
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.
Page America is presently in negotiations with the holders of Series One
Preferred Stock in an attempt to have such holders forego a portion of their
liquidation preference so that funds may be available for distribution to the
holders of Common Stock of Page America. There is no assurance that the holders
of Series One Preferred Stock will agree to forego these rights or how much, if
any, they will make available to the holders of Common Stock
Set forth below is Page America's present estimate at March 31, 1997 of the
amount of funds which Page America will have after the Acquisition and the
present estimated liabilities.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SOURCES LIABILITIES
- ------------------------------ ------------------------------
Cash Consideration $25,000,000 Page America Credit Facility $35,200,000
Stock Consideration 35,000,000 Subordinated Notes 18,000,000
Cash balance, including cash
from existing escrow 590,000 Transaction Costs 1,125,000
Taxes 826,000
Other Liabilities 1,526,000
Estimated amounts for
liquidation 1,685,000
Repurchase cost of warrants 1,055,000
Liquidation Preference of
Series
One Preferred Stock 33,650,000
----------- -----------
Total $60,590,000 Total $93,067,000
========== ==========
</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 under certain circumstances 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 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
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<PAGE> 46
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).
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> 47
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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<PAGE> 48
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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<PAGE> 49
(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
9,385,509 shares (or approximately 38.2% of the issued and outstanding shares of
Metrocall Common Stock) have agreed to vote in favor of this amendment. As of
January 31, 1997, there were 24,556,338 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 January 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.
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 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
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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 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.
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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 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
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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 indemnification" 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.
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<PAGE> 58
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.
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
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<PAGE> 59
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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<PAGE> 60
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 September 30, 1996, Page America provided paging services to
approximately 216,000 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
September 30, 1996, approximately 74 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. The Page America Credit Facility was not repaid at maturity
causing the Page America Credit Facility and the Subordinated Notes to be in
default (see Note E of Notes to Consolidated Financial Statements). Such debt is
classified as a current liability and Page America's current liabilities
exceeded its current assets by $52.4 million at December 31, 1995 and $56.7
million at September 30, 1996.
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 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.
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RESTRUCTURING OF DEBT
On July 28, 1995, concurrent with the sale of Page America's Florida and
California paging assets, the Page America Credit Facility was amended. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Page America -- Liquidity and Capital Resources." Among other
things, the amendment provided for an acceleration of the final maturity to
December 29, 1995 and modified the financial covenants so that Page America
would not be in default as of the amendment date. Page America used a portion of
the net proceeds from the sale of its Florida and California operations to
reduce the debt by $11.8 million and prepay interest at the LIBOR rate from
August 1, 1995 through December 29, 1995. In its third fiscal quarter, Page
America recorded a charge of approximately $1.8 million related to the amended
agreement which included the write-down of deferred financing costs of
approximately $1.1 million. The Page America Credit Facility is secured by
substantially all the assets of Page America.
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 Page
America Credit Facility and to defer the cash payment of interest until
maturity. Commencing January 1, 1995, interest is increased from 12 to 15
percent per annum, compounded semi-annually, and is satisfied by the issuance of
additional promissory notes with terms substantially identical to the
Subordinated Notes, as amended. In 1995, Page America 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 Page America occurs, the note holders will have the right to require
Page America to repurchase the notes at par plus accrued interest.
BACKGROUND OF THE PAGING INDUSTRY
Radio paging began more than four decades ago as an adjunct to telephone
answering services, delivering tone-only messages to subscribers. Beginning in
the 1970's, cost-effective technological innovations and regulatory reforms
helped to accelerate the use of paging services. Advances in microprocessor
technology facilitated dramatic reductions in the size and weight of pagers. In
1982, the FCC increased the number of available channels for paging, further
stimulating growth of the industry.
During the 1980's, the paging industry expanded significantly. Factors
contributing to the growth in the paging industry include: (i) a continuing
shift towards a service-based economy and a resultant need to keep in contact;
(ii) increasing mobility among workers; (iii) increasing awareness of the
benefits of mobile communications; (iv) a reduction in the price of pagers; (v)
product distribution at the retail level; and (vi) increasing availability of
information service-based offerings.
In addition, the benefits of mobile and wireless communications have gained
widespread acceptance as a result of the growth in cellular communications. 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
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;
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(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
11 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
140,000 pagers throughout most of Connecticut, New York State south of
Albany (including Long Island), New Jersey and Eastern Pennsylvania. The
Chicago network consists of 80 transmitters over 11 available paging
channels. This network provides service to 81,000 pagers from the Wisconsin
border, throughout Illinois, Northern Indiana and into Western Michigan.
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 74 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
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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>
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,
-------------------------------------------------------
SEPTEMBER 30,
1993 1994 1995 1996
--------------- --------------- --------------- ---------------
UNITS % UNITS % UNITS % UNITS %
-------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Digital display......... 287,000 94.1% 283,000 91.0% 207,000 93.7% 200,000 92.6%
Tone only............... 8,000 2.6 8,000 2.7 4,000 1.8 3,000 1.2
Tone and voice.......... 1,000 0.3 1,000 0.3 * -- * --
Alphanumeric display.... 9,000 3.0 19,000 6.0 10,000 4.5 13,000 6.2
------- ---- ------- ---- ------- ----
Total......... 305,000 100.0% 311,000 100.0% 221,000 100.0% 216,000 100.0%
======= ==== ======= ==== ======= ====
</TABLE>
- ---------------
* Less than 500 units in service
Page America sells and leases a variety of paging models, including credit
card-sized pagers, pen-like pagers, wristwatch pagers and conventional pagers,
with a range of available options, such as silent vibrating alert and extended
message memory. 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.
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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, SEPTEMBER 30,
-------------------------------------------------------- ----------------
1993 1994 1995 1996
---------------- ---------------- ---------------- ----------------
UNITS % UNITS % UNITS % UNITS %
------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Company owned........... 105,000 34.4% 96,000 30.9% 58,000 26.2% 56,000 25.9%
Subscriber owned........ 102,000 33.5 109,000 35.0 87,000 39.4 90,000 41.7
Third party reseller.... 98,000 32.1 106,000 34.1 76,000 34.4 70,000 32.4
------- --- ------- --- ------- --- ------ -----
Total......... 305,000 100.0% 311,000 100.0% 221,000 100.0% 216,000 100.0%
======= === ======= === ======= === ======= =====
</TABLE>
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 140,000 pagers
throughout most of Connecticut, New York State south of Albany (including Long
Island), New Jersey and Eastern Pennsylvania.
The Chicago RCC facilities, which were acquired by Page America in 1984,
serve approximately 81,000 pagers in the Illinois and Northwestern Indiana
areas. The Chicago technical facilities consist of three paging terminals, and
the Chicago network consists of 80 transmitters over 11 available channels. This
network provides service from the Wisconsin border, throughout Illinois,
Northwestern Indiana and into Western Michigan.
MARKETING
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 September 30, 1996,
Page America employed 75 persons in direct sales and marketing support
positions.
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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,
----------------------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996
------------------- ------------------- ------------------- -------------------
REVENUES % REVENUES % REVENUES % REVENUES %
----------- ----- ----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct Sales
Force........ $24,301,000 80.3% $30,626,000 82.2% $24,117,000 82.9% $13,952,000 81.4%
Resellers...... 5,956,000 19.7 6,505,000 17.5 4,611,000 15.8 2,621,000 15.3
Retail
Stores....... -- -- 127,000 0.3 379,000 1.3 569,000 3.3
----------- --- ----------- --- ----------- --- ----------- -----
Total.. $30,257,000 100.0% $37,258,000 100.0% $29,107,000 100.0% $17,142,000 100.0%
=========== === =========== === =========== === =========== =====
</TABLE>
Page America's own direct sales force operates out of 11 sales offices. The
direct sales effort is supported through a multimedia marketing campaign with
advertising, promotion and subscriber enhancement campaigns. 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 and retail dealers. Resellers purchase service at wholesale
rates from Page America, and in turn, provide service to their own customers.
Resellers contribute to Page America's profits without Page America having to
incur any significant selling or administrative overhead. Independent retail
dealers, consisting of electronics and video stores, also market Page America's
products.
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, 1995.
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
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<PAGE> 66
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 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
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<PAGE> 67
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 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 September 30, 1996, Page America employed 150 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
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<PAGE> 68
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 1996 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.
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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, 1995 and consolidated balance sheets at December 31,
1994 and 1995 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 nine-month period ended December 31, 1991 and for the year ended
December 31, 1992 and the consolidated balance sheet data at December 31, 1991,
1992 and 1993 are also derived from audited financial statements not included in
this Proxy Statement/Prospectus.
The selected consolidated financial data at September 30, 1996 and for the
nine months ended September 30, 1995 and 1996 are derived from unaudited
financial statement included elsewhere herein and include all adjustments,
consisting only of normal recurring adjustments, which Page America considers
necessary for a fair presentation of the financial position and results of
operations for the periods and as of the dates presented. Operating results for
the nine months ended September 30, 1996 are not necessarily indicative of the
results to be expected for the full fiscal year ending December 31, 1996.
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>
NINE-MONTH
PERIOD ENDED NINE MONTHS ENDED
DECEMBER 31, YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------ --------------------------------------------------------- -----------------------------
1991 1992 1993 1994(4) 1995(2) 1995 1996
------------ ------------ ------------ ------------ ---------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AND PAGER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:(1)
Total revenues.......... $ 25,209 $ 32,805 $ 30,257 $ 37,258 $ 29,107 $ 23,224 $ 17,142
Operating Expenses:
Cost of service and
sales............... 3,018 3,296 4,253 5,709 4,363 3,426 2,667
Selling............... 5,501 6,544 4,879 6,842 6,066 4,682 3,075
General and
administrative...... 6,219 8,940 8,688 10,653 8,923 7,216 4,933
Technical............. 2,507 3,455 3,343 4,685 4,262 3,411 2,459
Depreciation,
amortization and
write-off of
intangibles......... 6,066 9,519 9,793 10,817 8,585 6,265 3,988
------- ------- ------- ------- ------- ------- -------
Operating profit
(loss)................ 1,898 1,051 (699) (1,448) (3,092) (1,776) 20
Interest expense........ 4,952 4,783 4,032 5,102 6,263 4,796 4,712
Other expenses.......... 1,053 1,957 1,814 478 3,738 3,740 435
Extraordinary gain(5)... -- 7,156 -- -- -- -- --
Cumulative effect of
changes in accounting
principles(7)......... -- (3,960) -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net loss................ (4,107) (2,493) (6,545) (7,028) (13,093) (10,312) (5,127)
Preferred stock dividend
requirements.......... (1,449) (2,791) (3,268) (3,023)(3) (2,863)(3) (2,148) (2,148)
------- ------- ------- ------- ------- ------- -------
Net loss applicable to
common shares......... $ (5,556) $ (5,284) $ (9,813) $ (10,051) $(15,956) $ (12,460) $ (7,275)
======= ======= ======= ======= ======= ======= =======
Net loss per common
share(6).............. $ (1.54) $ (1.40) $ (2.55) $ (1.55) $ (2.01) $ (1.58) $ (0.64)
======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding........... 3,609 3,774 3,847 6,464 7,936 7,897 11,309
OTHER DATA:
Pagers in service at end
of period............. 223,000 228,000 305,000 311,000 221,000 221,000 216,000
Capital expenditures,
net of book value of
pagers sold (excluding
acquisitions)......... $ 5,707 $ 4,296 $ 2,630 $ 5,365 $ 3,300 $ 2,774 $ 2,295
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------- SEPTEMBER 30,
1991 1992(5) 1993(4) 1994(3) 1995(2)(3) 1996(2)
------------ ------------ ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital
(deficiency).......... $ (9,996) $ (10,242) $ (2,053) $ (9,541) $(52,444) $ (56,713)
Total assets............ 67,623 58,755 75,193 70,229 44,003 42,006
Long-term debt, less
current maturities.... 58,499 48,269 57,850 56,953 69 46
Series A, A-2 and B
Preferred Stock....... 10,799 17,063 -- -- -- --
Accumulated deficit..... (54,281) (59,365) (68,980) (78,989) (94,945) (102,220)
Shareholders' equity
(deficit)............. (16,688) (21,402) 9,096 439 (11,222) (17,047)
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) for
the nine-month period ended December 31, 1991 and for the years ended
December 31, 1992, 1993, 1994 and 1995 and the nine-month periods ended
September 30, 1995 and 1996 was $8.0 million, $10.6 million, $9.1 million,
$9.4 million, $5.5 million, $4.5 million, and $4.0 million, respectively.
EBITDA is a standard measure of financial performance in the paging industry
but should not be construed as an alternative to operating income or cash
flows from operating activities as determined in accordance with generally
accepted accounting principles. EBITDA is also the operating measure by
which Page America's financial covenants are calculated under the Page
America Credit Facility.
(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 providing, among other things, for an accelerated maturity date of
December 29, 1995 and its Subordinated Notes were modified to provide for a
final maturity of six months thereafter. Such debt, which was classified as
long term at December 31, 1994, is in default and is classified as a current
liability at December 31, 1995 and September 30, 1996.
(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. 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. See Notes C and E of
Notes to Consolidated Financial Statements.
(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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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, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------- ------------------------------------
1993 1994 1995 1995 1996
--------------- --------------- ---------------- ---------------- ---------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues.............. $30,257 100.0% $37,258 100.0% $ 29,107 100.0% $ 23,224 100.0% $17,142 100.0%
Operating expenses:
Cost of service and sales... 4,253 14.1 5,709 15.3 4,363 15.0 3,426 14.7 2,667 15.6
Selling expenses............ 4,879 16.1 6,842 18.4 6,066 20.8 4,682 20.2 3,075 17.9
General and administrative
expenses.................. 8,688 28.7 10,653 28.6 8,923 30.7 7,216 31.1 4,933 28.8
Technical expenses.......... 3,343 11.1 4,685 12.6 4,262 14.6 3,411 14.7 2,459 14.3
Depreciation, amortization
and write-off of
intangibles............... 9,793 32.3 10,817 29.0 8,585 29.5 6,265 26.9 3,988 23.3
-------- ----- ------- ----- ------- ----- ------- -------
Operating profit (loss)..... (699) (2.3) (1,448) (3.9) (3,092) (10.6) (1,776) (7.6) 20 0.1
Interest expense............ 4,032 13.3 5,102 13.7 6,263 21.5 4,796 20.7 4,712 27.5
Net loss.................... $(6,545) (21.6)% $(7,028) (18.9)% $(13,093) (45.0)% $(10,312) (44.4)% $(5,127) (29.9)%
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1995
TOTAL REVENUES for the nine month period ended September 30, 1996 were
approximately $6.1 million (26.2 percent) lower than that of the 1995 period.
The sale of Page America's operations in Florida and California in July 1995
accounted for $4.4 million of the decrease. In addition, average revenue per
subscriber declined as rates obtained from new subscribers were lower than the
rates associated with lost subscribers. Subscriber growth in 1995 and 1996 was
limited, as pager purchases were constrained by limited available capital. Page
America had 216,000 units in service at September 30, 1996 and 221,000 units at
December 31, 1995, a decline of 5,000 units.
COST OF SERVICE decreased by $508,000 (24.0 percent) in the nine month
period in 1996 over the same period in 1995. The decrease was principally due to
cost of service associated with the sold operations. Cost of sales increased
from 61.4 percent of sales revenues in the first nine months of 1995 to 70.9
percent in the same period in 1996. This increase in cost of sales as a percent
of sales revenues is principally a result of lower selling prices due to
competitive pressure.
SELLING EXPENSES decreased by approximately $1.6 million (34.3 percent) in
the nine months ended September 30, 1996 as compared to 1995. $1.0 million of
the decrease was due to selling expenses associated with the sold operations.
Page America's remaining operations experienced a decrease primarily due to a
reduction in personnel and sales.
GENERAL AND ADMINISTRATIVE EXPENSES experienced a decrease of $2.3 million
(31.6 percent) in the nine months ended September 30, 1996 as compared to the
same period in the prior year. This was principally due to expenses associated
with the sold operations, a reduction in personnel and a decrease in
professional fees.
TECHNICAL EXPENSES for the first nine months of 1996 decreased by $952,000
(27.9 percent) when compared with the same period in 1995, principally as a
result of the sale of the Florida and California operations.
DEPRECIATION EXPENSE decreased by $910,000 (24.0 percent), primarily due to
the sale of depreciable assets in Florida and California.
AMORTIZATION EXPENSE decreased by $1.4 million (55.3 percent) principally
due to the elimination of intangible assets related to the Florida and
California operations and the write-off, at the end of fiscal year 1995, of
certain intangibles related to the NYNEX acquisition.
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<PAGE> 71
INTEREST EXPENSE remained relatively constant for nine months ended
September 30, 1996, as compared to the same period in 1995.
OTHER EXPENSES decreased approximately $3.3 million 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, a loss realized on the sale of the Florida and
California operations of approximately $916,000 and a $723,000 write-down of
deferred financing costs during the third quarter of 1995. The nine month period
in 1996 included banking fees of $450,000 associated with the modification of
the senior credit facility.
NET LOSS was $5.1 million (29.9 percent of total revenues) in the nine
months ended September 30, 1996, as compared to $10.3 million (44.4 percent of
total revenues) in the same period of 1995.
EBITDA (earnings before interest, taxes, depreciation and amortization) in
the nine months ended September 30, 1996 was $4.0 million as compared to $4.5
million in the 1995 period.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
TOTAL REVENUES for fiscal 1995 were approximately $8.2 million (21.9
percent) lower than that of 1994. The sale of the operations in Florida and
California accounted for a decrease of approximately $4.5 million while Page
America's other operations experienced a $3.7 million decrease in total revenues
as compared to 1994. Average revenue per subscriber declined as the result of
the emphasis on the sale of pagers (for which 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. Subscriber growth in 1994 and 1995 was limited as pager purchases were
constrained by limited available capital. Page America's units in service at
December 31, 1995 showed a decrease of 90,000 units from the 311,000 units in
service at December 31, 1994. A substantial portion of this decrease (78,000
units) is attributable to the sale of the Florida and California operations.
COST OF SERVICE decreased $303,000 (10.3 percent) in 1995. This decrease
was principally due to cost of service associated with the sold operations. Cost
of sales decreased by approximately $1 million (37.7 percent) in 1995. As a
percent of sales revenues, cost of sales increased from 61% of sales revenues in
1994 to 64% in 1995, primarily as a result of lower selling prices due to
competitive pressure.
SELLING EXPENSE decreased by approximately $776,000 (11.3 percent) in 1995
as compared to 1994. $661,000 of the decrease was due to selling expenses
associated with the sold operations.
GENERAL AND ADMINISTRATIVE EXPENSES decreased by $1.7 million (16.2
percent). A decrease of $1 million was due to expenses associated with the sold
operations. 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 existing operations resulted from the
lower average price of pagers purchased in 1995 and the decrease in pagers on
lease to customers, partially offset by a $465,000 valuation adjustment of pager
assets in the fourth quarter of 1995.
AMORTIZATION EXPENSE decreased by approximately $1.1 million (24.7 percent)
in 1995 over 1994, principally due to the elimination of intangible assets
related to the Florida and California operations and certain customer lists
becoming fully amortized in the second quarter of 1994 and first quarter of
1995, partially offset by a write off of certain intangibles related to the
NYNEX acquisition.
INTEREST EXPENSE increased by approximately $1.2 million (22.8 percent) in
1995 primarily due to higher interest rates, in the current period, on
borrowings outstanding under Page America's senior credit facility and
subordinated debt agreement.
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<PAGE> 72
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.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
TOTAL REVENUES for fiscal 1994 were approximately $7 million (23.1 percent)
higher than that of 1993. The operations acquired in the Crico transaction
accounted for increases of approximately $8.8 million while Page America's other
operations experienced a $1.8 million decrease in total revenues as compared to
1993. Subscriber growth, primarily in Page America's New York operation, was not
sufficient to offset the overall lower average revenue per subscriber. Average
revenue per subscriber declined as the result of the emphasis on the sale of
pagers (for which 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 lower monthly rates caused by
competitive pressure. Subscriber growth in 1993 and 1994 was limited as pager
purchases were limited, by management, to an amount necessary to maintain the
subscriber base in order to conserve capital. Page America had 311,000 units in
service at December 31, 1994, an increase of 6,000 units over the 305,000 units
in service at December 31, 1993.
COST OF SERVICE increased $1.1 million (60 percent) in 1994. This increase
was principally due to cost of service associated with the operations acquired
from Crico. Cost of sales increased by approximately $353,800 (15 percent) in
1994. As a percent of sales revenues, cost of sales decreased from 66% of sales
revenues in 1993 to 61% in 1994. This decrease in cost of sales as a percent of
sales revenues is principally a result of lower current costs of pagers.
SELLING EXPENSE increased by approximately $1.9 million (40 percent) in
1994 as compared to 1993. The increase was due to selling expenses associated
with the acquired operations.
GENERAL AND ADMINISTRATIVE EXPENSES increased by $1.9 million (23.0
percent). This increase was due to expenses associated with the acquired
operations, partially offset as Page America's existing operations experienced a
decrease of $449,600 primarily due to a reduction in salaries and related
benefits.
TECHNICAL EXPENSES increased by $1.3 million (40.1 percent) as a result of
the operations acquired from Crico.
DEPRECIATION EXPENSE decreased by approximately $497,800 (7.3 percent).
This resulted from the decrease in the renting of pagers to customers, in favor
of the sale of pagers, the ensuing decrease in pager assets, and from Page
America's $934,000 valuation adjustment of pager assets in the fourth quarter of
1993 which left a lower depreciable pager asset base. These offset the
depreciation associated with the fixed assets acquired from Crico.
AMORTIZATION EXPENSE increased by approximately $1.5 million (52.0 percent)
in 1994 over 1993, due to intangibles acquired in the Crico transaction.
INTEREST EXPENSE increased by approximately $1.1 million (26.6 percent) in
1994 as a result of higher interest bearing debt resulting from the December 30,
1993 acquisition financing and refinancing and higher interest rates in 1994.
OTHER EXPENSES decreased approximately $1.3 million (73.6 percent) in 1994.
In 1993 approximately $677,400 was written off in deferred financing cost
resulting from the debt refinancing. Fiscal year 1994 includes a second quarter
gain of approximately $178,400 recognized on the sale of shares of stock in a
cellular interest, owned by a subsidiary of Page America, and a gain of $175,000
recognized in the third quarter on the sale of a paging license in the State of
Wisconsin.
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<PAGE> 73
NET LOSS was $7.0 million (18.9 percent of total revenues) in the year
ended December 31, 1994, as compared to $6.5 million (21.6 percent of total
revenues) in the year ended December 31, 1993.
EBITDA in 1994 was $9.4 million as compared to $9.1 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Page America had a working capital deficiency of approximately $56.7
million at September 30, 1996 as compared to a deficiency of approximately $52.4
million at December 31, 1995. The increase in working capital deficiency was
primarily due to unfavorable operating results, principally relating to interest
costs, and accrued dividends on Series One Preferred Stock.
To reduce indebtedness and improve liquidity, Page America sold its
California and Florida paging assets in 1995 for a cash sale price of $19.4
million. $500,000 of the sale price is being held in escrow and is scheduled to
be released to Page America within six months of the date hereof, as provided
for in the agreement. In connection with this sale, Page America incurred
expenses amounting to approximately $1.0 million. Page America used a portion of
the net proceeds from this sale to reduce the balance due on the Page America
Credit Facility by $11.8 million and prepay interest at the LIBOR rate from
August 1, 1995 through December 29, 1995.
The accompanying financial statements have been prepared on a going concern
basis. 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. The Page America Credit Facility was not repaid at maturity
causing the credit facility and the Subordinated Notes to be in default at
December 29, 1995 (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 $52.4 million at December 31, 1995.
On April 26, 1996, the Page America Credit Facility was 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 Page America's assets to
Metrocall. The Page America Credit Facility was not paid by Page America at
maturity and Page America remains in default thereunder. In addition, the
Subordinated Notes of Page America matured at December 31, 1996 and Page America
remains in default thereunder.
Pursuant to the Acquisition Agreement, Page America intends to sell
substantially all of its assets to Metrocall. The Cash Consideration to be
received by Page America in the Acquisition will not be sufficient for Page
America to pay in full in cash its outstanding obligations under the Page
America 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 bank lenders
to the Acquisition and to the release of their liens on Page America's assets
will be required. There is no assurance that Page America will be able to reach
agreement with its creditors.
Page America's operating activities generated $2.6 million of cash flow in
the first nine months of 1996. Page America believes that cash generated from
operations and proceeds from the $750,000 loan under the Page America Credit
Facility will be sufficient to fund operations through the anticipated date of
sale to Metrocall if Page America does not have to pay any amounts due
(principal or interest) under the Page America Credit Facility or the
Subordinated Notes. Page America does not have any material capital expenditure
commitments.
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.
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<PAGE> 74
At December 31, 1995, Page America had net operating losses of
approximately $71.5 million for federal income tax purposes which will expire at
varying dates between 1998 and 2010. Certain shareholder 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 1995, Page America wrote off
approximately $900,000 of accounts receivable against the allowance for doubtful
accounts.
INFLATION AND CHANGING PRICES
Inflation has not materially affected the sale of paging services by 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.................. 44 President, Chief Operating Officer 1990
and Director
Richard A. Contrera.................... 50 Vice President -- RCC Engineering 1985
Martin Katz............................ 44 Vice President -- Administration
and Chief Financial Officer
1995
Martin H. Neidell...................... 50 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 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.
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<PAGE> 75
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 1995
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
------------------------------- COMPENSATION
OTHER ------------ ALL OTHER
SALARY BONUS ANNUAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMP. ($) (#) (1)($)
- ---------------------------------- ----- -------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Steven L. Sinn.................... 1995 $148,078 -- -- -- $2,644
Chairman of the Board and 1994 $250,000 -- -- -- --
Chief Executive Officer 1993 $200,000 $200,000 -- -- --
Kathleen C. Parramore............. 1995 $160,673 -- -- 150,000 $4,957
President and Chief 1994 $140,000 $ 39,000 -- -- --
Operating Officer 1993 $130,741 $ 30,500 -- -- --
Martin Katz....................... 1995 $102,692 -- -- 75,000 $1,038
Vice President
Richard A. Contrera............... 1995 $110,039 -- -- -- $5,173
Vice President 1994 $104,745 $ 7,867 -- -- --
1993 $ 97,125 $ 8,753 -- -- --
</TABLE>
- ---------------
(1) Consists of company matching contributions under 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.
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."
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<PAGE> 76
Effective August 1, 1995, Mr. Sinn resigned as Chairman of the Board and
Chief Executive Officer of Page America. Mr. Sinn entered into a consulting and
non-competition agreement with Page America pursuant to which Mr. Sinn agreed to
serve as a consultant to Page America for one year at compensation of $250,000.
Mr. Sinn also agreed pursuant to the agreement not to compete with Page America
during his one year consulting term. During 1995, Mr. Sinn was paid $100,962
pursuant to the consulting agreement.
STOCK OPTION GRANTS AND EXERCISES
The table below shows information regarding the grant of stock options made
to Page America's Chief Executive Officer and the other most highly compensated
executive officers during the fiscal year ended December 31, 1995. The amounts
shown for each officer as potential realizable values are based on arbitrarily
assumed annualized rates of stock price appreciation over the term of the
options. Actual gains, if any, on stock option exercises are dependent on the
future performance of Page America Common Stock. There is no assurance that such
potential realizable values will be achieved.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
INDIVIDUAL GRANTS OF STOCK PRICE APPRECIATION
------------------------------------------------------------- FOR OPTION TERMS(3)
EXERCISE ----------------------------
NUMBER % GRANTS TO ALL PRICE PER EXPIRATION 5% STOCK 10% STOCK
NAME GRANTED(1) EMPLOYEES SHARE($)(2) DATE PRICE($) PRICE($)
- ------------------------ ---------- --------------- -------------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Kathleen C. Parramore... 150,000 66.7 $.75 10/2/02 $46,500 $106,500
Martin Katz............. 75,000 33.3 $.75 10/2/02 $23,250 $ 53,250
</TABLE>
- ---------------
(1) These options may not be exercised prior to one year from the date of grant
and may be exercised 20% per year thereafter, subject to acceleration upon
the occurrence of certain events.
(2) The exercise price was established at the market price on the date of grant,
October 2, 1995.
(3) The assumed annual rate of appreciation of five and ten percent would result
in the price of Page America's stock increasing to $1.06 and $1.46 per
share, respectively.
The following table sets forth information with respect to the named
executives concerning exercise of options during the fiscal year ended December
31, 1995 and unexercised options held at December 31, 1995. The value of
unexercised, in-the-money options at December 31, 1995 is the difference between
the exercise price of options and the fair market value of Page America Common
Stock on December 31, 1995, which was $.125 per share.
STOCK OPTION EXERCISES TABLE
FOR THE YEAR ENDED DECEMBER 31, 1995
YEAR END STOCK VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR END($)
ACQUIRED ON VALUE ---------------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ----------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kathleen C.
Parramore........... 0 0 10,500 152,000 0 0
Martin Katz........... 0 0 0 75,000 0 0
Richard A. Contrera... 0 0 8,750 1,250 0 0
</TABLE>
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<PAGE> 77
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 September 30, 1996 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 %
One International Place
Boston, MA 02110
Jack Kadis(2)..................................................... 8,069,113 %
One International Place
Boston, MA 02110
Bariston Paging Partners, L.P.(2)................................. 7,781,837 %
c/o Bariston Associates, Inc.
One International Pl.
Boston, MA 02110
T. Rowe Price High Yield Fund, Inc.(3)............................ 2,264,135 %
100 East Pratt Street
Baltimore, MD 21202
T. Rowe Price Strategic Partners Associates, Inc.(4).............. 974,401 %
100 East Pratt Street
Baltimore, MD 21202
Sandler Mezzanine General Partnership(5).......................... 1,497,464 %
767 Fifth Avenue
New York, NY 10153
Revy Investment Co., Inc.(6)...................................... 1,022,724 %
1300 S.W. Fifth Avenue
Portland, OR 97201
Richard Contrera(7)............................................... 25,757 *
Kathleen Parramore(8)............................................. 168,624 *
Martin Katz(9).................................................... 75,000 *
Directors and executive officers as a group(10) (5 persons)....... 294,981 %
</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").
67
<PAGE> 78
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").
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.
(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 247,500 shares of Page America Common Stock issuable upon exercise
of options owned by all executive officers and Directors; 21,481 shares of
Page America Common Stock vested under Page America's Stock Purchase Plan;
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.
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.
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.
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<PAGE> 79
MANAGEMENT OF METROCALL
The directors and executive officers of Metrocall are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- --------------------------------------------------
<S> <C> <C>
Richard M. Johnston.............. 61 Chairman of the Board (term expires in 1999)
William L. Collins, III.......... 46 President, Chief Executive Officer and Director
(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)
Steven D. Jacoby................. 39 Chief Operating Officer and Vice President
Vincent D. Kelly................. 37 Chief Financial Officer, Treasurer and Vice
President
</TABLE>
The holders of Series A Preferred Stock have the right to designate two
directors of Metrocall. As of the date of this Proxy Statement/Prospectus, one
director, Michael Greene, had been designated. The remaining director has not
yet been identified.
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. Since 1970, Mr. Johnston has been Vice President for
Investments of The Hillman Company, an investment firm which is a greater than
5% beneficial owner of Metrocall's Common Stock.
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.
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
69
<PAGE> 80
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.
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.
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.
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. 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. Prior to joining Metrocall, Mr. Kelly was an accountant
with Bruner, Kane and McCarthy, Ltd., certified public accountants.
Each of the members of the Board of Directors, or their affiliates, and
Messrs. Jacoby and Kelly, 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 38.4% of the issued and outstanding
shares of Metrocall Common Stock on the date hereof.
Certain stockholders of Metrocall which held approximately 40.3% of the
issued and outstanding shares of Metrocall Common Stock (prior to the A+ Network
Merger) 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 stockholders to serve as directors of Metrocall. The terms of the
Voting Agreement expired effective as of the Effective Time of the A+ Network
Merger, except that the parties to the agreement have agreed to vote in favor of
the reelection of Ms. Brock when her term expires at the next Metrocall annual
meeting. Messrs. Singer and Russenberger have separately agreed to vote shares
of Metrocall Common Stock they hold at the next Metrocall annual meeting in
favor of the reelection of Ms. Brock.
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
70
<PAGE> 81
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.
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). 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
100,000, 100,000, 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 options (other than 2,000
options held by Mr. Johnston) 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.
71
<PAGE> 82
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(UNAUDITED)
The following unaudited pro forma condensed combined balance sheet under
the heading "Pro Forma Metrocall" gives effect to the acquisition of the equity
interest in A+ Network (to the extent not held at September 30, 1996) for
approximately 8,556,000 shares of Metrocall Common Stock at $5.25 per share, an
equal number of VCRs which have no current value, direct acquisition costs of
approximately $8.2 million and the assumption of $125 million of A+ Network debt
as if the acquisition had occurred on September 30, 1996. The pro forma
condensed combined balance sheet under the heading "Pro Forma Combined Company"
gives effect to (a) the issuance of $39.9 million liquidation value of Series A
Convertible Redeemable Preferred Stock consummated prior to the acquisition of
A+ Network and (b) the refinancing of A+ Network's $125 million of long-term
debt for approximately $127.47 million. The unaudited pro forma condensed
combined balance sheet under the heading "Pro Forma Combined Company and Page
America" also gives effect to the acquisition of substantially all the assets of
Page America for (A) $25 million in cash, (B) 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, (C) 830,333 shares of Metrocall Common Stock,
(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, and expected direct acquisition costs of approximately
$1.2 million as if the acquisition had occurred on September 30, 1996.
The unaudited pro forma condensed combined statements of operations for the
nine month period ended September 30, 1996 and for the year ended December 31,
1995 give effect to (a) under the heading "Pro Forma Metrocall," the
acquisitions of Parkway Paging, Inc. and Satellite Paging and Message Network,
the A+ Network Merger and the merger of Network Paging Corporation into A+
Communications, Inc. on October 24, 1995, the issuance of $39.9 million of
Series A Convertible Redeemable Preferred Stock and the refinancing of A+
Network's long-term debt as described above and (b) under the heading "Pro Forma
Combined Company and Page America," the pending acquisition of Page America as
if it had occurred on January 1, 1995.
Each of the recent and pending acquisitions will be accounted for by the
purchase method of accounting. The purchase prices have been 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 and the
financial statements of Metrocall, Parkway, Satellite and A+ Network
incorporated by reference herein and the financial statements of Page America
included herein. 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 the unaudited pro
forma condensed combined data.
In addition, the unaudited pro forma condensed balance sheet of Page
America Group, Inc. as of September 30, 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.
72
<PAGE> 83
METROCALL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(in Thousands)
<TABLE>
<CAPTION>
PREFERRED
HISTORICAL STOCK
--------------------- PRO PRO ISSUANCE PRO FORMA HISTORICAL
A+ FORMA FORMA AND DEBT COMBINED PAGE
METROCALL NETWORK ADJUSTMENTS METROCALL REFINANCING(F) COMPANY AMERICA
--------- -------- ----------- --------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and
short term investments..... $ 10,243 $ 19,877 $ -- $ 30,120 $ -- $ 30,120 $ 616
Accounts receivable, net..... 11,090 12,008 -- 23,098 -- 23,098 1,008
Inventory.................... -- 10,961 (10,961)(A) -- -- -- --
Prepaid expenses and other
current assets............. 1,985 3,134 -- 5,119 -- 5,119 670
-------- -------- --------- -------- -------- -------- --------
Total current assets....... 23,318 45,980 (10,961) 58,337 -- 58,337 2,294
Furniture and equipment, net... 105,449 63,212 10,961(A) 179,622 -- 179,622 6,424
Intangibles, net............... 257,533 100,939 91,131(B) 449,603 -- 449,603 32,800
Equity investments............. 24,823 -- (24,548)(B) 275 -- 275 --
Other assets................... 1,380 -- -- 1,380 -- 1,380 488
-------- -------- --------- -------- -------- -------- --------
Total assets........... $412,503 $210,131 $ 66,583 $689,217 $ -- $689,217 $ 42,006
======== ======== ========= ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term obligations...... $ 276 $ -- $ -- $ 276 $ -- $ 276 $ 51,166
Accounts payable and accrued
expenses................... 19,234 15,924 8,184(C) 43,342 (13,400) 29,942 3,853
Deferred revenues and
subscriber deposits........ 3,008 7,163 -- 10,171 -- 10,171 1,840
Other current liabilities.... 13,482 -- -- 13,482 -- 13,482 2,148
-------- -------- --------- -------- -------- -------- --------
Total current
liabilities.............. 36,000 23,087 8,184 67,271 (13,400) 53,871 59,007
Capital lease obligation....... 3,747 -- -- 3,747 -- 3,747 --
Long-term obligations.......... 217,900 124,849 -- 342,749 (22,530) 320,219 46
Deferred income taxes.......... 21,993 818 72,643(D) 95,454 -- 95,454 --
Minority interest.............. 500 -- -- 500 -- 500 --
-------- -------- --------- -------- -------- -------- --------
Total liabilities.......... 280,140 148,754 80,827 509,721 (35,930) 473,791 59,053
Redeemable preferred stock..... -- -- -- -- 38,400(F) 38,400 --
Total stockholders' equity..... 132,363 61,377 (14,244)(E) 179,496 (2,470) 177,026 (17,047)
-------- -------- --------- -------- -------- -------- --------
Total liabilities, redeemable
preferred stock and
stockholders' equity......... $412,503 $210,131 $ 66,583 $689,217 $ -- $689,217 $ 42,006
======== ======== ========= ======== ======== ======== ========
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------- COMBINED
ASSETS AND COMPANY
LIABILITIES NOT OTHER PRO AND
ACQUIRED OR FORMA PAGE
ASSUMED(O) ADJUSTMENTS(P) AMERICA
--------------- -------------- ---------
<S> <C> <C> <C>
Current assets:
Cash, cash equivalents and
short term investments..... $ (616) $(20,000)(Q) $ 10,120
Accounts receivable, net..... -- -- 24,106
Inventory.................... -- -- --
Prepaid expenses and other
current assets............. (502) -- 5,287
--------- -------- --------
Total current assets....... (1,118) (20,000) 39,513
Furniture and equipment, net... -- -- 186,046
Intangibles, net............... -- 25,069(B) 507,472
Equity investments............. -- -- 275
Other assets................... (199) -- 1,669
--------- -------- --------
Total assets........... $ (1,317) $ 5,069 $734,975
========= ======== ========
Current liabilities:
Current maturities of
long-term obligations...... $ (51,166) $ -- $ 276
Accounts payable and accrued
expenses................... (1,013) 1,198(P) 33,980
Deferred revenues and
subscriber deposits........ -- -- 12,011
Other current liabilities.... (2,148) -- 13,482
--------- -------- --------
Total current
liabilities.............. (54,327) 1,198 59,749
Capital lease obligation....... -- -- 3,747
Long-term obligations.......... (46) 5,000(Q) 325,219
Deferred income taxes.......... -- -- 95,454
Minority interest.............. -- -- 500
--------- -------- --------
Total liabilities.......... (54,373) 6,198 484,669
Redeemable preferred stock..... -- 15,000(F) 53,400
Total stockholders' equity..... 53,056 (16,129)(P) 196,906
--------- -------- --------
Total liabilities, redeemable
preferred stock and
stockholders' equity......... $ (1,317) $ 5,069 $734,975
========= ======== ========
</TABLE>
See accompanying notes to this unaudited statement.
73
<PAGE> 84
METROCALL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------- PRO FORMA A+ PRO FORMA
METROCALL PARKWAY SATELLITE NETWORK(G) ADJUSTMENTS
--------- ------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Service, rent & maintenance revenue.......... $ 92,160 $7,403 $ 10,723 $ 77,698 $ --
Product sales................................ 18,699 2,344 1,369 8,345 --
--------- ------- -------- -------- --------
Total revenues....................... 110,859 9,747 12,092 86,043 --
Net book value of products sold.............. (15,527) (2,262) (1,557) (11,944) --
--------- ------- -------- -------- --------
95,332 7,485 10,535 74,099 --
Service, rent & maintenance expense.......... 27,258 2,330 3,918 16,758 --
Selling, marketing, general and
administrative............................. 40,303 3,655 4,281 45,872 (930)(H)
Depreciation & amortization.................. 31,504 1,153 1,064 25,052 17,563(I)
Other........................................ 2,050 -- 404 -- --
--------- ------- -------- -------- --------
Total operating expenses............. 101,115 7,138 9,667 87,682 16,633
--------- ------- -------- -------- --------
(Loss) income from operations................ (5,783) 347 868 (13,583) (16,633)
Interest and other income (expense), net..... (10,522) (477) (740) (14,589) (3,971)(J)
--------- ------- -------- -------- --------
Net (loss) income before taxes....... (16,305) (130) 128 (28,172) (20,604)
Benefit (provision) for taxes................ 595 43 -- -- 3,742(K)
--------- ------- -------- -------- --------
Net (loss) income before
extraordinary item................. (15,710) (87) 128 (28,172) (16,862)
Extraordinary item........................... (4,392) -- 5,928 (607) --
--------- ------- -------- -------- --------
Net (loss) income.................... (20,102) (87) 6,056 (28,779) (16,862)
Preferred dividends.......................... -- -- -- -- (5,586)(L)
--------- ------- -------- -------- --------
Net loss attributable to common
stockholders............................... $ (20,102) $ (87) $ 6,056 $(28,779) $(22,448)
========= ======= ======== ======== ========
Net loss from continuing operations
attributable to common stockholders........ $ (1.34)
Extraordinary item, net of income tax
benefit.................................... (0.38)
---------
Net loss per share attributable to common
stockholders............................... $ (1.72)
=========
Shares used in computing net loss per
share...................................... 11,668
=========
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------- COMBINED
HISTORICAL OPERATIONS OTHER PRO COMPANY
PRO FORMA PAGE NOT FORMA AND PAGE
METROCALL AMERICA ACQUIRED(O) ADJUSTMENTS AMERICA
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Service, rent & maintenance revenue.......... $187,984 $ 26,415 $(4,028) $ -- $210,371
Product sales................................ 30,757 2,692 (362) -- 33,087
-------- --------- ------- ------- --------
Total revenues....................... 218,741 29,107 (4,390) -- 243,458
Net book value of products sold.............. (31,290) (1,723) 242 -- (32,771)
-------- --------- ------- ------- --------
187,451 27,384 (4,148) -- 210,687
Service, rent & maintenance expense.......... 50,264 6,902 (1,364) -- 55,802
Selling, marketing, general and
administrative............................. 93,181 14,989 (2,630) -- 105,540
Depreciation & amortization.................. 76,336 8,585 (1,838) 3,409(I) 86,492
Other........................................ 2,454 -- -- -- 2,454
-------- --------- ------- ------- --------
Total operating expenses............. 222,235 30,476 (5,832) 3,409 250,288
-------- --------- ------- ------- --------
(Loss) income from operations................ (34,784) (3,092) 1,684 (3,409) (39,601)
Interest and other income (expense), net..... (30,299) (10,001) 9,864 (400)(J) (30,836)
-------- --------- ------- ------- --------
Net (loss) income before taxes....... (65,083) (13,093) 11,548 (3,809) (70,437)
Benefit (provision) for taxes................ 4,380 -- -- -- 4,380
-------- --------- ------- ------- --------
Net (loss) income before
extraordinary item................. (60,703) (13,093) 11,548 (3,809) (66,057)
Extraordinary item........................... 929 -- -- -- 929
-------- --------- ------- ------- --------
Net (loss) income.................... (59,774) (13,093) 11,548 (3,809) (65,128)
Preferred dividends.......................... (5,586) (2,863) 2,863 (2,100)(F) (7,686)
-------- --------- ------- ------- --------
Net loss attributable to common
stockholders............................... $(65,360) $ (15,956) $14,411 $(5,909) $(72,814)
======== ========= ======= ======= ========
Net loss from continuing operations
attributable to common stockholders........ $ (3.00) $ (2.92)
Extraordinary item, net of income tax
benefit.................................... 0.04 0.03
-------- --------
Net loss per share attributable to common
stockholders............................... $ (2.96) $ (2.89)
======== ========
Shares used in computing net loss per
share...................................... 22,103 25,221
======== ========
</TABLE>
See accompanying notes to this unaudited statement.
74
<PAGE> 85
METROCALL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
HISTORICAL PRO
------------------------------------- A+ FORMA
METROCALL PARKWAY(M) SATELLITE(M) NETWORK(G) ADJUSTMENTS
--------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Service, rent & maintenance revenue..... $ 79,453 $5,302 $6,564 $ 67,313 $ --
Product sales........................... 19,155 860 801 4,554 --
-------- ------ ------ -------- ---------
Total revenues.................. 98,608 6,162 7,365 71,867 --
Net book value of products sold......... (15,546) (934) (805) (6,451) --
-------- ------ ------ -------- ---------
83,062 5,228 6,560 65,416 --
Service, rent & maintenance expense..... 26,297 1,417 2,418 14,338 --
Selling, marketing, general and
administrative........................ 36,361 2,305 2,449 36,531 (560)(H)
Depreciation & amortization............. 40,385 586 447 20,628 12,163(I)
Other................................... -- -- 12 396 --
-------- ------ ------ -------- ---------
Total operating expenses........ 103,043 4,308 5,326 71,893 11,603
-------- ------ ------ -------- ---------
(Loss) income from operations........... (19,981) 920 1,234 (6,477) (11,603)
Interest and other income
(expense) net......................... (10,836) (274) (713) (10,093) 267(J)
Minority interest in loss of
investments........................... (2,422) -- -- -- 2,211(N)
-------- ------ ------ -------- ---------
Net (loss) income before taxes...... (33,239) 646 521 (16,570) (9,125)
Benefit (provision) for taxes........... 279 (229) -- -- 4,821(K)
-------- ------ ------ -------- ---------
Net (loss) income................... (32,960) 417 521 (16,570) (4,304)
Preferred Dividends..................... -- -- -- -- (4,190)(L)
-------- ------ ------ -------- ---------
Net loss attributable to common
stockholders.......................... $(32,960) $ 417 $ 521 $(16,570) $ (8,494)
======== ====== ====== ======== =========
Net loss per share attributable to
common stockholders................... $ (2.23)
========
Shares used in computing net loss per
share................................. 14,806
========
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------- COMBINED
OTHER COMPANY
HISTORICAL PRO AND
PRO FORMA PAGE OPERATIONS FORMA PAGE
METROCALL AMERICA NOT ACQUIRED(O) ADJUSTMENTS AMERICA
--------- ---------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Service, rent & maintenance revenue..... $158,632 $ 15,644 $ -- $ -- $174,276
Product sales........................... 25,370 1,498 -- -- 26,868
-------- -------- ------- ------- --------
Total revenues.................. 184,002 17,142 -- -- 201,144
Net book value of products sold......... (23,736) (1,062) -- -- (24,798)
-------- -------- ------- ------- --------
160,266 16,080 -- -- 176,346
Service, rent & maintenance expense..... 44,470 4,064 -- -- 48,534
Selling, marketing, general and
administrative........................ 77,086 8,008 -- -- 85,094
Depreciation & amortization............. 74,209 3,988 -- 3,963 (I) 82,160
Other................................... 408 -- 408
-------- -------- ------- ------- --------
Total operating expenses........ 196,173 16,060 -- 3,963 216,196
-------- -------- ------- ------- --------
(Loss) income from operations........... (35,907) 20 -- (3,963) (39,850)
Interest and other income
(expense) net......................... (21,649) (5,147) 5,197 (300) (J) (21,899)
Minority interest in loss of
investments........................... (211) -- -- -- (211)
-------- -------- ------- ------- --------
Net (loss) income before taxes...... (57,767) (5,127) 5,197 (4,263) (61,960)
Benefit (provision) for taxes........... 4,871 -- -- -- 4,871
-------- -------- ------- ------- --------
Net (loss) income................... (52,896) (5,127) 5,197 (4,263) (57,089)
Preferred Dividends..................... (4,190) (2,148) 2,148 (1,575) (F) (5,765)
-------- -------- ------- ------- --------
Net loss attributable to common
stockholders.......................... $(57,086) $ (7,275) $ 7,345 $(5,838) $(62,854)
======== ======== ======= ======= ========
Net loss per share attributable to
common stockholders................... $ (2.28) $ (2.23)
======== ========
Shares used in computing net loss per
share................................. 25,066 28,184
======== ========
</TABLE>
See accompanying notes to this unaudited statement.
75
<PAGE> 86
PAGE AMERICA GROUP, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CONSIDERATION
HISTORICAL ASSETS ACQUIRED/ RECEIVED/OTHER PRO FORMA
PAGE AMERICA LIABILITIES ASSUMED(O) TRANSACTION COSTS(R) PAGE AMERICA
------------ ---------------------- -------------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets
Cash and cash equivalents....... $ 616 $ -- $ 25,000 $ 25,616
Accounts receivable............. 1,008 1,008 -- --
Prepaid expenses and other
current assets............... 670 168 -- 502
-------- ------- ------- --------
Total current assets.... 2,294 1,176 25,000 26,118
Equipment, net.................... 6,424 6,424 -- --
Other assets
Intangibles, net................ 32,800 32,800 -- --
Other assets.................... 488 289 -- 199
Equity investments.............. -- -- 35,293 35,293
-------- ------- ------- --------
33,288 33,089 35,293 35,492
-------- ------- ------- --------
$ 42,006 $ 40,689 $ 60,293 $ 61,610
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term
debt......................... $ 51,166 $ -- $ -- $ 51,166
Accounts payable and accrued
expenses..................... 3,853 1,640 2,180 4,393
Preferred dividends payable..... 2,148 -- -- 2,148
Deferred revenue and customer
deposits..................... 1,840 1,840 -- --
-------- ------- ------- --------
Total current
liabilities........... 59,007 3,480 2,180 57,707
Long-term obligations............. 46 -- -- 46
Shareholders' equity
Preferred stock................. 30,068 -- -- 30,068
Other stockholders' equity...... (47,115) -- 20,904 (26,211)
-------- ------- ------- --------
Total stockholders'
equity................ (17,047) -- 20,904 3,857
-------- ------- ------- --------
$ 42,006 $ 3,480 $ 23,084 $ 61,610
======== ======= ======= ========
</TABLE>
See accompanying notes to this unaudited statement.
76
<PAGE> 87
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The pro forma condensed combined financial statements assume a per share
price of $6.375 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 of all acquisitions are subject
to change, which may be material, based upon a variety of factors including
actual share price at closing of acquisition, financial performance prior to
closing of the company to be acquired, and asset appraisals.
(A) Reflects the reclassification of pagers held for resale or future
rental, from inventory to furniture and equipment to conform accounting
practices to those of Metrocall.
(B) Reflects fair values assigned to intangible assets acquired which
consist of the following (in thousands):
<TABLE>
<CAPTION>
PAGE
A+ AMERICA
--------- --------
<S> <C> <C>
FCC Licenses................................................... $ 122,191 $ 30,092
Subscriber Lists............................................... 54,511 27,777
Non-Compete Agreements......................................... 1,950 --
Goodwill....................................................... 73,461 --
Less: Historical Investment by Metrocall....................... (60,043) --
Less: Historical Intangibles................................... (100,939) (32,800)
--------- --------
$ 91,131 $ 25,069
========= ========
</TABLE>
On June 30, 1996, the Company purchased approximately 40% of the
outstanding common stock of A+ Network for approximately $91.8 million plus
direct acquisition costs which were reflected on the Company's balance sheet as
equity investment in A+ Network of $26.8 million and goodwill of $65.0 million.
During the third quarter the Company recognized a loss of $2.2 million related
to its investment in A+ Network under the equity method of accounting. This loss
reduced the equity investment to approximately $24.5 million as of September 30,
1996.
(C) Reflects estimated accruals for direct acquisition costs together with
estimated accruals for costs of closing acquired duplicate facilities, estimated
severance for planned terminations of acquired employees and share registration
rights.
(D) The merger with A+ Network is structured as a tax free reorganization.
The deferred income tax liability represents the tax effect on the difference
between the amounts allocated to assets acquired and their tax basis.
(E) Reflects the shares of Metrocall Common Stock and VCRs expected to be
issued for these acquisitions, less historical equity amounts. The accompanying
statements also include the expected issuance of approximately 450,000 shares of
Metrocall Common Stock for pending acquisitions of A+ Network. Historical
financial statements for these A+ Network acquisitions have not been included in
the accompanying pro forma statements as they are not significant. The
accompanying statements do not reflect the issuance of approximately 468,000
options to former holders of A+ Network options as part of the A+ Network
acquisition.
(F) Reflects application of proceeds from $39.9 million private placement
of convertible redeemable preferred stock by the Company prior to closing the A+
Network merger less related costs of $1.5 million. Of the $38.4 million in net
proceeds related to this placement, $25.0 million is used to reduce long-term
obligations while $13.4 million is used to reduce accounts payable and accrued
expenses. Also reflects the purchase of $125.0 million of notes (the "Notes")
issued by A+ Network for $127.47 million ($126.22 million offer consideration
and payment for consents to modify indenture and $1.25 million of estimated
accrued
77
<PAGE> 88
interest, fees and expenses related to refinancing the A+ Notes) with debt under
the Metrocall Credit Facility.
Reflects issuance of 1,500 shares of Series B Junior Convertible Preferred
Stock of Metrocall having a stated value of $15 million in the acquisition of
Page America and bearing dividends at 14% per year.
(G) On October 24, 1995, A+ Network acquired Network Paging Corp.
("Network") in a merger (the "A+/Network Merger") for approximately $12.0
million in cash, common stock valued at $50.8 million and incurred related
expenses of approximately $3.1 million. At the same time, A+ Communications sold
$125.0 million of the A+ Notes. The acquisition was accounted for using the
purchase method. The following gives effect to the acquisition by A+
Communications and the sale of the A+ Notes as if they had occurred on January
1, 1995. The unaudited pro forma condensed financial data should be read in
conjunction with A+ Network's historical consolidated financial statements and
the consolidated unaudited financial statements of Network and the notes thereto
incorporated by reference herein.
<TABLE>
<CAPTION>
HISTORICAL
----------------------- PRO FORMA PRO FORMA
A+ NETWORK NETWORK(1) ADJUSTMENTS A+ NETWORK
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C>
Service, rent and maintenance revenue....... $ 53,308 $ 24,390 $ -- $ 77,698
Product sales............................... 4,024 4,321 -- 8,345
-------- -------- --------- --------
Total revenues...................... 57,332 28,711 -- 86,043
Net book value of products sold............. (7,878) (4,066) -- (11,944)
-------- -------- --------- --------
49,454 24,645 -- 74,099
Service, rent and maintenance expenses...... 11,584 5,533 (359)(2) 16,758
Selling, general and administrative......... 32,503 19,424 (38)(2) 45,872
(1,498)(2)
147(3)
(4,666)(4)
Depreciation and amortization............... 14,835 3,026 7,191(5) 25,052
Reorganization.............................. 669 -- (669)(6) --
-------- -------- --------- --------
Total operating expenses............ 59,591 27,983 108 87,682
-------- -------- --------- --------
Loss from operations........................ (10,137) (3,338) (108) (13,583)
Interest expense, net....................... (3,708) (760) (10,121)(7) (14,589)
-------- -------- --------- --------
Loss before income taxes and
extraordinary item........................ (13,845) (4,098) (10,229) (28,172)
Income taxes................................ -- (707) 707(8) --
-------- -------- --------- --------
Loss before extraordinary item.............. (13,845) (4,805) (9,522) (28,172)
Extraordinary item.......................... (607) -- -- (607)
-------- -------- --------- --------
Net loss.................................... $(14,452) $ (4,805) $ (9,522) $(28,779)
======== ======== ========= ========
</TABLE>
-----------------------
(1) Historical Network financial statements are presented for the period
from January 1, 1995 through October 24, 1995.
(2) Adjustment to eliminate specific operating and nonrecurring expenses
that would not have been incurred had the A+/Network Merger occurred
on January 1, 1995. Such savings are specifically identified as
follows (in thousands):
<TABLE>
<S> <C>
Reduction in long distance telephone charges.................... $ 267
Redundant paging terminals and related telephone expenses....... 92
Redundant yellow page advertising expense....................... 38
Salary costs of personnel not to be retained by A+/Network based
on analysis of A+/Network staffing requirements............... 1,498
------
Total................................................... $1,895
======
</TABLE>
(3) Adjustment to provide for changes in compensation of certain
executive officers pertaining to employment contracts entered into at
the time the A+/Network Merger closed.
(4) Adjustment to eliminate compensation costs that would not have been
incurred had the A+/Network Merger occurred on January 1, 1995.
(5) To record amortization expense related to intangibles for the period
from January 1, 1995 to October 24, 1995 net of $304,000 in historical
amortization expense for intangibles recorded by Network before the
A+/Network Merger.
(6) To give effect to elimination of the non-recurring reorganization
expenses incurred by A+ Network as a result of the A+/Network Merger.
(7) Reflects interest expense on the A+ Notes at 11 7/8% (plus
amortization of debt issuance costs of approximately $4.6 million and
discount of $907,500) net of interest expense ($5,270,000) applicable
to all existing long-term debt which was repaid with the proceeds from
the sale of the A+ Notes.
78
<PAGE> 89
(8) Adjustment to reverse the income tax provision applicable to
Network, as its taxable income would be offset by A+ Network's net
operating losses for income tax purposes had the A+/Network Merger
occurred on January 1, 1995.
(H) Reflects the elimination of certain executive salaries for Parkway and
Satellite executives terminated upon completion of the respective acquisitions
in July and August of 1996.
(I) 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. The $1.9 million assigned to non-compete agreements in conjunction
with the A+ Network merger will be amortized over 3 years.
(J) Represents the estimated incremental interest at a rate of 8.00% that
would have been incurred assuming all acquisitions were completed on January 1,
1995.
Also reflects the estimated incremental savings from the refinancing of
$125.0 million of A+ Notes at a rate of 11.875% for $127.47 million ($126.22
million offer consideration and payment for consents to modify indenture and
$1.25 million estimated accrued interest, fees and expenses related to
refinancing) with debt under the Metrocall Credit Facility at a rate of 8.00%
that would have occurred assuming the refinancing was completed on January 1,
1995.
(K) Represents the tax benefit resulting from the amortization of acquired
intangibles for A+ Network and Parkway assuming an effective tax rate of 40%.
(L) Represents dividend payment on $39.9 million private placement of
Series A Convertible Redeemable Preferred Stock bearing dividends at 14% per
annum.
(M) Historical statements for Parkway and Satellite in 1996 are through
July 16 and August 30, respectively, which are the dates the acquisitions with
the Company were completed. Subsequent to completion of the acquisitions all
financial reporting data is included in historic Metrocall data.
(N) Represents elimination of Metrocall's portion of A+ Network's net loss
(40%) as accounted for under the equity method.
(O) 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 preferred dividends).
Reflects the revenues, expenses and results of operations of Page America's
Florida and California operations sold in July 1995 and certain corporate
expenses including interest and preferred dividends.
(P) Reflects the acquisition of substantially all the assets of Page
America for (A) $25 million in cash ($5 million of which is assumed to be
financed as long-term debt), (B) 1,500 shares of Series B Junior Convertible
Preferred Stock of Metrocall having a Stated Value of $15 million bearing
interest at 14% per year, (C) 830,333 shares of Metrocall Common Stock, (D)
shares of Metrocall Common Stock or other equity securities having a 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, and
(E) expected direct acquisition costs of approximately $1.2 million as if the
acquisition had occurred on September 30, 1996.
(Q) The $25 million payment is assumed to be paid from available cash
($20.0 million) and financing available under the Metrocall Credit Facility
($5.0 million).
(R) As to Page America, reflects proceeds described in Note P above and
reflects transaction costs payable ($1.1 million) and the liability for warrants
held by holders of the subordinated notes ($1.1 million).
79
<PAGE> 90
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.
80
<PAGE> 91
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1994 and September 30, 1996..... F-3
Consolidated Statements of Operations for the years ended December 31, 1995, 1994 and
1993 and for the Nine Months Ended September 30, 1996 and 1995..................... F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993 and for the Nine Months Ended September 30, 1996 and 1995..................... F-5
Consolidated Statement of Shareholders' Equity (Deficit) for the years ended December
31, 1995, 1994 and 1993 and for the Nine Months Ended September 30, 1996 and
1995............................................................................... F-7
Notes to Consolidated Financial Statements........................................... F-8
</TABLE>
F-1
<PAGE> 92
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Page America Group, Inc.
We have audited the accompanying consolidated balance sheets of Page
America Group, Inc. and subsidiaries as of December 31, 1995 and December 31,
1994, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. 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, 1995 and December 31,
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Page America Group, Inc. will continue as a going concern. As
shown in the financial statements, the Company has incurred a loss of $13
million for the year ended December 31, 1995. Losses from operations in recent
years have significantly weakened the Company's financial position and its
ability to purchase paging equipment and meet current operating expenses.
Further, as discussed in Note A, the Company is in default of its debt
agreements under which it has outstanding borrowings of $48 million, including
$33 million of borrowings under a credit facility with certain banks which is
secured by substantially all of the assets of the Company. Such debt is
classified as a current liability and the Company's current liabilities exceeded
its current assets by $52 million at December 31, 1995. Management's plans in
regard to these matters are also described in Note A.
The matters referred to in the preceding paragraph raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
or classifications of liabilities that may result from the outcome of this
uncertainty.
ERNST & YOUNG LLP
Hackensack, New Jersey
March 15, 1996
F-2
<PAGE> 93
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1995 1994 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................. $ 751 $ 1,128 $ 616
Accounts receivable, net of allowance for doubtful accounts
of $277, $439 and $257.................................. 1,017 1,665 1,008
Prepaid expenses and other current assets.................. 944 503 670
-------- -------- --------
Total current assets............................... 2,712 3,296 2,294
EQUIPMENT, less accumulated depreciation and amortization.... 6,662 10,924 6,424
OTHER ASSETS
Certificates of authority, net of accumulated amortization
of $3,216, $3,044 and $3,669............................ 20,968 31,788 20,730
Customer lists, net of accumulated amortization of $7,992,
$8,486 and $8,429....................................... 3,776 8,625 3,340
Other intangibles, net of accumulated amortization of
$3,676, $2,940 and $3,400............................... 8,945 12,595 8,730
Deferred financing costs, net.............................. 32 1,924 --
Deposits and other non-current assets...................... 908 1,077 488
-------- -------- --------
34,629 56,009 33,288
-------- -------- --------
$ 44,003 $ 70,229 $ 42,006
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt....................... $ 48,666 $ 1,068 $ 51,166
Accounts payable........................................... 1,982 4,819 1,613
Accrued expenses and other liabilities..................... 1,535 3,433 2,240
Preferred dividends payable................................ 1,432 1,444 2,148
Customer deposits.......................................... 299 544 260
Deferred revenue........................................... 1,242 1,529 1,580
-------- -------- --------
Total current liabilities.......................... 55,156 12,837 59,007
LONG-TERM DEBT, less current maturities...................... 69 56,953 46
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, 288,881 and 286,361 shares;
liquidation value -- $105, $100 and $105 per share...... 30,068 28,888 30,068
Common stock -- $.10 par value, authorized -- 100,000,000
shares; issued and outstanding 8,052,305, 7,101,868 and
16,037,095 shares....................................... 805 710 1,604
Paid-in capital.............................................. 52,850 49,830 53,501
Accumulated deficit.......................................... (94,945) (78,989) (102,220)
-------- -------- --------
(11,222) 439 (17,047)
-------- -------- --------
$ 44,003 $ 70,229 $ 42,006
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 94
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------------------
1995 1994 1993 1996 1995
---------- ---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Service revenues.................... $ 26,415 $ 32,693 $ 26,609 $ 15,644 $ 21,085
Sales revenues...................... 2,692 4,565 3,648 1,498 2,139
---------- ---------- ---------- ----------- ----------
Total revenues............ 29,107 37,258 30,257 17,142 23,224
Operating expenses:
Cost of service................... 2,640 2,943 1,841 1,605 2,113
Cost of sales..................... 1,723 2,766 2,412 1,062 1,313
Selling........................... 6,066 6,842 4,879 3,075 4,682
General and administrative........ 8,923 10,653 8,688 4,933 7,216
Technical......................... 4,262 4,685 3,343 2,459 3,411
Depreciation...................... 5,235 6,370 6,868 2,882 3,792
Amortization and write-off of
intangibles.................... 3,350 4,447 2,925 1,106 2,473
---------- ---------- ---------- ----------- ----------
32,199 38,706 30,956 17,122 25,000
---------- ---------- ---------- ----------- ----------
Operating profit (loss)........... (3,092) (1,448) (699) 20 (1,776)
Interest expense.................... (6,263) (5,102) (4,032) (4,712) (4,796)
Other income (expenses):
Gain (loss) on disposal of
assets......................... (657) 371 (53) 84 (918)
Amortization and write-off of
deferred costs................. (2,688) (437) (1,078) (61) (2,594)
Other............................. (393) (412) (683) (458) (228)
---------- ---------- ---------- ----------- ----------
(3,738) (478) (1,814) (435) (3,740)
---------- ---------- ---------- ----------- ----------
Net loss............................ (13,093) (7,028) (6,545) (5,127) (10,312)
Preferred stock dividend
requirements...................... (2,863) (3,023) (3,268) (2,148) (2,148)
---------- ---------- ---------- ----------- ----------
Net loss applicable to common
stock............................. $ (15,956) $ (10,051) $ (9,813) $ (7,275) $ (12,460)
========== ========== ========== =========== ==========
Loss per common share............... $ (2.01) $ (1.55) $ (2.55) $ (.64) $ (1.58)
========== ========== ========== =========== ==========
Weighted average number of shares
outstanding....................... 7,936,410 6,463,889 3,847,185 11,309,424 7,897,354
========== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 95
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ---------------------
1995 1994 1993 1996 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Cash received from customers...... $ 28,949 $ 36,958 $ 29,610 $ 17,658 $ 23,166
Cash paid to suppliers and
employees...................... (22,269) (23,913) (17,569) (12,990) (18,024)
Interest paid..................... (4,556) (4,389) (3,972) (2,008) (4,487)
Other............................. (60) (54) (41) (37) (52)
---------- ---------- ---------- ---------- ----------
Net cash provided by operating
activities..................... 2,064 8,602 8,028 2,623 603
---------- ---------- ---------- ---------- ----------
Cash flows from investing
activities:
Capital expenditures.............. (5,938) (8,016) (6,886) (2,826) (4,700)
Licensing costs................... (206) (1,016) (364) (216) (254)
Acquisitions and related
liabilities.................... -- (265) (13,108) -- --
Net proceeds from disposal of
assets......................... 17,473 416 46 619 17,334
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities......... 11,329 (8,881) (20,312) (2,423) 12,380
---------- ---------- ---------- ---------- ----------
Cash flows from financing
activities:
Proceeds from issuance of debt.... 116 -- 59,757 1,334 117
Net proceeds from issuance of
Series One Preferred Stock..... -- -- 7,752 -- --
Common Stock issued to employee
stock purchase plan............ -- -- 26 -- --
Net proceeds from issuance of
common stock................... -- -- 3,601 -- --
Principal payments on debt........ (13,077) (919) (51,984) (1,359) (12,638)
Costs related to financing of
debt........................... (741) (177) (3,802) (113) (739)
Costs related to issuance of
common stock................... (68) (39) -- -- (55)
Costs related to issuance of
Series One Preferred Stock..... -- (370) -- -- --
Cash related to planned Metrocall
transaction.................... -- -- -- (197) --
Costs related to 1992 terminated
registration statement......... -- -- (45) -- --
Costs related to 1992 note
repurchase..................... -- -- (275) -- --
---------- ---------- ---------- ---------- ----------
Net cash (used in) provided by
financing activities......... (13,770) (1,505) 15,030 (335) (13,315)
---------- ---------- ---------- ---------- ----------
Net (decrease) increase in cash and
cash equivalents.................. (377) (1,784) 2,746 (135) (332)
Cash and cash equivalents at
beginning of period............... 1,128 2,912 166 751 1,128
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of
period............................ $ 751 $ 1,128 $ 2,912 $ 616 $ 796
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 96
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
($ IN THOUSANDS)
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1995 1994 1993 1996 1995
-------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss............................... $(13,093) $(7,028) $(6,545) $(5,127) $(10,312)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization........ 9,690 11,254 10,193 4,049 8,859
Net book value of pagers sold........ 1,596 2,731 2,352 960 1,223
Write-off of deferred financing
costs............................. 1,584 -- 677 -- --
Provision for losses on accounts
receivable........................ 710 1,703 1,130 640 516
Provision for lost pagers............ 249 342 688 151 200
Loss (gain) on disposal of assets.... 657 (371) 54 (84) 918
Issuance of promissory notes to
satisfy interest on subordinated
debt.............................. 1,950 -- -- 1,463 1,463
Other................................ 578 204 54 465 331
Change in assets and liabilities:
Increase in accounts receivable... (158) (300) (647) (331) (59)
Decrease (increase) in prepaid
expenses and other.............. 279 (245) 174 148 (752)
(Decrease) increase in accounts
payable......................... (1,759) 83 (392) (285) (1,620)
(Decrease) increase in accrued
expenses........................ (219) 229 290 574 (164)
-------- ------- ------- ------- --------
Total adjustments............ 15,157 15,630 14,573 7,750 10,915
-------- ------- ------- ------- --------
Net cash provided by operating
activities........................... $ 2,064 $ 8,602 $ 8,028 $ 2,623 $ 603
======== ======= ======= ======= ========
Supplemental schedule of noncash
investing
and financing activities:
Dividends accrued on preferred
stock............................. $ 1,432 $ 1,444 $ 3,071 $ 2,148 $ 716
Dividends added to the liquidation
value of Preferred Stock.......... 1,432 -- -- -- 1,432
Notes issued in connection with
acquisitions...................... -- -- 250 -- --
Common stock issued:
In connection with acquisitions... 1,470 -- 5,425 -- 1,471
To employee stock purchase plan... 16 130 32 -- --
Dividend payment on preferred
stock........................... 1,445 1,527 -- 1,432 1,444
Common Stock adjustment relating to
Crico asset acquisition........... -- 1,471 -- -- --
Capital expenditures in accounts
payable and accrued expenses...... 94 1,367 160 194 618
Capital expenditures financed........ 1,287 -- 1,512 637 1,052
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<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, 1993.............................................. 131,742 $ 1,834 3,828,434
Conversion of Preferred Stock........................................... (263) (3) 263
Issuance of Common Stock:
In connection with acquisition........................................ 1,240,000
In connection with Subordinated Notes................................. 915,625
To employee stock purchase plan and trust............................. 15,000
Issuance of warrants in connection with subordinated debt...............
Preferred Stock exchange................................................ 229,978 $22,998
Repayment of Related Party receivable and cancellation of
certificates.......................................................... (4,210) (421)
Sale of Preferred Stock Series One...................................... 80,000 8,000
Expenses related to Preferred and Common Stock issuance.................
Dividends declared on Preferred Stock...................................
Net loss................................................................
------- ------- -------- ------ ---------
BALANCE AT DECEMBER 31, 1993............................................ 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 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 (unaudited):
To employee stock purchase plan and trust............................. 85,200
For dividends on Preferred Stock -- Series One........................ 7,899,590
Expense related to issuance of Common Stock (unaudited).................
Dividends declared on Preferred Stock (unaudited).......................
Net loss (unaudited)....................................................
------- ------- -------- ------ ---------
BALANCE AT SEPTEMBER 30, 1996 (UNAUDITED)............................... 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, 1993.............................................. $ 383 $35,746 $ (59,365) $(21,402)
Conversion of Preferred Stock........................................... 0 3 0
Issuance of Common Stock:
In connection with acquisition........................................ 124 5,301 5,425
In connection with Subordinated Notes................................. 92 3,571 3,663
To employee stock purchase plan and trust............................. 1 57 58
Issuance of warrants in connection with subordinated debt............... 867 867
Preferred Stock exchange................................................ 320 23,318
Repayment of Related Party receivable and cancellation of
certificates.......................................................... (421)
Sale of Preferred Stock Series One...................................... 8,000
Expenses related to Preferred and Common Stock issuance................. (796) (796)
Dividends declared on Preferred Stock................................... (3,070) (3,070)
Net loss................................................................ (6,545) (6,545)
------ ------- --------- --------
BALANCE AT DECEMBER 31, 1993............................................ 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 (unaudited):
To employee stock purchase plan and trust............................. 9 13 22
For dividends on Preferred Stock -- Series One........................ 790 642 1,432
Expense related to issuance of Common Stock (unaudited)................. (4) (4)
Dividends declared on Preferred Stock (unaudited)....................... (2,148) (2,148)
Net loss (unaudited).................................................... (5,127) (5,127)
------ ------- --------- --------
BALANCE AT SEPTEMBER 30, 1996 (UNAUDITED)............................... $1,604 $53,501 $(102,220) $(17,047)
====== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-7
<PAGE> 98
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
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.
INTERIM FINANCIAL INFORMATION -- The unaudited consolidated financial
statements as of September 30, 1996 and for the nine months ended September 30,
1996 and 1995 include, in the opinion of management, all adjustments (consisting
of normal recurring adjustments) necessary to present fairly the Company's
consolidated financial position, results of operations and cash flows. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less, at date of
acquisition, to be cash equivalents.
EQUIPMENT -- Equipment is stated at cost less accumulated depreciation and
amortization and includes pagers held for sale or lease. Depreciation is
computed by the declining balance method for pager equipment and the
straight-line method for all other equipment in amounts sufficient to allocate
the cost of depreciable assets to operations over their estimated useful lives.
Leasehold improvements are amortized over the shorter of the life of the
respective lease or service life of the improvement. Cost of sales and service
does not include depreciation expense, which is presented separately in the
accompanying statements of operations.
CERTIFICATES OF AUTHORITY -- The costs of certificates of authority related
to the conduct of RCC operations are amortized on a straight-line basis
principally over periods of 40 years.
CUSTOMER LISTS -- Customer lists generally consist of a portion of the cost
of business acquisitions assigned to the value of customer accounts and are
amortized on a straight-line basis over the estimated lives of those customers
which range up to fourteen years.
OTHER INTANGIBLES -- Other intangibles include the excess of the purchase
price over the fair market value of the net assets acquired and are amortized on
a straight-line basis principally over 40 year periods. The Company routinely
evaluates the carrying value of all of its intangibles for impairment.
INTEREST RATE PROTECTION -- On December 30, 1993, the Company entered into
a new senior credit facility with certain banks. On February 15, 1994, the
Company entered into an interest rate cap agreement which protects the Company
against increases in interest rates on $25 million of this debt. The unamortized
cost of this agreement is included in prepaid expenses in the consolidated
balance sheet and is being amortized
F-8
<PAGE> 99
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
over the three year life of the agreement. The fair value of the instrument, as
further described in Note E, was based upon a quote from an independent
financial institution.
LOSS PER SHARE -- Loss per share is computed based upon the weighted
average number of common shares outstanding during the periods presented and is
computed after giving effect to preferred stock dividend requirements. Stock
options, warrants and the assumed conversion of the convertible preferred stock
have not been included in the calculation, since their inclusion would be
anti-dilutive for each of the periods presented.
NET LOSSES AND MANAGEMENT'S PLANS -- The accompanying financial statements
have been prepared on a going concern basis. The Company, since its inception,
has experienced a deficiency in working capital and recurring losses. In 1995,
as a result of non-compliance by the Company with certain covenants of its
credit facility, the terms were modified to accelerate the final maturity to
December 29, 1995, and the subordinated notes were modified to provide for a
final maturity of six months thereafter. The credit facility was not repaid at
maturity causing the credit facility and the subordinated notes to be in default
(see Note E). Such debt is classified as a current liability and the Company's
current liabilities exceeded its current assets by $52.4 and $56.7 million at
December 31, 1995 and September 30, 1996, respectively. The Company intends to
satisfy the amounts due under the credit facility and the subordinated notes in
1997 from cash or other assets generated by the sale of its assets (see Note
(M)). The successful completion of these efforts is essential as the Company has
no other immediate plans that will provide sufficient cash flows to satisfy its
obligations. There can be no assurance that the Company will have sufficient
funds to finance its operations, which continue to show losses.
All of these matters raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts or classifications of liabilities that
may result from the outcome of this uncertainty.
NOTE B -- SALE OF FLORIDA AND CALIFORNIA OPERATIONS
On July 28, 1995, the Company sold its California and Florida paging assets
for a cash sale price of $19.4 million. One million dollars of the sale price is
being held in escrow and is scheduled to be released to the Company over a two
year period, as provided for in the agreement. Part of the proceeds was used to
reduce the Company's senior debt by $11.8 million and to prepay interest of $1.2
million through December 29, 1995. In connection with this sale, the Company
incurred expenses amounting to approximately $1.0 million. This sale included
approximately 78,000 pagers, two statewide and several regional frequencies. The
assets sold had a net book value of approximately $19.1 million and consisted of
the assets which the Company acquired from Crico Communications Corporation
("Crico") on December 30, 1993 and the 900 Mhz channel which is licensed to
provide state-wide coverage in California which the Company acquired in 1994 for
a purchase price of $500,000. The purchase price paid by the Company for the
Crico assets consisted of $12,650,000 in cash paid to Crico's lenders, the
issuance of an aggregate of 1,435,903 shares of Common Stock to Crico's lenders
and the issuance of 240,000 shares of Common Stock and warrants to purchase
130,000 shares of Common Stock at an exercise price of $5.00 per share to a
company related to certain shareholders of Crico. As a result of the sale, the
Company incurred a loss of approximately $718,000.
F-9
<PAGE> 100
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
NOTE C -- 1993 REFINANCING AND ACQUISITION FINANCING
On December 30, 1993, contemporaneous with the Crico acquisition, the
following occurred:
Credit Facility
The Company entered into a new senior secured credit facility, replacing
the Company's then existing credit facility. The new agreement provided for an
$11.27 million reducing revolving credit and a $45 million term loan facility,
each with a final maturity of March 31, 2000. In connection with this
transaction, the Company wrote off $677,400 of deferred financing costs related
to the retired credit facility. The terms of this credit facility were
subsequently modified. See Note E.
Subordinated Note Financing
The Company sold $13 million aggregate principal amount of 12 percent
Subordinated Notes originally due 2003. Payments on the Subordinated Notes
initially were to be interest only with mandatory principal payments of $1.3
million due semi-annually beginning on June 30, 1999. The terms of these notes
were subsequently modified. See Note E.
In connection with the issuance of the notes, the Company also issued
warrants to purchase an aggregate of 1,155,556 shares of Common Stock, at a
purchase price of $3.50 per share. The warrants expire ten years from issuance.
The Company may accelerate the expiration of the warrants at any time after
December 31, 1996 if the average closing price of the Common Stock for both the
60 day and the five day periods preceding the notice date was equal to or
greater than 150 percent of the warrant exercise price. The holders will be
entitled to anti-dilution protection under certain circumstances. If a change of
control of the Company occurs at less than a 25 percent premium over the
exercise price, the warrant holders will have the right to cause the Company to
pay to them the difference between the exercise price and 125 percent of the
exercise price; provided, however, the warrants must be exercised.
Preferred and Common Stock Issuance
The Company sold $8 million of a new series of Series One Convertible
Preferred Stock (See Note G). As part of this transaction, the Company also sold
500,000 shares of Common Stock at a price of $4.00 per share. The Series One
Convertible Preferred Stock has a 10 percent dividend, payable semi-annually in
arrears and is convertible into Common Stock at $4.50 per share, subject to
certain anti-dilution provisions. Payment of dividends may be made in cash or in
Common Stock of the Company registered under the Securities Act of 1933. Any
dividend payments not made when permitted under the Credit Facility and the
Subordinated Note Financing will result in, among other things, an increase in
the dividend rate to 15 percent per annum and entitle holders of the majority of
the Series One Convertible Preferred Stock to elect an additional representative
to the Board of Directors of the Company. Holders of the Series One Convertible
Preferred Stock were originally entitled to a preference in liquidation of $100
per share plus any accrued but unpaid dividends. In 1995 the holders of the
Series One Convertible Preferred Stock waived their rights to receive the
dividend payment of $1,432,000 due on June 30, 1995. In exchange, this amount
was added to the liquidation value of the shares thereby increasing the
liquidation value to $105 per share. On June 12, 1996, accrued dividends of
$1,432,000 at December 31, 1995 were paid by the issuance of 7,899,590 shares of
the Company's Common Stock. 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
F-10
<PAGE> 101
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
redemption, the holders may convert to shares of Common Stock. Upon any
redemption, accrued dividends must be paid by the Company in cash. Upon
conversion of the Series One Convertible Preferred Stock, the Company will have
the option to pay accrued dividends by issuing additional shares of its Common
Stock. Holders of the Series One Convertible Preferred Stock will be entitled to
vote as if their shares of Series One Convertible Preferred Stock were converted
into shares of Common Stock. Holders of a majority of the Series One Convertible
Preferred Stock, as a class, will be entitled to elect two representatives to
the Board of Directors. If a change in control in the Company occurs, the
holders of Series One Convertible Preferred Stock will have the right to cause
the Company to repurchase such stock at the liquidation value, plus accrued
dividends. The Company has registered for resale under the Securities Act of
1933 the Series One Convertible Preferred Stock, Common Stock issued in payment
of dividends and the Common Stock issuable upon conversion of the Series One
Convertible Preferred Stock. The Company also registered the warrants issued on
December 30, 1993 and shares of Common Stock issuable upon exercise thereof.
Preferred Stock Exchange
The Company also issued $23 million of Series One Preferred Stock in
exchange for (i) all outstanding shares of Series A Preferred Stock, Series A-2
Preferred Stock and Series B Preferred Stock (which were reflected outside of
shareholders' equity due to redemption provisions); (ii) warrants to purchase
1,276,289 shares of Common Stock having an exercise price of $6.761 per share
and (iii) $8,065,960 of dividends accrued through December 31, 1993 on the
exchanged preferred stock. As the result of the exchange, all the outstanding
Series A, Series A-2 and Series B Preferred Stock were canceled and provisions
relating to change in control and rights to terminate were terminated. The terms
of the exchange were negotiated between independent members of the Board of
Directors of the Company and the holders of the preferred stock.
NOTE D -- BALANCE SHEET CLASSIFICATIONS ($ IN THOUSANDS)
Prepaid expenses and other current assets comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1994 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current portion of escrow amount from the
sale of Florida and California
assets................................. $ 502 $ 502
Receivable from a reseller............... $ 152
Other current assets..................... 442 351 168
-------- -------- --------
$ 944 $ 503 $ 670
======== ======== ========
</TABLE>
F-11
<PAGE> 102
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
Equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1994 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Pagers................................. $ 8,164 $ 12,542 $ 7,846
Radio common carrier equipment......... 12,914 14,683 13,197
Office equipment....................... 3,946 4,002 3,951
Leasehold improvements................. 614 544 614
Building and land...................... 64 100 64
-------- -------- ----------
25,702 31,871 25,672
Less accumulated depreciation and
amortization......................... (19,040) (20,947) (19,248)
-------- -------- ----------
$ 6,662 $ 10,924 $ 6,424
======== ======== ==========
</TABLE>
Accrued expenses and other liabilities comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1994 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Interest............................... $ 101 $ 837 $ 626
Taxes.................................. 818 651 826
Salaries and bonuses................... 366 267 62
Professional services.................. 95 14 76
Bank reinstatement fee................. -- -- 350
Crico acquisition contingent payment... 1,471 --
Other.................................. 155 193 300
-------- -------- ----------
$ 1,535 $ 3,433 $ 2,240
======== ======== ==========
</TABLE>
NOTE E -- LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1996
------------ ------------ -------------
($ IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
Bank credit facility................. $ 33,200 $ 45,000 $33,948
Subordinated notes (including
deferred interest)................. 14,667 12,245 16,413
Other................................ 868 776 851
------- ------- --------
48,735 58,021 51,212
Less current maturities.............. 48,666 1,068 51,166
------- ------- --------
$ 69 $ 56,953 $ 46
======= ======= ========
</TABLE>
On December 30, 1993, the Company entered into a senior secured credit
facility with certain banks. The bank credit facility ("Credit Facility"),
replacing the Company's then existing credit facility, provided for an $11.27
million reducing revolving credit line and a $45 million term loan facility,
each with an original final
F-12
<PAGE> 103
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
maturity of March 31, 2000. The interest rate is based either on prime or LIBOR,
at the option of the Company, with further adjustment depending on the Company's
ratio of total debt to operating cash flow, as defined. Due to the existence of
a default at December 31, 1995, the interest rate was based on prime plus the
aforementioned adjustment. At December 31, 1995, the interest rate was prime of
8.5 percent plus 1.75 percent. At closing, the Company paid a fee to the Banks
in the amount of $951,550. The Company was also required to pay the Banks a
commitment fee of 0.5 percent on the unused balance of the revolving credit
facility and annual fees of $55,000. The Company canceled its revolving credit
facility effective November 29, 1994. Payments on the Credit Facility initially
were to be interest only with mandatory principal payments due quarterly
beginning on September 30, 1995.
On July 28, 1995, concurrent with the sale of the Company's Florida and
California paging assets, the Credit Facility was amended. Among other things,
the amendment provided for an acceleration of the final maturity to December 29,
1995 and modified the financial covenants so that the Company would no longer be
in default as of the amendment date. The Company used the net proceeds from the
sale of its Florida and California operations to reduce the debt by $11.8
million and prepay interest at the LIBOR rate from August 1, 1995 through
December 29, 1995. In its third fiscal quarter, the Company recorded a charge of
approximately $1.8 million related to the amended agreement which includes the
write-down of deferred financing costs of approximately $1.1 million. The Credit
Facility has not been repaid and the lenders have declared the Company in
default. The Credit Facility is secured by substantially all the assets of the
Company.
On December 30, 1993, the Company sold $13 million aggregate principal
amount of 12 percent Subordinated Notes originally due 2003, with warrants,
pursuant to a Note Purchase Agreement. Payments on the Subordinated Notes
initially were to be interest only with mandatory principal payments of $1.3
million due semi-annually beginning on June 30, 1999. All payments on the notes
are subordinated to the prior payment in full of all amounts outstanding under
the Credit Facility. The notes are governed by certain financial covenants. In
July, 1994, the Company exchanged the notes for identical notes which were
registered under the Securities Act of 1993.
On July 28, 1995, the subordinated notes were modified to provide for a
final maturity of six months subsequent to the final maturity of the Credit
Facility and to defer the cash payment of interest until maturity. As a result
of the default under the Credit Facility, the Company is in default of the
subordinated notes. Commencing January 1, 1995, interest is increased from 12 to
15 percent per annum, compounded semi-annually and is satisfied by the issuance
of additional promissory notes with terms substantially identical to the
subordinated notes, as amended. In 1995 the Company recorded a charge of
approximately $500,000 related to the modified agreement, which includes the
write-down of deferred financing costs of approximately $479,000. If a change in
control of the Company occurs, the note holders will have the right to require
the Company to repurchase the notes at par plus accrued interest.
On February 15, 1994, in accordance with the terms of the Credit Facility,
the Company entered into an interest rate cap agreement for which the Company
paid $65,000. This agreement protects the amount of $25 million against LIBOR
rates in excess of 7.5 percent and expires in February of 1997. There was no
impact on the weighted average borrowing rate or the reported interest expense
during 1994 and 1995 as the LIBOR rate did not exceed 7.5 percent. The estimated
fair value of this instrument at December 31, 1995 was $0. The net carrying
value of this instrument at December 31, 1995 was $24,000.
NOTE F -- CUMULATIVE SERIES C PREFERRED STOCK EXCHANGE
On March 7, 1994, the Company offered the holders of its Cumulative Series
C Preferred Stock to exchange each share of such stock, and undeclared dividends
thereon, for 2.725 shares of common stock. The
F-13
<PAGE> 104
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
holders of 112,509 shares of Series C elected to accept this offer. Accordingly,
306,581 shares of Common Stock of the Company were issued in exchange for those
shares of Series C and the holders' right to $970,400 of associated undeclared
dividends. In accordance with the original terms, on September 12, 1994, the
remaining shares outstanding were mandatorily converted to shares of Common
Stock of the Company and accrued dividends of $17,500 were paid.
NOTE G -- SHAREHOLDERS' EQUITY
SERIES ONE CONVERTIBLE PREFERRED STOCK -- Series One Convertible Preferred
Stock has a 10 percent dividend, payable semi-annually in arrears and is
convertible into Common Stock at an initial price of $4.50 per share, subject to
certain anti-dilution provisions. Payment of dividends may be made in cash or in
Common Stock of the Company. On August 11, 1994 and March 8, 1995, the Company
issued 406,220 shares and 437,629 shares of its Common Stock, respectively, to
the holders of Series One Convertible Preferred Stock, as full payment of
dividends for the year ended December 31, 1994. On June 30, 1995, the Preferred
shareholders waived their rights to receive the dividend payment of $1,432,000
due on the same date. In exchange, this amount was added to the liquidation
value of the shares. As of December 31, 1995, accrued dividends aggregated
$1,432,000.
COMMON STOCK RESERVED FOR ISSUANCE -- As of December 31, 1995, unissued
Common Stock of the Company was reserved for issuance in accordance with the
terms of outstanding warrants (1,511,238), stock options (251,700), convertible
preferred stock (6,363,578) and preferred stock dividends (7,900,000). As of
September 30, 1996, unissued Common Stock of the Company was reserved for
issuance in accordance with the terms of outstanding warrants (1,511,238), 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. In August, 1995, 100,000 options held by the former
President of the Company were canceled. No more options may be granted under
this plan.
The Company's 1990 Stock Option Plan provides for the grant by the Company
of options to purchase not more than 555,000 shares of Common Stock to key
employees and directors. The exercise price per share is the fair market value
of a share of Common Stock for options granted after December 29, 1992, and the
greater of (i) the fair market value of a share of Common Stock or (ii) $7.00,
for options granted on or before December 29, 1992. Options to be granted under
the 1990 Stock Option Plan may not be exercised prior to one year from the date
of grant and options may be exercised 20 percent per year thereafter. Exercise
of such options will be accelerated if the Company is sold, a change in control
occurs or as the Compensation Committee of the Board of Directors deems
appropriate. In August, 1995, 252,508 options held by the former President of
the Company were canceled. In October, 1995, 150,000 and 75,000 options were
granted to the President and the Chief Financial Officer of the Company,
respectively. These options have an exercise price of $.75 per share and will
expire in October, 2002.
F-14
<PAGE> 105
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
The following summarizes the changes in stock options:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1992 (183,597 exercisable).... 576,967 4.40-7.38
Granted................................................. 252,508 4.63
Canceled................................................ (413,774) 4.40-7.38
Expired................................................. (9,243) 4.40
--------
Outstanding at December 31, 1993 (198,575 exercisable).... 406,458 4.63-7.38
Canceled................................................ (11,750) 7.00-7.38
--------
Outstanding at December 31, 1994 (278,566 exercisable).... 394,708 4.63-7.38
Granted................................................. 225,000 .75
Canceled................................................ (368,008) 4.63-7.38
--------
Outstanding at December 31, 1995 (22,450 exercisable)..... 251,700 .75-7.38
Cancelled............................................... (11,700) 7.00
Outstanding at September 30, 1996 (12,750 exercisable).... 240,000 .75-7.38
========
</TABLE>
The stock options outstanding at December 31, 1995 and September 30, 1996
expire at various dates through October, 2002. As of September 30, 1996,
December 31, 1995 and December 31, 1994, 320,000, 308,300 and 266,292 options
were available for grant, respectively.
NOTE H -- INCOME TAXES
The Tax Reform Act of 1986 enacted a complex set of rules limiting the
utilization of net operating loss and tax credit carryforwards to offset future
taxable income following a corporate "ownership change". In general, an
ownership change occurs if the percentage of stock of a loss corporation owned
(actually, constructively and, in some cases, deemed ownership) by one or more
"5 percent shareholders" has increased by more than 50 percentage points over
the lowest percentage of such stock owned by those persons during a three year
testing period. If an ownership change occurs it would limit the utilization of
the net operating loss carryforwards for federal income tax purposes. The
Company has determined that there has been an ownership change as of December
31, 1993. As of December 31, 1995, the Company had net operating losses of
approximately $71.5 million for federal income tax purposes which will expire at
various dates between 1998 and 2010. $52.6 million of the total net operating
losses of $71.5 million are subject to the aforementioned limitations. In
addition, the Company has investment tax credit carryforwards of approximately
$670,000 which expire principally in 1997 through 2000, which are also subject
to limitation.
F-15
<PAGE> 106
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
The effects of temporary differences that gave rise to deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------- ---------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred tax assets:
FCC License amortization.......................... $ 110
Depreciation...................................... $ 590
Allowance for bad debts........................... $ 13 $ 68
Commission expense................................ 1,425 1,502
Investment tax credit carryforwards................. 670 670
Net operating loss carryforwards.................... 27,362 22,278
Other............................................... 256 392
---- -------- --- -------
Total deferred tax assets................. 13 29,823 68 25,432
Less: Valuation allowance......................... (13) (29,699) (68) (25,329)
---- -------- --- -------
Net deferred tax assets........................... 124 103
Deferred tax liabilities:
Depreciation...................................... 124
FCC license amortization.......................... 88
Other............................................. 15
---- -------- --- -------
Total deferred tax liabilities............ 124 103
---- -------- --- -------
Net deferred tax asset/liability.................... $ 0 $ 0 $ 0 $ 0
==== ======== === =======
</TABLE>
The Company's valuation allowance increased by approximately $4,315 to
$29,712 as of December 31, 1995 due principally to the increase in the net
operating losses.
The reconciliation of income taxes computed at the U.S. federal statutory
tax rate to income tax expense is:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax (benefit) at U.S. statutory rates................. $(4,429) $(2,390) $(2,225)
State income taxes, net of federal benefit............ (487) (195) (134)
Valuation allowance................................... 4,315 3,014 2,121
Other................................................. 601 (429) 238
------- ------- -------
$ 0 $ 0 $ 0
======= ======= =======
</TABLE>
NOTE I -- CONTINGENCIES
The Company is involved in various lawsuits and proceedings arising in the
normal course of business. In the opinion of management of the Company, the
ultimate outcome of these lawsuits and proceedings will not have a material
effect on the financial position, results of operations or cash flows of the
Company.
F-16
<PAGE> 107
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
NOTE J -- RELATED PARTY TRANSACTIONS
A company (the "Related Company") whose president is a Director of the
Company acted as a placement agent in connection with the sale by the Company of
shares of Series One Convertible Preferred Stock and subordinated notes and the
entering into of the bank credit facility. As a result, the Related Company
received a fee of $532,500 plus reimbursement of its out-of-pocket expenses
which was paid in December, 1993.
The Related Company has been engaged to provide investment banking
functions for which it receives an annual fee of $105,000, subject to cost of
living adjustments. This agreement will terminate if the Related Company ceases
to control a majority of the Series One Convertible Preferred Stock (or Common
Stock issued upon conversion thereof) or owns less than 20% of the Company's
fully diluted shares of Common Stock. At December 31, 1995, investment banking
fees accrued but unpaid were $151,000.
In 1993 the Related Company repaid $421,000 of indebtedness owed to the
Company by surrendering for cancellation 4,210 shares of Series One Convertible
Preferred Stock which had a value of $100 per share.
NOTE K -- RENTALS
Rental expense for the fiscal years 1995, 1994 and 1993, and the nine
months ended September 30, 1996 and 1995 was approximately $3,062,000,
$3,236,000, $2,353,000, $1,794,000 and $2,435,000 respectively.
Future minimum annual payments under non-cancelable operating leases for
office space and transmitter sites, as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1996........................................................... $1,145
1997........................................................... 823
1998........................................................... 664
1999........................................................... 546
2000........................................................... 432
Thereafter..................................................... 1,576
------
$5,186
======
</TABLE>
Certain leases are subject to increases in taxes, operating and other
expenses.
NOTE L -- EMPLOYEE BENEFIT PLAN
The Company has a 401(K) plan covering substantially all of its employees.
All employees who have completed ninety days of service are eligible to
participate. Employees may contribute 1% to 4% of compensation to the plan on an
after-tax basis and also defer additional amounts of compensation in 1%
increments on a pre-tax basis, subject to limits established by the Internal
Revenue Code. The Company matches 100% of after-tax and 25% of pre-tax
contributions with shares of its common stock. The total cost of the plan
amounted to $69,400, $124,800, $140,700, $34,800 and $50,100 in 1995, 1994 and
1993, and for the nine months ended September 30, 1996 and 1995 respectively.
F-17
<PAGE> 108
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
NOTE M -- PLANNED SALE OF ASSETS AND AMENDMENTS TO CREDIT FACILITY (UNAUDITED)
On April 23, 1996, the Company entered into a definitive agreement to sell
substantially all of its net operating 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) 830,000 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 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.
Following completion of the transaction, which is expected to occur in
1997, the Company plans to liquidate. The cash consideration received from
Metrocall will not be sufficient to satisfy the Company's liabilities. Page
America must seek the agreement of its bank lenders, holders of subordinated
notes and other creditors in order to discharge its liabilities. In addition,
the Acquisition will require the consent of the Company's bank lenders and the
release of their liens on the Company's assets. The value of the assets of the
Company 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 agreements reached with the Company's creditors and holders of Series
One Preferred Stock and on the market value of the shares of Metrocall Common
Stock, Common Stock Equivalents and Series B Preferred Stock received by the
Company pursuant to the acquisition agreement.
On April 26, 1996, the Credit Facility was 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. The
Company is currently in default in the payment of all amounts due under the
Credit Facility and in payment of its Subordinated Notes.
NOTE N -- OTHER SUBSEQUENT EVENTS (UNAUDITED)
Stock Exchange Listing
Due to the Company's inability to comply with all the financial guidelines
of the American Stock Exchange ("AMEX") for continued listing, the Company's
common stock was removed from the AMEX listing in April, 1996. The AMEX has
advised Page America that in view of the planned sale of its assets, trading in
the Company's common stock will not resume on the AMEX.
Preferred Stock Dividends
On June 12, 1996, the Company issued 7,899,590 shares of its Common Stock
as full payment of the dividends accrued as of December 31, 1995. See Note C.
F-18
<PAGE> 109
APPENDIX A
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
A-1
<PAGE> 110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SCHEDULES........................................................................... A-4
EXHIBITS............................................................................ A-4
ARTICLE 1
DEFINITIONS....................................................................... A-5
ARTICLE 2
PURCHASE AND SALE OF ASSETS....................................................... A-7
2.1 Conveyance of Assets....................................................... A-7
2.2 Excluded Assets............................................................ A-8
2.3 Liabilities................................................................ A-8
2.4 Excluded Liabilities....................................................... A-8
2.5 Parent and Stockholder Action.............................................. A-9
2.6 Proxy Statement and Registration Statement................................. A-9
ARTICLE 3
CLOSING........................................................................... A-10
3.1 Determination of Closing Date.............................................. A-10
3.2 Time and Place of Closing.................................................. A-11
3.3 Closing Documents.......................................................... A-11
ARTICLE 4
PURCHASE PRICE, METHOD OF PAYMENT, ALLOCATION OF PURCHASE PRICE................... A-11
4.1 Purchase Price for Assets.................................................. A-11
4.2 Post-Closing Allocation of the Purchase Price.............................. A-12
4.3 Adjustments to the Purchase Price.......................................... A-13
4.4 Payment of Post-Closing Purchase Price Adjustments......................... A-14
4.5 Escrow Agreement........................................................... A-14
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.................................................... A-14
5.1 Representations and Warranties of the Sellers.............................. A-14
5.2 Representations and Warranties of the Buyer................................ A-19
ARTICLE 6
CONDUCT PRIOR TO CLOSING.......................................................... A-21
6.1 Filing of Assignment Applications.......................................... A-21
6.2 Antitrust Laws and the Sellers............................................. A-21
6.3 Antitrust Laws and the Buyer............................................... A-21
6.4 Access to Information Concerning Sellers' Business......................... A-22
6.5 Confidentiality............................................................ A-22
6.6 Control of the Sellers' Business........................................... A-22
6.7 The Sellers' Pre-Closing Covenants......................................... A-23
6.8 The Buyer's Pre-Closing Covenants.......................................... A-24
6.9 No Solicitation of Offers.................................................. A-24
6.10 Risk of Loss............................................................... A-24
ARTICLE 7
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS............................. A-25
7.1 Offer of Employment........................................................ A-25
7.2 Wage and Withholding Reporting Obligations................................. A-25
ARTICLE 8
CONDITIONS PRECEDENT.............................................................. A-25
8.1 Conditions Precedent to Obligations of Parties............................. A-25
</TABLE>
A-2
<PAGE> 111
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.2 Conditions Precedent to Obligations of the Buyer........................... A-26
8.3 Conditions Precedent to the Obligations of the Sellers..................... A-27
8.4 Waiver of Conditions....................................................... A-27
ARTICLE 9
TERMINATION AND DEFAULT........................................................... A-28
9.1 General.................................................................... A-28
9.2 Procedure Upon Termination................................................. A-29
9.3 Effect of Termination...................................................... A-29
ARTICLE 10
POST-CLOSING TRANSACTIONS......................................................... A-29
10.1 Transition................................................................. A-29
10.2 Access To Books and Records................................................ A-29
10.3 Assignment and Further Assurances.......................................... A-29
10.4 Confidentiality of Customer Lists.......................................... A-29
ARTICLE 11
INDEMNIFICATION AND SURVIVAL...................................................... A-30
11.1 Indemnification by the Sellers............................................. A-30
11.2 Indemnification by the Buyer............................................... A-30
11.3 Claims for Indemnification................................................. A-31
11.4 Defense by Indemnifying Party.............................................. A-31
11.5 Manner of Indemnification.................................................. A-31
11.6 Survival of Representations and Warranties................................. A-32
ARTICLE 12
MISCELLANEOUS..................................................................... A-32
12.1 Brokers.................................................................... A-32
12.2 Notices.................................................................... A-32
12.3 Expenses of Transfer....................................................... A-33
12.4 Assignment................................................................. A-33
12.5 Counterparts............................................................... A-33
12.6 Entire Agreement........................................................... A-33
12.7 Governing Law.............................................................. A-33
12.8 Headings................................................................... A-34
12.9 Severability............................................................... A-34
12.10 Modification and Amendment................................................. A-34
12.11 Waiver..................................................................... A-34
12.12 Parties Obligated and Benefited............................................ A-34
12.13 Attorneys' Fees............................................................ A-34
12.14 Rights to Specific Performance............................................. A-34
12.15 Actions.................................................................... A-34
12.16 Terms...................................................................... A-34
12.17 Construction............................................................... A-35
12.18 Buyer Stockholder Approval of Certain Matters.............................. A-35
12.19 Transfers of Series B Preferred Shares..................................... A-35
</TABLE>
A-3
<PAGE> 112
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this "Agreement"),
dated as of January 30, 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> 113
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> 114
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
A-6
<PAGE> 115
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);
A-7
<PAGE> 116
(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
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(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 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
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possible to close on the first day of the next calendar month, then the Closing
shall be held as soon as 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) (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) 830,333 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.
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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
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such expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
(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.
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(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 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
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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 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).
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(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.
(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.
C-5
<PAGE> 151
APPENDIX D
(DRAFT)
January , 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 (the
"Agreement"), providing for the acquisition (the "Acquisition") by Metrocall of
substantially all of the assets and 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 stated value of $15
million, (c) 830,333 shares of Common Stock of Metrocall, and (d) shares of
Common Stock of Metrocall or other equity securities having a value equal to $15
million, subject to adjustment based on changes in Page America's working
capital deficit at September 30, 1996. 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, 1995, 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;
D-1
<PAGE> 152
Board of Directors
January , 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
April 22, 1996, as well as a copy of the Agreement dated January , 1997,
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.
D-2
<PAGE> 153
PAGE AMERICA GROUP, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PAGE AMERICA
GROUP, INC.
The undersigned stockholder of Page America Group, Inc., a New York
corporation, revoking any previous proxies for its shares, hereby appoints David
A. Barry, Kathleen C. Parramore, Martin Katz and Martin H. Neidell, and each of
them, the true and lawful attorneys-in-fact and proxies of the undersigned, each
having full power of substitution, to vote all shares of stock which the
undersigned is entitled to vote at the Special Meeting of Stockholders of Page
America Group, Inc. to be held on , 1997, and at any
adjournments thereof, on all matters set forth in the Notice of Special Meeting
of Stockholders and the related Proxy Statement dated , 1997
as follows:
1. Approval of the Amended and Restated Asset Purchase Agreement dated
as of January 29, 1997 and the Plan of Liquidation and the transactions
contemplated thereby, all as more fully described in the Proxy
Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(continued and to be signed on reverse side)
<PAGE> 154
(continued from other side)
THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INSTRUCTIONS ON THE
REVERSE SIDE. IN THE ABSENCE OF SUCH INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR
APPROVAL OF THE AMENDED AND RESTATED ASSET PURCHASE AGREEMENT AND THE PLAN OF
LIQUIDATION AND THE TRANSACTIONS CONTEMPLATED THEREBY.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and the related Proxy Statement dated , 1997.
Dated______________________ , 1997
__________________________________
Signature
_________________________________
Signature if held jointly
PLEASE DATE AND SIGN ABOVE EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON. JOINT
OWNERS SHALL EACH SIGN PERSONALLY. CORPORATE PROXIES SHOULD BE SIGNED IN FULL
CORPORATE NAME BY AN AUTHORIZED OFFICER AND ATTESTED. PERSONS SIGNING IN A
FIDUCIARY CAPACITY SHOULD INDICATE THEIR FULL NAME, IN SUCH CAPACITY.
<PAGE> 155
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.
II-1
<PAGE> 156
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<S> <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.*
3.1 Amended and Restated Certificate of Incorporation of Metrocall, Inc., as
amended.+
3.2 Fourth Amended and Restated Bylaws of Metrocall, Inc., as amended.(c)
4.1 Specimen Certificate representing the Metrocall, Inc. Common Stock.(b)
4.2 Form of Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Metrocall, Inc. Series
B Junior Convertible Preferred Stock+
4.3 Specimen Certificate of Metrocall Series B Junior Convertible Preferred
Stock+
4.4 Form of Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Metrocall, Inc. Common
Stock Equivalent Convertible Preferred Stock+
4.5 Specimen Certificate of Metrocall Common Stock Equivalents+
5. Opinion of Wilmer, Cutler & Pickering as to the legality of the securities
being registered.+
23.1 Consent of Wilmer, Cutler & Pickering (included in Exhibit 5).+
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.*
24 Power of Attorney (included in signature pages of this Registration
Statement)*
</TABLE>
-----------------------
* Exhibit filed herewith.
+ 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 Metrocall's Registration Statement on
Form S-1, as amended (File No. 33-63886), filed with the Commission
on July 12, 1993.
(c) Incorporated by reference to Metrocall's Registration Statement on
Form S-4, as amended. (File No. 333-6919), filed with the Commission
on October 4, 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.
II-2
<PAGE> 157
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;
provided, however, that paragraphs (c)(1)(i) and (c)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference 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
II-3
<PAGE> 158
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.
(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.
II-4
<PAGE> 159
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alexandria, Commonwealth
of Virginia, on February 4, 1997.
METROCALL, INC.
By: /s/ WILLIAM L. COLLINS, III
------------------------------------
Name: William L. Collins, III
Title: President and CEO
POWER OF ATTORNEY
We, the undersigned officers and directors of Metrocall, Inc., hereby
severally constitute and appoint William L. Collins III and Vincent D. Kelly,
and each of them singly, to sign for us and in our names in the capacities
indicated below, the Registration Statement filed herewith and any all
amendments to said Registration Statement (including post-effective amendments),
and generally to do all such things in our names and in our capacities as
officers and directors to enable Metrocall, Inc. to comply with the provisions
of the Securities Act of 1933, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said Registration Statement
and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
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>
/s/ WILLIAM L. COLLINS, III President, Chief Executive Officer February 4, 1997
- ------------------------------------ and
WILLIAM L. COLLINS, III Director (Principal Executive
Officer)
/s/ VINCENT D. KELLY Vice President and Chief Financial February 4, 1997
- ------------------------------------ Officer (Principal Financial and
VINCENT D. KELLY Accounting Officer)
/s/ RICHARD M. JOHNSTON Chairman of the Board February 4, 1997
- ------------------------------------
RICHARD M. JOHNSTON
/s/ RONALD V. APRAHAMIAN Director February 4, 1997
- ------------------------------------
RONALD V. APRAHAMIAN
Director
- ------------------------------------
HARRY L. BROCK, JR.
/s/ SUZANNE S. BROCK Director January 27, 1997
- ------------------------------------
SUZANNE S. BROCK
/s/ FRANCIS A. MARTIN, III Director February 4, 1997
- ------------------------------------
FRANCIS A. MARTIN, III
/s/ RYAL R. POPPA Director January 28, 1997
- ------------------------------------
RYAL R. POPPA
/s/ RAY D. RUSSENBERGER Director February 4, 1997
- ------------------------------------
RAY D. RUSSENBERGER
/s/ ELLIOTT H. SINGER Director February 4, 1997
- ------------------------------------
ELLIOTT H. SINGER
/s/ MICHAEL GREENE Director February 4, 1997
- ------------------------------------
MICHAEL GREENE
</TABLE>
II-5
<PAGE> 160
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------------
<C> <C> <S>
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.*
3.1 -- Amended and Restated Certificate of Incorporation of Metrocall, Inc., as
amended.+
3.2 -- Fourth Amended and Restated Bylaws of Metrocall, Inc., as amended.(c)
4.1 -- Specimen Certificate representing the Metrocall, Inc. Common Stock.(b)
4.2 -- Form of Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Rights of Metrocall, Inc. Series B Junior
Convertible Preferred Stock+
4.3 -- Specimen Certificate of Metrocall Series B Junior Convertible Preferred Stock+
4.4 -- Form of Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Rights of Metrocall, Inc. Common Stock
Equivalent Convertible Preferred Stock+
4.5 -- Specimen Certificate of Metrocall Common Stock Equivalents+
5. -- Opinion of Wilmer, Cutler & Pickering as to the legality of the securities being
registered.+
23.1 -- Consent of Wilmer, Cutler & Pickering (included in Exhibit 5).+
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.*
24 -- Power of Attorney (included in signature pages of this Registration Statement)*
</TABLE>
- ---------------
* Exhibit filed herewith.
+ 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 Metrocall's Registration Statement on Form S-1,
as amended (File No. 33-63886), filed with the Commission on July 12, 1993.
(c) Incorporated by reference to Metrocall's Registration Statement on Form S-4,
as amended. (File No. 333-6919), filed with the Commission on October 4,
1996.
<PAGE> 1
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
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SCHEDULES...........................................................................
EXHIBITS............................................................................
ARTICLE 1
DEFINITIONS....................................................................... 1
ARTICLE 2
PURCHASE AND SALE OF ASSETS....................................................... 3
2.1 Conveyance of Assets....................................................... 3
2.2 Excluded Assets............................................................ 4
2.3 Liabilities................................................................ 4
2.4 Excluded Liabilities....................................................... 4
2.5 Parent and Stockholder Action.............................................. 5
2.6 Proxy Statement and Registration Statement................................. 5
ARTICLE 3
CLOSING........................................................................... 6
3.1 Determination of Closing Date.............................................. 6
3.2 Time and Place of Closing.................................................. 7
3.3 Closing Documents.......................................................... 7
ARTICLE 4
PURCHASE PRICE, METHOD OF PAYMENT, ALLOCATION OF PURCHASE PRICE................... 7
4.1 Purchase Price for Assets.................................................. 7
4.2 Post-Closing Allocation of the Purchase Price.............................. 8
4.3 Adjustments to the Purchase Price.......................................... 9
4.4 Payment of Post-Closing Purchase Price Adjustments......................... 10
4.5 Escrow Agreement........................................................... 10
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.................................................... 10
5.1 Representations and Warranties of the Sellers.............................. 10
5.2 Representations and Warranties of the Buyer................................ 15
ARTICLE 6
CONDUCT PRIOR TO CLOSING.......................................................... 17
6.1 Filing of Assignment Applications.......................................... 17
6.2 Antitrust Laws and the Sellers............................................. 17
6.3 Antitrust Laws and the Buyer............................................... 17
6.4 Access to Information Concerning Sellers' Business......................... 18
6.5 Confidentiality............................................................ 18
6.6 Control of the Sellers' Business........................................... 18
6.7 The Sellers' Pre-Closing Covenants......................................... 19
6.8 The Buyer's Pre-Closing Covenants.......................................... 20
6.9 No Solicitation of Offers.................................................. 20
6.10 Risk of Loss............................................................... 20
ARTICLE 7
COVENANTS RELATING TO EMPLOYMENT AND EMPLOYEE MATTERS............................. 21
7.1 Offer of Employment........................................................ 21
7.2 Wage and Withholding Reporting Obligations................................. 21
ARTICLE 8
CONDITIONS PRECEDENT.............................................................. 21
8.1 Conditions Precedent to Obligations of Parties............................. 21
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.2 Conditions Precedent to Obligations of the Buyer........................... 22
8.3 Conditions Precedent to the Obligations of the Sellers..................... 23
8.4 Waiver of Conditions....................................................... 23
ARTICLE 9
TERMINATION AND DEFAULT........................................................... 24
9.1 General.................................................................... 24
9.2 Procedure Upon Termination................................................. 25
9.3 Effect of Termination...................................................... 25
ARTICLE 10
POST-CLOSING TRANSACTIONS......................................................... 25
10.1 Transition................................................................. 25
10.2 Access To Books and Records................................................ 25
10.3 Assignment and Further Assurances.......................................... 25
10.4 Confidentiality of Customer Lists.......................................... 25
ARTICLE 11
INDEMNIFICATION AND SURVIVAL...................................................... 26
11.1 Indemnification by the Sellers............................................. 26
11.2 Indemnification by the Buyer............................................... 26
11.3 Claims for Indemnification................................................. 27
11.4 Defense by Indemnifying Party.............................................. 27
11.5 Manner of Indemnification.................................................. 27
11.6 Survival of Representations and Warranties................................. 28
ARTICLE 12
MISCELLANEOUS..................................................................... 28
12.1 Brokers.................................................................... 28
12.2 Notices.................................................................... 28
12.3 Expenses of Transfer....................................................... 29
12.4 Assignment................................................................. 29
12.5 Counterparts............................................................... 29
12.6 Entire Agreement........................................................... 29
12.7 Governing Law.............................................................. 29
12.8 Headings................................................................... 30
12.9 Severability............................................................... 30
12.10 Modification and Amendment................................................. 30
12.11 Waiver..................................................................... 30
12.12 Parties Obligated and Benefited............................................ 30
12.13 Attorneys' Fees............................................................ 30
12.14 Rights to Specific Performance............................................. 30
12.15 Actions.................................................................... 30
12.16 Terms...................................................................... 30
12.17 Construction............................................................... 31
12.18 Buyer Stockholder Approval of Certain Matters.............................. 31
12.19 Transfers of Series B Preferred Shares..................................... 31
</TABLE>
<PAGE> 4
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.26 Office Locations
Schedule 1.30 Indebtedness for Borrowed Money
Schedule 2.1 Assets
Schedule 2.3 Liabilities
Schedule 4.2 Allocation of Purchase Price
Schedule 5.1.3 Seller Violations and Conflicts
Schedule 5.1.4(a) Licenses; Actions
Schedule 5.1.5 Existing Liens
Schedule 5.1.6 Tax Audits and Waivers
Schedule 5.1.7 Litigation
Schedule 5.1.10 Variations from GAAP on Financial Statements
Schedule 5.1.11 Real Property; Exceptions to Title
Schedule 5.1.14 Contracts
Schedule 5.1.15 Transferability of Contract Rights
Schedule 5.1.16 Personnel Benefits; Bonuses
Schedule 5.1.18 Transactions with Affiliates
Schedule 5.2.7 Metrocall Common Stock Available for Issuance
Schedule 12.1 Brokers
Schedule 12.18 Stockholders Agreeing to Vote in Favor of Stockholder Proposals
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.5(a) Stockholders' Agreement
Exhibit 4.1(a) Series B Preferred Stock
Exhibit 4.1(c) Common Stock Equivalents
Exhibit 4.5 Escrow Agreement
Exhibit 8.3.6(a) Form of Registration Rights Agreement (Affiliates)
Exhibit 8.3.6(b) Form of Registration Rights Agreement (Conversion Shares)
Exhibit 12.19 Transfers of Metrocall Series B Preferred Shares
</TABLE>
<PAGE> 5
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this "Agreement"),
dated as of January 30, 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.
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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.
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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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<PAGE> 8
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
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(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 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
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possible to close on the first day of the next calendar month, then the Closing
shall be held as soon as 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) (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) 830,333 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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<PAGE> 29
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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<PAGE> 30
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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<PAGE> 31
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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<PAGE> 32
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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<PAGE> 34
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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<PAGE> 35
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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<PAGE> 36
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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<PAGE> 37
Exhibit 2.5(a)
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated April 22, 1996 among Metrocall,
Inc., a Delaware corporation ("Buyer"), and the persons listed on the signature
page hereof (the "Stockholders").
WHEREAS, the Stockholders collectively own, beneficially or of
record, the number of issued and outstanding shares of the Series One
Convertible Preferred Stock (the "Preferred Stock"), and the number of issued
and outstanding shares of Common Stock, par value $.10 per share (the "Common
Stock") of Page America Group, Inc., a New York corporation (the "Company")
indicated on the attached signature pages;
WHEREAS, Buyer, the Company, and its wholly owned
subsidiaries, 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, and Page America of Pennsylvania,
Inc., a Pennsylvania corporation (collectively, the "Sellers"), propose to
enter into an Asset Purchase Agreement of even date herewith (the "Purchase
Agreement") providing for the purchase and sale of all or substantially all of
the Sellers' assets to Buyer (the "Asset Sale and Purchase");
WHEREAS, as a condition to the willingness of Buyer to enter
into the Purchase Agreement, Buyer has requested that each Stockholder agree,
and in order to induce Buyer to enter into the Purchase Agreement, each
Stockholder has agreed to enter into this Agreement setting forth certain
rights and obligations of the parties with respect to the Stockholder Shares
(as hereinafter defined);
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreement herein contained, the parties agree
as follows:
ARTICLE I
DEFINED TERMS
Section 1.1. Defined Terms. (a) Capitalized terms used herein
and not defined shall have the meaning ascribed thereto in the Purchase
Agreement.
(b) The term "Stockholder Shares" as used herein means, with
respect to each Stockholder the aggregate of (i) the number of shares of
Preferred Stock owned beneficially or of record by such Stockholder, (ii) the
number of shares of Common Stock owned beneficially
<PAGE> 38
or of record by such Stockholder (the numbers for items (i) and (ii) are set
forth opposite such Stockholders's name on the signature page hereof, and (iii)
any additional shares of Common Stock, Preferred Stock or rights to acquire
voting securities of the Company acquired by such Stockholder (whether by
purchase or otherwise) from and after the date of this Agreement.
ARTICLE II
VOTING OF STOCKHOLDER SHARES FOR THE ASSET SALE AND PURCHASE
Section 2.1 No Disposition of Shares. Prior to the earlier to
occur of (i) the stockholder approval referenced in Section 8.3.7 of the
Purchase Agreement or (ii) the termination of the Purchase Agreement pursuant
to Article 9 thereof, no Stockholder shall transfer, pledge, or otherwise
dispose of any Stockholder Shares, deposit any Stockholder Shares into a voting
trust or enter into any voting agreement or arrangement with respect thereto,
or enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect acquisition, sale, assignment, transfer or
disposition of any Stockholder Shares.
Section 2.2 Voting of Stockholder Shares. Each Stockholder
hereby agrees to cause each Stockholder Share owned by such Stockholder
beneficially or of record to be voted (i) at such special meeting of
stockholders of the Company to be called to consider the Asset Sale and
Purchase (the "Special Meeting"), in favor of the Asset Sale and Purchase and
(ii) at any meeting of stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which their vote, consent or other
approval is sought, against (a) any Acquisition Proposal or (b) any amendment
of the Company's Articles of Incorporation or By- laws or other proposal or
transaction involving the Company or any of its subsidiaries which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Asset Sale and Purchase, the Purchase Agreement or any other
transactions contemplated by the Purchase Agreement (each of the foregoing in
clauses (a) or (b) above a "Competing Transaction"). In furtherance of the
foregoing, each Stockholder hereby irrevocably appoints ______________,
_________________, and each of them, any other designees of Buyer, the
attorneys-in-fact and proxies of such Stockholder, each with full power of
substitution, to vote at the Special Meeting or at any annual, special or
adjourned meeting of the Company's stockholders or otherwise (including by
executing written consents) in such manner as each such attorney-in-fact and
proxy or his substitute shall in his sole discretion deem proper (i) in favor
of the Asset Sale and Purchase, the execution and delivery of the Purchase
Agreement and approval of the terms thereof and each of the other transactions
contemplated by the Purchase Agreement and (ii) against any Competing
Transaction. This power of attorney and proxy is coupled with an interest,
irrevocable and granted in consideration of the Buyer's agreement to enter into
the Purchase Agreement. Upon the execution of this Agreement, all prior powers
of attorney, proxies and consents given by the
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undersigned with respect to such Stockholder Shares will, without further
action, be revoked and no subsequent powers of attorney, proxies, consents or
revocation may be given (and, if given, will not be deemed effective) by such
Stockholder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder severally represents and warrants to Buyer that:
SECTION 3.1. Representations and Warranties. Such
Stockholder is the sole, true, lawful and beneficial or record owner of the
number of Stockholder Shares set forth opposite his name on the signature page
hereof and there are no restrictions on such Stockholder's voting rights or
rights of disposition pertaining thereto, except for the restrictions of the
Securities Act of 1933, as amended. None of such Stockholder Shares is subject
to any voting trust or other agreement (other than this Agreement) or
arrangement with respect to the voting of such Stockholder Shares. This
Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder. The execution,
delivery and performance by such Stockholder of this Agreement and the
consummation by such Stockholder of the transactions contemplated hereby
require no action by, or filing with, any governmental body, agency, official
or authority by such Stockholder. The execution, delivery and performance of
this Agreement by such Stockholder does not, and the consummation by such
Stockholder of the transaction contemplated hereby does not and will not,
contravene or conflict with or constitute a material violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to such Stockholder.
ARTICLE IV
COVENANTS OF STOCKHOLDERS
SECTION 4.1 No Solicitation of Offers. Each Stockholder
shall comply with, and be bound by, the restrictions set forth in Section 6.9
of the Purchase Agreement as if such restrictions were fully set forth herein.
SECTION 4.2 Stock Option. Each Stockholder hereby grants to
Buyer an irrevocable option (the "Stock Option") to purchase all of Stockholder
Shares legally and/or beneficially owned by such Stockholder at any time during
the Exercise Period (as defined below). Buyer shall pay Stockholders for each
share of Common Stock delivered at the Stock Option Closing (as hereinafter
defined), a price per share equal to the average of the last sales
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<PAGE> 40
price per share on the American Stock Exchange for the twenty consecutive
trading days immediately prior to the date of execution of this Agreement (the
"Common Stock Purchase Price"). Buyer shall pay Stockholders for each share of
Preferred Stock delivered at Closing, a price per share of $105.00.
SECTION 4.3 Exercise of Stock Option. (a) Subject to Section
4.4 hereof, the Stock Option may be exercised by Buyer, in whole and for each
Stockholder but not in part or for less than all Stockholders, during the
period (the "Exercise Period") commencing on the date of the Company's exercise
of its termination rights pursuant to Section 9.1.6 of the Purchase Agreement
and ending on the date ten business days thereafter.
(b) In the event Buyer wishes to exercise the Stock Option,
Buyer shall send a written notice (an "Exercise Notice") during the Exercise
Period to each Stockholder specifying that Buyer shall purchase the total
number of Stockholder Shares held by such Stockholder and a date, which shall
be a business day for the closing of such purchase no later than sixty days
after the sending of such notice (the "Stock Option Closing"). The Stock
Option Closing shall take place at the Washington, D.C. offices of Wilmer,
Cutler & Pickering.
(c) Upon receipt of the Exercise Notice, each Stockholder
shall become obligated to deliver to Buyer a certificate or certificates
representing the number of Stockholder Shares held by such Stockholder in
accordance with the terms of this Agreement, on the later of the date specified
in such Exercise Notice and the first business day on which the conditions
specified in Section 4.4 shall be satisfied. The date specified in such
Exercise Notice for the Stock Option Closing may be as early as one business
day after the date of such Exercise Notice.
Section 4.4 Condition To Delivery of the Stockholder Shares.
The obligation of the Stockholders to deliver the Stockholder Shares upon
exercise of the Stock Option is subject to the following conditions:
(a) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the exercise of the Stock
Option and the delivery of the Stockholder Shares shall have expired or been
terminated, and any required consent of the FCC applicable to the exercise of
the Stock Option shall have become a Final Order.
(b) There shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction restricting, preventing or
prohibiting the exercise of the Stock Option or delivery of the Stockholder
Shares in respect of such exercise.
Section 4.5 Stock Option Closing. At the Stock Option
Closing, each Stockholder will deliver to Buyer a certificate or certificates
evidencing the number of Stockholder Shares owned by such Stockholder, each
such certificate being duly endorsed in
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<PAGE> 41
blank and accompanied by such stock powers and such other documents as may be
necessary in Buyer's judgment to transfer record ownership of the Stockholder
Shares into Buyer's name on the stock transfer books of the Company, and Buyer
will purchase all delivered Stockholder Shares at the price specified in
Section 4.2. All payments made by Buyer to the Stockholders pursuant to this
Section 4.5 shall be made by wire transfer of immediately available funds or by
certified bank check payable to the Stockholders.
Section 4.6 Adjustments Upon Changes in Capitalization. In
the event of any change in the number of issued and outstanding Stockholder
Shares by reason of any stock dividend, subdivision, merger, recapitalization,
combination, conversion or exchange of share, or any other change in the
corporate or capital structure of the Company (including, without limitation,
the declaration or payment of an extraordinary dividend of cash or securities)
which would have the effect of diluting or otherwise adversely affect Buyer's
rights and privileges under this Agreement, the number and kind of Stockholder
Shares and any consideration payable in respect of the Stockholder Shares shall
be appropriately and equitably adjusted to restore to Buyer its rights and
privileges under this Agreement. Without limiting the scope of the foregoing,
in any such event, at the option of Buyer, the Stock Option shall represent the
right to purchase in addition to the number and kind of shares which Buyer
would be entitled to purchase pursuant to Section 4.2, whatever securities,
cash or other property the Stockholder Shares shall have been converted into or
otherwise exchanged for, together with any securities, cash or other property
which shall have been distributed with respect to such Stockholder Shares.
ARTICLE V
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall become
effective upon its execution by each of the parties hereto and upon the
execution of the Purchase Agreement. This Agreement may be terminated at any
time by mutual written consent of each of the parties hereto. Other than the
Stock Option, which shall be governed by Sections 4.2 through 4.6, this
Agreement shall terminate, without any action by the parties hereto, on the
date on which the Purchase Agreement terminates in accordance with its terms.
No such termination shall relieve any party from liability for any breach of
this Agreement. The representations and warranties set forth herein shall not
survive the termination of this Agreement (or in the event the Stock Option is
exercised, the purchase of the Stockholder Shares pursuant thereto).
Section 5.2 Specific Performance. The parties hereto agree
that Buyer would be irreparably damaged if for any reason any Stockholder
failed to perform any of its other obligations under this Agreement, and that
Buyer would not have an adequate remedy at law for money damages in such event.
Accordingly, Buyer shall be entitled to specific
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<PAGE> 42
performance and injunctive and other equitable relief to enforce the
performance of this Agreement by each Stockholder. This provision is without
prejudice to any other rights that Buyer may have against any Stockholder for
any failure to perform any obligations under this Agreement.
Section 5.3 Modification of Agreement. This Agreement may not
be modified amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; provided that
no party may assign, delegate, or otherwise transfer any of its rights or
obligation under this Agreement without the consent of the other parties
hereto, except to the extent that Buyer may assign its rights under this
Agreement to its direct or indirect wholly- owned subsidiary, but such
assignment shall not relieve Buyer of its obligations hereunder. This Agreement
shall be construed in accordance with and governed by the law of Delaware
without regards to conflict of laws principles. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto shall have received
counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
BUYER
METROCALL, INC. (SEAL)
By:
---------------------
Its:
STOCKHOLDERS
SHARES OF SHARES OF
COMMON STOCK PREFERRED STOCK
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
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<PAGE> 43
- ------------------------ ---------- ----------
STOCKHOLDERS
SHARES OF SHARES OF
COMMON STOCK PREFERRED STOCK
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
- ------------------------ ---------- ----------
7
<PAGE> 44
Exhibit 4.1(a)
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> 45
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
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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.
(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
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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 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
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<PAGE> 48
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
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<PAGE> 49
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 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
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<PAGE> 50
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
Corporation or any of its subsidiaries, (iv) every obligation of the
Corporation or any of its
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<PAGE> 51
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.
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(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 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
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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.
(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
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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
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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.
(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:
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(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 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
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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.
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
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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.
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(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.
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
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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 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> 61
Exhibit 4.1(c)
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> 62
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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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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<PAGE> 65
(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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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.
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Exhibit 4.5
INDEMNITY ESCROW AGREEMENT
This Indemnity Escrow Agreement (the "Agreement") is entered
into this __th day of __________, 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
each individually a "Seller"), Metrocall, Inc., a Delaware corporation (the
"Buyer"), and [ ] (the "Escrow Agent").
RECITALS
WHEREAS, Sellers and Buyer executed an Amended and Restated
Asset Purchase Agreement dated as of January 30, l997 (the "Purchase
Agreement"), pursuant to which Sellers agreed to sell and Buyer agreed to buy
all of Sellers' Assets upon the terms and conditions set forth in the Purchase
Agreement; and
WHEREAS, pursuant to the Purchase Agreement, Sellers and Buyer
have agreed to place a portion of the purchase price for the Assets consisting
of Metrocall Common Stock or Common Stock Equivalents having a Share Value (as
defined in Section 4.1(a)(iv) of the Purchase Agreement) of Four Million
Dollars ($4,000,000) (the "Escrow Shares") in an escrow account ("Indemnity
Escrow Account") as hereinafter described; and
WHEREAS, the Escrow Agent is an unrelated third party and has
agreed to act as Escrow Agent for the Indemnity Escrow Account pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein, including those described above, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined in
this Agreement shall have the meanings given them in the Purchase Agreement.
2. Purpose of the Indemnity Escrow Account. The Indemnity
Escrow Account is being established to satisfy, at least in part, any
indemnification claims made by Buyer against Sellers pursuant to Section 11.1
of the Purchase Agreement.
<PAGE> 68
3. Delivery of the Indemnity Escrow Account to the Escrow
Agent. Concurrently with the Closing and following the execution of this
Agreement, Buyer will, in accordance with Section 4.1(b)(ii) of the Purchase
Agreement, deliver the Escrow Shares to the Escrow Agent for deposit in the
Indemnity Escrow Account. The Escrow Shares will be registered in the name of
the Escrow Agent, as Escrow Agent under this Agreement. The Escrow Shares will
be voted as directed by Sellers.
4. Maintenance of the Indemnity Escrow Account. Upon receipt
of the property specified in Paragraph 3, the Escrow Agent shall maintain such
property in the Indemnity Escrow Account and, during the term of this
Agreement, the Escrow Agent agrees to hold such property and any accumulated
income thereon in the Indemnity Escrow Account in escrow, to invest any income
thereon in Permitted Investments and to disburse amounts in the Indemnity
Escrow Account (including any income) in accordance with Paragraphs 5 and 6 of
this Agreement. As used herein, the term "Permitted Investments" shall mean
(a) United States Treasury Obligations having a term to maturity of no more
than 180 days, (b) money market bank accounts and mutual funds, provided that
the amount invested in money market bank accounts and mutual funds shall not
exceed $10,000 and (c) any other investment approved by Sellers and Buyer in
writing.
5. Claims Against and Disbursements from the Indemnity Escrow
Account.
(a) Claims Procedure. To make a claim against the
Indemnity Escrow Account, Buyer shall submit a written notice ("Notice") to the
Escrow Agent which sets forth a representation that Buyer or any other person
indemnified under Section 11.1 of the Purchase Agreement ("Claimant" or
"Claimants") has incurred an indemnifiable loss, liability, claim, damage or
expense ("Loss") or there has been a claim asserted against Buyer that could
result in a Loss, which Notice shall include information regarding (A) the type
of Losses for which indemnification is sought under Section 11.1 of the
Purchase Agreement, and (B) the dollar amount of such Losses, or, if the amount
of such Loss cannot be quantified, a good faith estimate of the Loss. Such
Notice shall be include a certificate of Buyer that Claimant has complied with
any applicable provisions of the Purchase Agreement regarding such Losses.
Buyer shall also therein verify that a copy of such Notice has been sent to
Sellers.
(b) Disbursements. Following receipt of the Notice, the
Escrow Agent shall release to Buyer, from the Indemnity Escrow Account, on the
first (1st) business day following the fourteenth (14th) day after the Escrow
Agent's receipt of the Notice, that number of Escrow Shares having an aggregate
Share Value equal to the amount of any Losses claimed in the Notice; provided,
however, that the Escrow Agent shall not make any disbursements as provided
herein if the Escrow Agent receives an objection ("Notice of Objection") in
writing, signed by each of the Sellers, within the relevant period, accompanied
by a certificate from each of the Sellers that Sellers have sent a copy of such
Notice of Objection to Buyer.
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If a Notice of Objection is sent, Buyer and Sellers shall
negotiate in good faith to resolve the objection set forth in the Notice of
Objection. If Buyer and Sellers resolve the objection, they shall sign and
deliver to the Escrow Agent a notice (the "Joint Notice") to such effect
indicating the amount, if any, of the resolved claim and the Escrow Agent
shall, within two (2) business days of receipt of the Joint Notice, release
that number of Escrow Shares having an aggregate Share Value equal to such
amount from the Indemnity Escrow Account to the Buyer.
If Buyer and Sellers are unable to resolve the objection
through negotiation, the Escrow Agent shall make a disbursement from the
Indemnity Escrow Account only upon receipt of a judgment of a court of
competent jurisdiction directing disbursement, together with a certification of
Buyer that such judgment is final and non-appealable. The Escrow Agent shall,
within two (2) business days of receipt of the order, release Escrow Shares in
the Indemnity Escrow Account as directed by the judgment. For purposes of
calculating the number of Escrow Shares to be released in payment of any
losses, the parties agree that such shares shall be valued at the Share Value.
6. Delivery of the Indemnity Escrow Account to Sellers. The
Escrow Agent shall deliver to Sellers on April 1, 1998, all remaining property
(including accumulated income) in the Indemnity Escrow Account in excess of
Escrow Shares having an aggregate Share Value equal to the sum of (a) the
amount of any Losses (including estimates) claimed in Notices delivered prior
to the close of business on March 31, 1998 which have not been paid by the
Escrow Agent plus (b) the amount of any Losses (including estimates) claimed in
Notices which are the subject of a dispute pursuant to Notices of Objection as
of such date.
7. Escrow Agent.
(a) Sellers and Buyer hereby appoint the Escrow Agent and
the Escrow Agent agrees to serve as Escrow Agent, pursuant to the terms of this
Agreement.
(b) The Escrow Agent shall not be bound in any way by any
of the terms of the Purchase Agreement or any other agreement between the
parties other than this Agreement and shall be obliged only to hold and
disburse amounts in the Indemnity Escrow Account in accordance with the terms
of this Agreement.
(c) The Escrow Agent need not inquire into the
genuineness of the signatures on any document submitted to it and purporting to
be executed by Buyer or Sellers or their counsel, and may rely upon any
instrument or signature that the Escrow Agent believes in good faith to be
genuine, and may assume that any person purporting to give any writing, notice,
advice or instruction in connection with this Agreement has been duly
authorized to give such writing, notice, advice or instruction. The Escrow
Agent may act upon the advice of counsel in connection with the performance by
it of its duties under this Agreement.
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<PAGE> 70
(d) The Escrow Agent's fee for services rendered
hereunder shall be as set forth on the attached schedule, which fee shall be
shared equally by Buyer and Sellers.
(e) The Escrow Agent shall not be liable for, and Buyer
and Sellers hereby agree to hold harmless and indemnify the Escrow Agent
against, any and all liability and all expenses incurred in defending against
or otherwise dealing with any claim of liability or legal proceeding of any
kind that may arise in connection with its acting as Escrow Agent under this
Agreement, except such liabilities as may result from the Escrow Agent's wilful
misconduct or negligence.
(f) If the Escrow Agent shall be unable to act or shall
resign as Escrow Agent hereunder, Buyer shall forthwith appoint a successor
Escrow Agent ("Successor") reasonably satisfactory to Sellers. The Escrow
Agent may at any time give written notice of its resignation to the other
parties hereto. Such resignation shall take effect when the designated
Successor accepts its appointment in writing. This Agreement may not be
assigned by the Escrow Agent or any Successor without the prior written consent
of the other parties hereto.
8. Miscellaneous.
(a) This Agreement shall become effective on the date of
execution and shall terminate on the date on which all principal and income in
the Indemnity Escrow Account are disbursed in accordance with the terms of this
Agreement and the Purchase Agreement.
(b) All notices to be sent hereunder shall be in writing
and delivered personally or mailed by certified mail, postage prepaid, return
receipt requested (such mailed notice to be effective on the date such receipt
is acknowledged) as follows:
If to Sellers, addressed to:
Bariston Associates, Inc.
One International Place
Boston, Massachusetts
Attn: David A. Barry
Fax No.: 617-330-8951
with a copy to
Stroock, Stroock & Lavan
Seven Hanover Square
New York, New York
Attn: Martin Neidell, Esq.
Fax No.: 212-806-6006
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<PAGE> 71
If to Buyer, addressed to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly,
Chief Financial Officer and Treasurer
Fax No.: 703-768-9625
With a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Thomas W. White, Esq.
Fax No.: 202-663-6363
If to Escrow Agent, addressed to:
(c) The covenants, agreements, representations and
warranties contained in or made pursuant to this Agreement shall survive the
delivery of the amounts in the Indemnity Escrow Account by the Escrow Agent.
(d) In the event that any provision of this Agreement
shall be found to violate public policy or to be otherwise void or
unenforceable, such finding shall not invalidate any other provision of this
Agreement.
(e) This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute one instrument.
(f) This Agreement may not be assigned by any party
hereto without the consent of the other parties.
(g) Any waiver by any party of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement.
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<PAGE> 72
(h) This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware, without
reference to the principles of conflicts of laws.
9. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day first above written.
BUYER
METROCALL, INC.
By: (Seal)
-----------------
Its:
-----------------
SELLERS
PAGE AMERICA GROUP, INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA OF NEW YORK, INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA OF ILLINOIS, INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA COMMUNICATIONS OF INDIANA,
INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA OF PENNSYLVANIA, INC.
By: (Seal)
-----------------
Its:
-----------------
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<PAGE> 74
ESCROW AGENT
--------------------------
By: (Seal)
-----------------
Its:
-----------------
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<PAGE> 75
Exhibit 8.3.6(a)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
entered into as of __________________ , 1997, by and among METROCALL, INC., a
Delaware corporation (the "Company"), and PAGE AMERICA GROUP, INC., a New York
corporation ("Page America"), and the shareholders of Page America listed on
the signature pages hereof (the "Shareholders"; together with Page America, the
"Holders").
RECITALS
WHEREAS, the Company, Page America, its wholly owned
subsidiaries, Page America of New York, Inc., Page America of Illinois, Inc.,
an Illinois corporation, Page America Communications of Indiana, Inc., an
Indiana corporation, and Page America of Pennsylvania, a Pennsylvania
corporation (collectively, the "Sellers"), have entered into that certain
Amended and Restated Asset Purchase Agreement, dated January 30, 1997 (the
"Purchase Agreement"), pursuant to which, in pertinent part, the Company
purchased and the Sellers sold all or substantially all of the Sellers' Assets
("the Asset Purchase and Sale");
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Company paid part of the Purchase Price in shares of the Company's common
stock, par value $.01 per share , [("Common Stock") and the Company's Common
Stock Equivalents ("CSEs"), which, subject to approval of the stockholders of
the Company of an increase in the Company's authorized shares of Common Stock,
will be converted into Common Stock ("CSE Conversion Shares; together with the
Common Stock and the CSEs, the "Company Stock")], and
WHEREAS, the Company registered such shares of Company Stock
on Form S-4 before the Closing of the Asset Purchase and Sale; and
WHEREAS, the Holders may be deemed to be underwriters of the
Company Stock pursuant to Rule 145(c) of the Securities Act and may thus be
subject, inter alia, to the volume limitations on the Holders' transfer of
shares of Company Stock pursuant to Rule 144(e) promulgated under the
Securities Act;
WHEREAS, as a result of the foregoing and pursuant to the
terms of the Purchase Agreement, the Company has agreed to register the shares
of Company Stock received by the Holders thereunder pursuant to the terms and
conditions set forth herein.
<PAGE> 76
AGREEMENTS
NOW THEREFORE, in consideration of the foregoing recitals and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
I.
DEFINITIONS
1. "Commission" means the Securities and Exchange
Commission.
2. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
3. "Registrable Securities" means the shares of Company
Stock received by the Page America from the Company or by the Shareholders from
Page America pursuant to the Purchase Agreement. Any Registrable Security will
cease to be a Registrable Security when (i) such Registrable Security has been
transferred pursuant to an effective registration statement under the
Securities Act covering such Registrable Security, (ii) such Registrable
Security is no longer held of record by any of the Holders or their successors
or assigns, or (iii) the holder of such Registrable Security is then able to
use Rule 144 promulgated under the Securities Act (or any successor provision)
to transfer such Registrable Security without the volume limitations under Rule
144(e).
4. "Securities Act" means the Securities Act of 1933, as
amended.
II.
REGISTRATION STATEMENT
As soon as practicable following the issuance and transfer of
Company Stock by the Company to Page America pursuant to the terms of the
Purchase Agreement (but in no event later than twenty (20) days thereafter),
the Company shall file with the Commission on Form S-3 (or such other form as
may be appropriate) (the "Registration Statement"), with respect to the sale of
all of the Registrable Securities and any other securities of the Company that
the Company elects to include therein; provided, however, that the Registrable
Securities shall have priority in inclusion in the Registration Statement over
such other securities. The Company shall use its best efforts to have the
Registration Statement declared effective by the Commission under the
Securities Act as soon as possible, and to keep the Registration Statement
effective as long as there are Registrable Securities. The Company further
agrees, if necessary, to supplement or make amendments to the Registration
Statement if required by the registration form used by the Company for the
Registration Statement or by the instructions applicable to such registration
form or by the Securities Act or the rules and regulations thereunder, and to
comply with the requirements of the Securities Act and the rules and
regulations promulgated by
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<PAGE> 77
the Commission thereunder relating to the sale or other disposition of the
securities covered by the Registration Statement. The Company may postpone for
up to ninety (90) days the sale of any Registrable Securities pursuant to the
Registration Statement if the Company reasonably believes that such sale will
have a material adverse effect on any proposal or plan by the Company or any of
its subsidiaries to engage in any financing, acquisition of assets (other than
in the ordinary course of business) or any merger, consolidation, tender offer
or other significant transaction; provided that the Company shall have the
right to so postpone such filing or effectiveness only one (1) time during any
period of twelve (12) consecutive months.
III.
REGISTRATION PROCEDURES
Following the issuance of Company Stock by the Company to Page
America pursuant to the terms of the Purchase Agreement, the Company will as
expeditiously as possible:
(a) furnish to the Holders, prior to the filing
of the Registration Statement, if requested in writing, copies of the
Registration Statement as proposed to be filed, and thereafter furnish to the
Holders such number of copies of the Registration Statement, each amendment and
supplement thereto (including any exhibits thereto requested by such party),
the prospectus included in the Registration Statement (including each
preliminary prospectus) and such other documents as the Shareholder may
reasonably request in writing in order to facilitate the disposition of the
Registrable Securities owned by the Holders; provided, however, that the
obligation of the Company to deliver copies of prospectuses or preliminary
prospectuses to the Holders is subject to the receipt by the Company of
reasonable assurances from the Holders that the Holders will comply with the
applicable provisions of the Securities Act and of such other securities or
blue sky laws as may be applicable in connection with any use of such
prospectuses or preliminary prospectuses;
(b) use its best efforts to register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions as the Holders may reasonably request and do any and all other
acts and things which may be reasonably necessary to enable the Holders to
consummate the disposition in such jurisdictions of the Registrable Securities;
provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection, (ii) subject itself to taxation in
any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;
(c) notify the Holders in writing (i) at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, and (ii) of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be
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<PAGE> 78
stated therein or necessary to make the statements therein not misleading and
promptly make available to the Holders any such supplement or amendment;
(d) make available for inspection by the Holders
and any attorney, accountant or other professional retained thereby
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such inspectors in
connection with the Registration Statement. Records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
in the judgment of counsel to the Company the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the Registration
Statement, or (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
Shareholder agrees that information obtained by such party as a result of such
inspections shall be deemed confidential and shall not be used by such party as
the basis for any market transactions in the securities of the Company unless
and until such is made generally available to the public. The Holders further
agree that they will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent disclosure
of the Records deemed confidential; and
(e) do any and all such other acts and things as
may be reasonably necessary or advisable to enable holders of Registrable
Securities to consummate the public sale or other disposition of their
Registrable Securities in such jurisdictions as are covered by the Registration
Statement.
The Company may require the Holders to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as it may from time to time reasonably request and such
other information as may be legally required in connection with such
registration.
Each Shareholder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in subsection
3(c) hereof, such Shareholder will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement until receipt of
the copies of the supplemented or amended prospectus contemplated by subsection
3(c) hereof, and, if so directed by the Company, the Holders will deliver to
the Company all copies, other than permanent file copies then in their
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice.
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IV.
REGISTRATION EXPENSES
All fees and expenses incident to the Company's performance of
or compliance with this Agreement shall be borne by the Company, including,
without limitation, the following fees and expenses: (a) all registration and
filing fees; (b) the fees and expenses of the Company's compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities); (c) printing expenses; (d) the fees and disbursements of counsel
for the Company, and the fees and expenses for independent certified public
accountants, underwriters and other persons retained by the Company in
connection with such registration; (e) any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities; (f) fees of
transfer agents and registrars; (g) fees of the national Association of
Securities Dealers, Inc.; and (h) messenger and delivery expenses. In
addition, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Company, and the
expenses and fees for listing or authorizing for quotation the securities to be
registered on each securities exchange on which any shares of Company Stock are
then listed or quoted.
V.
INDEMNIFICATION; CONTRIBUTION
(a) INDEMNIFICATION BY THE COMPANY. The Company
agrees to indemnify and hold harmless the Holders from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs
of investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
prospectus contained therein or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arising out of
or based upon the Company's breach of any representation, warranty, covenant or
agreement contained in this Agreement; provided, however, that the Company
shall not be liable in any such case to the extent any of such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon information
furnished in writing to the Company by the Holders expressly for use therein.
(b) INDEMNIFICATION BY THE HOLDERS. The Holders
agree to indemnify and hold harmless, on a several (and not joint) basis, the
Company, its directors and officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to the Holders, but only with respect to information furnished
in
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<PAGE> 80
writing by the Holders or on their behalf expressly for use in the Registration
Statement or prospectus relating to the Registrable Securities, any amendment
or supplement thereto or any preliminary prospectus; provided that the
obligation of the Holders to indemnify will be several and not joint, and the
liability of each of the Holders will be in proportion to the net amount
received by each Shareholder from the sale of Registrable Securities pursuant
to the Registration Statement. In case any action or proceeding shall be
brought against the Company or its directors or officers, or any such
controlling person, in respect of which indemnity may be sought against the
Holders, the Holders shall have the rights and duties given to the Company, and
the Company or its directors or officers or such controlling person shall have
the rights and duties given to the Holders, by the preceding subsection hereof.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If
any action or proceeding (including any governmental investigation) shall be
brought or asserted against any person entitled to indemnification under
subsections (a) or (b) above (an "Indemnified Party") in respect of which
indemnity may be sought from any party who has agreed to provide such
indemnification (an "Indemnifying Party"), the Indemnifying Party shall assume
the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party, and shall assume the payment of all
expenses. Such Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof; but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (i) the Indemnifying Party has agreed to pay such fees and
expenses, or (ii) the named parties to any such action or proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that there
is a conflict of interest on the part of counsel employed by the Indemnifying
Party to represent such Indemnified Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that Indemnified Party elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Party; it being understood,
however, that the Indemnifying Party shall not, in connection with any one
cause action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such Indemnified Parties, (which firm shall be designated in
writing by such Indemnified Parties). The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action or proceedings, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement of judgment.
(d) CONTRIBUTION. If the indemnification
provided for in this Section 5 is unavailable to the Indemnified Parties in
respect of any losses, claims, damages, liabilities or judgment referred to
herein, then such Indemnifying Party, in lieu of Indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
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<PAGE> 81
as a result of such losses, claims, damages, liabilities and judgments in the
following manner: as between the Company on the one hand and each Shareholder
on the other, in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and each Shareholder on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand
and of the Holders on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the party's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. No person guilty of fraudulent misrepresentation (within the means
of subsection 11(f) of the Securities Act) shall, be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
(e) SURVIVAL. The indemnity and contribution
agreements contained in this Section 5 shall remain operative and in full force
and effect with respect to any sales of Registrable Securities made pursuant to
the Registration Statement regardless of (i) any termination of this Agreement,
(ii) any investigation made by or on behalf of any Indemnified Party or by or
on behalf of the Company, and (iii) the consummation of the sale or successive
resale of the Registrable Securities.
VI.
MISCELLANEOUS
(a) AMENDMENTS AND WAIVERS. The provision of
this agreement may not be amended, modified or supplements, and waivers or
consents to departures from the provisions hereof may not be given other than
as initially agreed upon in writing by the Company and the Shareholder.
(b) NOTICES. All notices and other
communications provided for or permitted hereunder shall be made in writing by
hand delivery, regular mail, registered first-class mail, telex, telecopier or
air courier guaranteeing overnight delivery:
(i) if to the Holders, initially to:
Bariston Associates, Inc.
One International Place
Boston, Massachusetts
Attn: David A. Barry
Fax No.: 617-330-8951
with a copy to:
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<PAGE> 82
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attn: Martin Neidell, Esq.
Fax No.: 212-806-6006
and thereafter at such other address as
may be designated from time to time by
notice given in accordance with the
provisions of this Section.
(ii) if to the Company:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly,
Chief Financial Officer and
Treasurer
Fax No.: 703-768-9625
with a copy to:
Wilmer, Cutler & Pickering
100 Light Street
Baltimore, MD 20037-1420
Fax No.: 410-986-2828.
Attn: John B. Watkins, Esq.
(c) SUCCESSORS AND ASSIGNS. The Holders may not
assign any rights or benefits under this Agreement without prior written
consent of the Company, which consent shall not be unreasonably withheld. The
Company may not assign any rights or benefits under this Agreement without
prior written consent of the Holders, which consent shall not be unreasonably
withheld. This Agreement shall inure to the benefit of and be binding upon the
permitted successor and assigns of the Company and the Holders.
(d) COUNTERPARTS. This Agreement may be executed
in a number of identical counterparts and it shall not be necessary for the
Company and the Holders to execute each of such counterparts, but when each has
executed and delivered one or more of such counterparts, the several parts,
when taken together, shall be deemed to constitute one and the same instrument,
enforceable against each in accordance with its terms. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart executed by the party against whom enforcement of this
Agreement is sought.
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<PAGE> 83
(e) HEADINGS. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.
(g) SEVERABILITY. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall
be fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
(h) ENTIRE AGREEMENT. This Agreement is intended
by the Company and the Holders as final expression of their agreement and is
intended to be a complete and exclusive statement of their agreement and
understanding in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the
Company and the Holders with respect to such subject matter.
(i) THIRD PARTY BENEFICIARIES. Other than
Indemnified Parties not a party hereto and the Holders, this Agreement is
intended for the benefit of the Company and the Holders and their respective
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person or entity.
(j) EFFECTIVENESS. This Agreement shall have no
force or effect unless and until the Company issues Company Stock to the
Holders pursuant to terms of the Purchase Agreement.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE COMPANY:
METROCALL, INC.
By:
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Name:
-------------------------
Title:
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PAGE AMERICA:
PAGE AMERICA GROUP, INC.
By:
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Name:
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Title:
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SHAREHOLDERS:
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SHAREHOLDERS
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Exhibit 8.3.6(b)
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of ______________, 1997, by and among METROCALL, INC., a Delaware
corporation (the "Company"), 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 each individually a
"Seller").
RECITALS
WHEREAS, Sellers and the Company executed an Amended and Restated
Asset Purchase Agreement dated as of January 30, 1997 (the "Purchase
Agreement"), pursuant to which Sellers agreed to sell and the Company agreed
to buy all of Sellers' Assets upon the terms and conditions set forth in the
Purchase Agreement;
WHEREAS, as part of the consideration for the purchase of assets
pursuant to the Purchase Agreement, the Company will issue to Sellers 1,500
shares of its Series B Junior Convertible Preferred Stock (the "Preferred
Stock"), the terms and conditions of which are set forth in the Certificate of
Designation (as hereinafter defined); and
WHEREAS, in connection with the issuance of the Preferred Stock
pursuant to the Purchase Agreement, the Company has agreed, on the terms and
conditions set forth herein, to register shares of Common Stock as set forth
below.
NOW THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Certificate of Designation" means the Certificate or
Designation, Number, Powers, Preferences and Relative, Participating, Optional
and Other Rights of Series B Junior Convertible Preferred Stock of Metrocall,
Inc., the form of which is attached as Exhibit 4.1(a) to the Purchase
Agreement.
<PAGE> 87
1.02 "Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1.03 "Conversion Shares" means shares of the Company's Common
Stock, $.01 par value per share ("Common Stock"), issuable upon conversion of
Preferred Shares, provided, however, that any Conversion Share will cease to be
a Conversion Share when (i) such Conversion Share has been transferred pursuant
to an effective registration statement under the Securities Act covering such
Conversion Share (but not including any transfer exempt from registration under
the Securities Act), or (ii) the Holder of such Conversion Share is then able
to use Rule 144 promulgated under the Securities Act (or any successor
provision) to transfer such Conversion Share without regard to any restrictions
pursuant to Rule 144(k) (but not including any transfer exempt from
registration under the Securities Act).
1.04 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
1.05 "Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any court, panel, judge,
board, bureau, commission, agency or other entity, body or other Person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
1.06 "Holder" means each Seller and each transferee permitted
pursuant to Section 12.19 of the Purchase Agreement that has become a party to
this Agreement as provided in Section 6.04.
1.07 "Person" means an individual or corporation, partnership,
trust, unincorporated organization, association or other entity and includes
any Governmental Authority.
1.08 "Preferred Shares" means the shares of Series B Junior
Convertible Preferred Stock issued to the Sellers pursuant to the Purchase
Agreement and any additional or replacement shares of Preferred Stock issued
with respect to Preferred Shares upon any stock dividend, stock split,
recapitalization or similar event.
1.09 "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
1.10 "Stockholder Approval" means the approval by the stockholders
of the Company of the convertibility provisions of Section 5 of the Certificate
of Designation.
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ARTICLE II
REGISTRATION RIGHTS
2.01 Required Registration.
(a) In the event that the Stockholder Approval occurs,
the Company shall prepare and file with the Commission a registration statement
under the Securities Act with respect to resale of the Conversion Shares and
shall use its best efforts to cause such registration statement to become
effective promptly after filing. The registration statement with respect to
the Conversion Shares shall be filed with the Commission within thirty (30)
days after the Stockholder Approval.
(b) Except as provided in Section 2.01(c) of this
Agreement, the Company shall use its best efforts to maintain the effectiveness
of the registration statement filed pursuant to this Section 2.01 until such
time as all Conversion Shares registered pursuant to the registration statement
either have been transferred pursuant to the registration statement or are
eligible to be sold pursuant to Rule 144 under the Securities Act without
regard to any restrictions pursuant to Rule 144(k). Each Holder shall provide
written notice to the Company within fifteen (15) days after it has sold all of
its Conversion Shares registered pursuant to this Section 2.01.
(c) The obligations of the Company under this Section
2.01 are subject to the condition that the Company shall be entitled to require
the Holders to suspend for up to ninety (90) days once in any twelve month
period the sale of Conversion Shares pursuant to a registration statement filed
pursuant to this Section if (i) and for so long as the Board of Directors of
the Company determines, in its reasonable judgment, that the sale of Conversion
Shares pursuant thereto would materially interfere with any material financing,
acquisition, corporate reorganization or other material transaction by the
Company, (ii) the Company promptly gives the Holders of the Conversion Shares
written notice of such determination, and (iii) all other similarly situated
shareholders shall also be subject to the same suspension. The Company shall
have no obligation to maintain the effectiveness of a registration statement
with respect to Conversion Shares during periods when the Holders are required
to suspend the sale of such Conversion Shares as provided in this Section
2.01(c). As soon as practicable after the expiration of such periods, the
Company shall amend its registration statement as necessary to permit the
Holders to sell Conversion Shares pursuant to such registration statement.
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<PAGE> 89
ARTICLE III
REGISTRATION PROCEDURES
3.01 Company Obligations. Following the Stockholder Approval, the
Company will:
(a) furnish to the Holders, prior to the filing of a
registration statement pertaining to any Conversion Shares (each a
"Registration Statement") or any prospectus, amendment or supplement thereto,
copies of each such Registration Statement as proposed to be filed, which
documents will be subject to the reasonable review and comments of the Holders
(and their respective attorneys), and the Company will not file any such
Registration Statement, any prospectus or any amendment or supplement thereto
(or any such documents incorporated by reference) to which the Holders shall
reasonably object in writing; and thereafter furnish to the Holders such number
of copies of such Registration Statement, each amendment and supplement thereto
(including any exhibits thereto), the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents as
any Holder may reasonably request in writing in order to facilitate the
disposition of the Conversion Shares registered pursuant to such Registration
Statement; provided, however, that the obligation of the Company to deliver
copies of prospectuses or preliminary prospectuses to any Holder shall be
subject to the receipt by the Company of reasonable assurances from such Holder
that such Holder will comply with the applicable provisions of the Securities
Act and of such other securities or blue sky laws as may be applicable in
connection with any use of such prospectuses or preliminary prospectuses;
(b) use its best efforts to register or qualify the
Conversion Shares registered pursuant to such Registration Statement under such
other securities or blue sky laws of such jurisdictions as a Holder may
reasonably request and do any and all other acts and things which may be
reasonably necessary to enable the Holder to consummate the disposition in such
jurisdictions of such Conversion Shares; provided, however, that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subsection, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction;
(c) apply, prior to or concurrently with the filing of
the Registration Statement, to the Nasdaq National Market System (or, if the
Company is not listed on the Nasdaq National Market System, any other exchange
on which the Company's Common Stock is then listed) for the listing of the
Conversion Shares and use its best efforts to obtain the listing of such stock;
(d) notify the Holders in writing at any time when a
prospectus relating to the Conversion Shares registered pursuant to such
Registration Statement is required to be delivered under the Securities Act, of
the occurrence of an event requiring the preparation
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<PAGE> 90
of a supplement or amendment to such prospectus or filing of a report
incorporated in the prospectus by reference so that, as thereafter delivered to
the purchasers of such Conversion Shares, such prospectus (including documents
incorporated therein by reference) will not contain an 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 not misleading and promptly
prepare, file with the Commission and make available to the Holders any such
supplement, amendment or report incorporated in the prospectus by reference,
including, without limitation, after any period referred to in Section 2.01(c);
(e) make available for inspection by the Holders of
Conversion Shares to be registered pursuant to a Registration Statement and any
attorney, accountant or other professional retained thereby (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspectors in
connection with such Registration Statement. Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed by the Inspectors
unless (i) in the judgment of counsel to the Company the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, or (iii) the
information in such Records is generally available to the public. As a
condition of receiving access to such confidential information described in
clause (i) or (ii) of the preceding sentence, the Holders of such Conversion
Shares shall agree that such confidential information obtained by them as a
result of such inspections shall be deemed confidential and shall not be used
by them as the basis for any market transactions in the securities of the
Company unless and until such information is made generally available to the
public, it being understood that nothing in this sentence shall reduce the
Company's obligations hereunder, including under Section 3.01(d). Each Holder
further shall agree that it will, upon learning that disclosure of such Records
from such Holder is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential;
(f) obtain consents from its independent public
accountants in customary form as required to obtain and maintain effectiveness
of the registration statement;
(g) obtain an opinion or opinions from its counsel in
customary form and reasonably satisfactory to the Holders and their respective
legal counsel;
(h) make generally available to the Holders earnings
statements, which need not be audited, satisfying the provisions of Section
11(a) of the Securities Act no later than forty-five days after the end of the
twelve-month period beginning with the first month of the
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<PAGE> 91
first fiscal quarter commencing after the effective date of a Registration
Statement, which earnings statements shall cover said twelve-month period;
(i) promptly notify each Holder of the issuance or
threatened issuance of any stop order or other order suspending the
effectiveness of a Registration Statement or preventing or suspending the use
of any preliminary prospectus, prospectus or prospectus supplement, use
reasonable efforts to prevent the issuance of any such threatened stop order or
other order, and, if any such order is issued, use its best efforts to obtain
the lifting or withdrawal of such order at the earliest possible moment and
promptly notify each Holder of any such lifting or withdrawal;
(j) if requested by any Holder, the Company will promptly
incorporate in a prospectus supplement or post-effective amendment to a
Registration Statement such information concerning such Holder and such
Holder's intended method of distribution as such Holder requests to be included
therein (and which is not violative of an applicable law, rule or regulation,
in the reasonable judgment of the Company, after consultation with its outside
legal counsel), including, without limitation, with respect to any change in
the intended method of distribution, the amount or kind of Conversion Shares
being offered by such Holder, the offering price for such Conversion Shares or
any other terms of the offering or distribution of the Conversion Shares, and
the Company will make all required filings of such prospectus supplement or
post-effective amendment as soon as possible after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(k) as promptly as practicable after the filing with the
Commission of any document which is incorporated by reference into a
registration statement, notify each Holder of such filing and deliver a copy of
such document to each Holder;
(l) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates, not bearing any restrictive legends,
unless otherwise required by the Holders, representing the Conversion Shares to
be sold under the Registration Statement, and enable such Conversion Shares to
be in such denominations and registered in such names as such Holders may
request;
(m) cooperate with the Holders, their respective legal
counsel and any other interested party (including any interested broker-dealer)
in making any filings or submissions required to be made, and the furnishing of
all appropriate information in connection therewith, with the National
Association of Securities Dealers, Inc.
(n) cause its subsidiaries to take all action necessary
to effect the registration of the Conversion Shares contemplated hereby,
including preparing and filing any required financial or other information;
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<PAGE> 92
(o) make available to the transfer agent for each class
or series of Conversion Shares a supply of certificates or other instruments
evidencing or constituting such Conversion Shares which shall be in a form
complying with the requirements of such transfer agent, promptly after a
registration thereof; and
(p) use its best efforts to keep each such registration
or qualification effective, including through new filings, amendments or
renewals, during the period the Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable in connection with such registration or qualifications in all
jurisdictions in which qualification or registration is necessary.
3.02 Information from Holders. The Company may require the Holders
to promptly furnish in writing to the Company such information regarding the
distribution of the Conversion Shares as it may from time to time reasonably
request and such other information as may be legally required in connection
with such registration.
3.03 Suspension of Sales. The Holders agree that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in subsection 3.01(d) hereof, they will immediately discontinue disposition of
Conversion Shares pursuant to a Registration Statement until they receive
copies of the supplemented or amended prospectus contemplated by subsection
3.01(d) hereof, and, if so directed by the Company, the Holders will deliver to
the Company all copies, other than permanent file copies then in their
possession, of the most recent prospectus (including any prospectus supplement)
covering such Conversion Shares at the time of receipt of such notice or
destroy all such copies.
ARTICLE IV
REGISTRATION EXPENSES
4.01 Except as provided in Section 4.02, all fees and expenses
incident to the Company's performance of or compliance with this Agreement
shall be borne by the Company, including, without limitation, the following
fees and expenses: (a) all Commission, National Association of Securities
Dealers, Inc., stock exchange or other registration and filing fees and listing
fees; (b) the fees and expenses of the Company's compliance with securities or
blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Conversion Shares); (c) printing
expenses; (d) the fees and disbursements of counsel for the Company and of one
counsel for the Holders, and the fees and expenses for independent certified
public accountants and other persons retained by the Company in connection with
such registration; (e) fees of transfer agents and registrars; and (f)
messenger and delivery expenses. In addition, the Company shall pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit or quarterly review, the expense of any liability
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insurance obtained by the Company, and the expenses and fees for listing or
authorizing for quotation the securities to be registered on each securities
exchange on which any shares of the Common Stock are then listed or quoted.
4.02 The Holders shall pay all underwriting discounts and
commissions and all of their internal expenses incurred in connection with the
offering (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties but excluding fees
and expenses of their counsel that are payable by the Company under Section
4.01).
ARTICLE V
INDEMNIFICATION; CONTRIBUTION
5.01 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder, each of such Holder's officers,
directors, partners and members, and each of such Holder's legal counsel and
independent accountants, if any, and each person controlling any such persons
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs
of investigation, any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, and any of the foregoing incurred in settlement of
any litigation, commenced or threatened) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus contained therein or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities laws applicable to
the Company and relating to action or inaction by the Company in connection
with any registration, qualification or compliance required hereunder or
arising out of or based upon the Company's breach of any representation,
warranty, covenant or agreement contained in this Agreement; provided, however,
that the Company shall not be liable in any such case to the extent any of such
losses, claims, damages, liabilities or expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such Holder expressly for
use therein.
5.02 Indemnification by Holders. Each Seller agrees, and each
other Holder that is not a signatory to this Agreement agrees by exercising any
of its rights hereunder, severally to indemnify and hold harmless the Company,
its directors and officers and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
set forth above in (a), but only with respect to information furnished in
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writing by such Holder, or on its behalf expressly for use in the Registration
Statement or prospectus relating to the Conversion Shares, any amendment or
supplement thereto or any preliminary prospectus, under the heading "Selling
Shareholders" and "Distribution" and provided that the obligation of each
Holder to indemnify will be several and not joint. In case any action or
proceeding shall be brought against the Company or its directors or officers
any such controlling person, in respect of which indemnity may be sought
against the Holder, the Holder shall have the rights and duties given to the
Company, and the Company or its directors or officers or such controlling
person shall have the rights and duties given to the Holder, by the preceding
Section 5.01 hereof. Each Holder's indemnity obligations under this Section
5.02 shall be limited to the net sales proceeds actually received in connection
with the applicable offering.
5.03 Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any person entitled to indemnification under Section 5.01 or
5.02 above (an "Indemnified Party") in respect of which indemnity may be sought
from any party who has agreed to provide such indemnification (an "Indemnifying
Party"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all expenses. Such Indemnified Party shall have
the right to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (a) the Indemnifying Party has agreed
to pay such fees and expenses, or (b) such Indemnified Party shall have been
advised by counsel that there is an actual or potential conflict of interest on
the part of counsel employed by the Indemnifying Party to represent such
Indemnified Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that Indemnified Party elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense of such action or proceeding on behalf
of such Indemnified Party; it being understood, however, that the Indemnifying
Party shall not, in connection with any one cause of action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all such Indemnified
Parties, which firm shall be designated in writing by such Indemnified Parties
unless there shall be conflicts of interest among such Indemnified Parties, in
which case the Indemnifying Party shall be liable for the fees and expenses of
additional counsel). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding or any threatened action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action or proceedings, the
Indemnifying Party shall indemnify and hold harmless such Indemnified Parties
from and against any loss or liability (to the extent stated above) by reason
of such settlement or judgment. The failure of any Indemnified Party to give
prompt notice of a claim for indemnification hereunder shall not limit the
Indemnifying Party's obligations to indemnify under this Agreement, except to
the extent such failure is prejudicial to the ability of the
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Indemnifying Party to defend the action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement unless (x) there is no finding or admission of any violation of any
rights of any Person and no effect on any other claims that be made against any
Indemnified Party, (y) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party and (z) such judgment or settlement
includes as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation.
5.04 Contribution. If the indemnification provided for in this
Article V is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities or judgment referred to herein, then such
Indemnifying Party, in lieu of Indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and judgments in the following
manner: as between the Company on the one hand and any Indemnified Party
entitled to indemnification under Section 5.01 on the other, in such proportion
as is appropriate to reflect the relative fault of the Company on the one hand
and any Indemnified Party entitled to indemnification under Section 5.02 on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company on the
one hand and of any Indemnified Party entitled to indemnification under Section
5.02 on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
No person guilty of fraudulent misrepresentation (within the means of
subsection 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
5.05 Survival. The indemnity and contribution agreements contained
in this Article V shall remain operative and in full force and effect with
respect to any sales of Conversion Shares made pursuant to a registration
statement filed pursuant to this Agreement regardless of (a) any termination of
this Agreement, (b) any investigation made by or on behalf of any Indemnified
Party or by or on behalf of the Company, and (c) the consummation of the sale
or successive resale of the Conversion Shares.
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<PAGE> 96
ARTICLE VI
MISCELLANEOUS
6.01 Rules 144 and 144A. The Company covenants that following the
registration of Conversion Shares it will file any reports required to be filed
by it under the Securities Act and the Exchange Act so as to enable Holders
holding registered Conversion Shares to sell such Conversion Shares without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rules 144 and 144A under the Securities Act, as each such Rule
may be amended from time to time, or (b) any similar rule or rules hereafter
adopted by the SEC. Upon the request of any such Holder, the Company will
forthwith deliver to such Holder a written statement as to whether it has
complied with such requirements.
6.02 Amendments and Waivers. The provision of this Agreement may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given other than as mutually agreed upon
in writing by the Company and the Holders of a majority of the Conversion
Shares.
6.03 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, regular mail,
registered first-class mail, confirmed facsimile or recognized express courier
service by next business day delivery;
(i) if to the Company:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attention: Chief Financial Officer
Fax Number: (703) 768-9625
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Thomas W. White, Esq.
Fax Number: (202) 663-6363
Notices shall be deemed given on the day on which delivered by hand or
facsimile, if delivered by 5:00 p.m. Eastern time; on the fifth business day
after mailing if delivered by mail; or the business day after delivery to an
overnight air courier if next-day delivery is specified.
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<PAGE> 97
(ii) if to any of the Holders, to the last
business address for such Holder shown on the Preferred Share Register
maintained by the Company pursuant to the Purchase Agreement.
6.04 Successors and Assigns. No Holder may assign any rights or
benefits under this Agreement except as provided in this Section 6.04. A
Holder may assign its rights under this Agreement to any Permitted Transferee
under the Purchase Agreement, provided that such Permitted Transferee executes
and delivers to the Company an agreement pursuant to which it becomes bound by
the terms of this Agreement, and such Permitted Transferee shall retain the
rights and benefits of the transferor under this Agreement. The Company shall
not assign any rights, benefits or obligations under this Agreement without
prior written consent of the Holders of a majority of the Conversion Shares;
provided, however, that the Company shall assign its rights, benefits and
obligations to any person the Company is merged with or consolidated into or to
any person to whom the Company sells substantially all of its assets. This
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of the Company, the Sellers and the other Holders.
6.05 Counterparts. This Agreement may be executed in a number of
identical counterparts and it shall not be necessary for the Company and the
Sellers to execute each of such counterparts, but when each has executed and
delivered one or more of such counterparts, the several parts, when taken
together, shall be deemed to constitute one and the same instrument,
enforceable against each in accordance with its terms. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart executed by the party against whom enforcement of this
Agreement is sought.
6.06 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
6.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.
6.08 Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or further laws effective
during the term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement.
6.09 Entire Agreement. This Agreement and the Purchase Agreement
(including exhibits thereto) are intended by the Company and the Sellers as
final expression of
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<PAGE> 98
their agreement and are intended to be a complete and exclusive statement of
their agreement and understanding in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the Company and the Sellers with respect to such subject matter.
6.10 Third Party Beneficiaries. Other than Indemnified Parties not
a party hereto, this Agreement is intended for the benefit of the Company, the
Sellers and their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other person
or entity.
6.11 Obligations Several; Independent Nature of Each Holder's
Rights. Each obligation of any Holder is several and no such Holder shall be
responsible for the obligations of any other Holder. Nothing contained herein,
and no action taken by any such Holder pursuant hereto, shall be deemed to
constitute such Holders as a partnership, an association, a joint venture or
any other kind of entity. Each Holder shall be entitled to protect and enforce
its rights arising out of this Agreement without notice to or the consent of
any other person and it shall not be necessary for any other such Holder to be
joined as an additional party in any proceeding for such purpose.
6.12 Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the Holder shall
operate as a waiver of or otherwise prejudice such Holder's rights, powers or
remedies.
6.13 Remedies. The Company acknowledges that the remedies at law
of the Holders in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Agreement are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise without requiring such
Holders to post any bond or other security, unless otherwise required by
applicable law (which cannot be waived by the Company).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 99
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
METROCALL, INC.
By:
-------------------------------------
Vincent D. Kelly
Chief Financial Officer
SELLERS:
PAGE AMERICA GROUP, INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA OF NEW YORK, INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA OF ILLINOIS, INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA COMMUNICATIONS OF INDIANA,
INC.
By: (Seal)
-----------------
Its:
-----------------
PAGE AMERICA OF PENNSYLVANIA, INC.
By: (Seal)
-----------------
Its:
-----------------
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<PAGE> 100
Exhibit 12.19
TRANSFERS OF METROCALL SERIES B PREFERRED SHARES
Any Permitted Transferee (as defined in the Agreement) shall agree to
be bound, pursuant to an instrument satisfactory in form and substance to
Metrocall, Inc. (the "Company"), to the following provisions which will govern
transfers of the Metrocall Series B Preferred Stock. Defined terms not
otherwise defined herein will have the meaning given such terms in the
Agreement.
1. Representations by Permitted Transferee. Each Permitted
Transferee severally represents and warrants to the Company that:
(a) The Metrocall Series B Preferred Shares are being
acquired for such Permitted Transferee's own account and not with a present
view to or for sale in connection with any distribution thereof in violation of
the Securities Act, subject to the condition that the disposition of the
property of a Permitted Transferee shall be at all times within its control.
(b) Such Permitted Transferee understands that (i) the
Metrocall Series B Preferred Shares are subject to certain restrictions on
transfer as set forth below, and (ii) the Metrocall Series B Preferred Shares
will bear legends to such effect and the Company will make a notation on its
transfer books to such effect.
(c) Such Permitted Transferee understands that no public
market now exists for the Metrocall Series B Preferred Shares.
2. Securities Law Restrictions on Transfer.
Each Permitted Transferee, if any, identified as an affiliate of the
Sellers will deliver to the Company on or prior to the Closing Date a written
agreement, in such form as may be agreed to by the parties, that such person
will not offer to sell, sell or otherwise dispose of any Metrocall Series B
Preferred Shares issued or transferred to such person in connection with the
transactions contemplated by the Agreement, except pursuant to an exemption
from the registration requirements of the Securities Act. The Company shall be
entitled to place appropriate legends on the certificates evidencing Metrocall
Series B Preferred Shares to be received by such affiliates in connection with
such transactions and to issue appropriate stop transfer instructions to any
transfer agent for such shares, to the effect that the Metrocall Series B
Preferred Shares received or to be received by such affiliate pursuant to the
such transactions may only be sold, transferred or otherwise conveyed, and the
Holder thereof may reduce his interest in or risks relating to such shares only
pursuant to an effective registration statement with respect to such transfer
(which the Company shall be under no obligation to file) under, or an exemption
from the registration requirements of, the Securities Act. The foregoing
restrictions on the transferability of Metrocall Series B Preferred Shares
shall apply to all purported sales, transfers
<PAGE> 101
and other conveyances of the shares received or to be received by such
affiliate in connection with such transactions and to all purported reductions
in interest or risks relating to such Metrocall Series B Preferred Shares.
3. Limitations on Subsequent Transfers
(a) No Permitted Transferee as of the Closing Date may
transfer any Metrocall Series B Preferred Shares unless the proposed transferee
agrees to be bound by the provisions of this 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 Company, and unless, after such transfer, the total
number of beneficial owners of Metrocall Series B Preferred Shares (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), does not
exceed 10. In order to facilitate compliance with this restriction, the
Permitted Transferee will, prior to effecting the transfer, provide to the
Company such information as the Company shall reasonably request as to the
identity of the proposed transferee, and the Company 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. Upon compliance with the foregoing provisions, and
completion of the transfer, the new holder of the Metrocall Series B Preferred
Shares shall be a "Permitted Transferee" for all purposes hereunder."
(b) In addition to any legend attached pursuant to
Section 2, each certificate representing the Metrocall Series B Preferred
Shares shall bear a legend in substantially the following form:
"The securities represented by this certificate are subject to
certain restrictions on transfer as set forth in an agreement
between the holder and the Company. Copies of such agreement
may be obtained upon request to the Secretary of the Company."
4. Replacement of Preferred Share Certificates. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate representing Metrocall Series B Preferred
Shares (a "Preferred Share Certificate"), and, if requested in the case of any
such loss, theft or destruction, upon delivery of an indemnity bond or other
agreement or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of any such Preferred
Share Certificate, the Company will issue a new Preferred Share Certificate, of
like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated
Preferred Share Certificate.
5. Registration; Transfer; Registration of Transfer and Exchange
of Metrocall Series B Preferred Shares.
The Metrocall Series B Preferred Shares shall be issued in registered
form only. The Company, or a transfer agent appointed by the Company (the
Company or such designated agent,
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<PAGE> 102
in such capacity, the "Preferred Share Agent"), shall number and list each
Preferred Share Certificate, as it is issued, in a register (the "Preferred
Share Register") which the Company or such agent shall maintain at the
principal executive offices of the Company or at such office specified in a
notice to the registered holders (the "Holders") of the Metrocall Series B
Preferred Shares (the "Office"). The Company or the Preferred Share Agent
shall also maintain on the Preferred Share Register a record of the Metrocall
Series B Preferred Shares held by each Holder or represented by a Preferred
Share Certificate that have become convertible into shares of Metrocall Common
Stock at any time. Such record shall be conclusive as to all Holders of
Metrocall Series B Preferred Shares.
At the option of any Holder of Metrocall Series B Preferred Shares,
any Preferred Share Certificate may be exchanged at the Office for a new
Preferred Share Certificate (or new Preferred Share Certificates, in the same
or different denominations), upon payment of the charges (if any) hereinafter
provided. Whenever any Preferred Share Certificates are so surrendered for
exchange the Company shall execute, and, if applicable, the Preferred Share
Agent shall countersign and deliver, the Preferred Share Certificates that the
Holder making the exchange is entitled to receive.
Subject to compliance with the restrictions set forth in this Exhibit
12.19, the Preferred Share Certificates shall be transferable only on the
Preferred Share Register, upon delivery thereof duly endorsed by the Holder or
by his duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer. In all cases of
transfer by an attorney, the original power of attorney, duly approved, or a
copy thereof, duly certified, shall be deposited and remain with the Company or
the Preferred Share Agent. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited and to remain
with the Preferred Share Agent in its discretion. Upon any registration of
transfer, the Company shall execute and, if applicable, the Preferred Share
Agent shall countersign and deliver, a new Preferred Share Certificate(s) to
the Persons entitled thereto. As used in this Agreement, "Person" means any
natural person, corporation, partnership, joint venture, limited liability
company, firm, association, joint-stock company, trust, unincorporated
organization, government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other capacity.
All Preferred Share Certificates issued upon any registration of
transfer or exchange of Preferred Share Certificates shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to
the same benefits under this Agreement, as the Preferred Share Certificates
surrendered for such registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Preferred Share Certificates. The Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Preferred Share Certificates.
3
<PAGE> 103
Any Preferred Share Certificate when duly endorsed in blank shall be
deemed negotiable, and when a Preferred Share Certificate shall have been so
endorsed, the Holder thereof may be treated by the Company, the Preferred Share
Agent and all other Persons dealing therewith as the absolute owner thereof for
any purpose and as the Person entitled to exercise the rights represented
thereby, or the transfer thereof on the Preferred Share Register, any notice to
the contrary notwithstanding; but until such transfer on the Preferred Share
Register, the Company and the Preferred Share Agent may treat the registered
Holder thereof as the owner for all purposes.
4
<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 8, 1996
(except with respect to the matters discussed in Note 13 as to which the date
is February 28, 1996) included in Metrocall, Inc.'s Form 10-K for the year
ended December 31, 1995 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.
January 31, 1997
<PAGE> 1
EXHIBIT 23.3
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 April 24, 1996
included in the financial statements of O.R. Estman, Inc. and Dana Paging, Inc.
for the year ended December 31, 1995 and to all references to our Firm included
in this registration statement.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
January 31, 1997
Roseland, New Jersey
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference, of our report dated
February 13, 1996, except to NOTE M for which the date is September 30, 1996,
relating to the financial statements of Parkway Paging, Inc. in this
Registration Statement on Form S-4 of Metrocall, Inc.
/s/ HUTTON, PATTERSON & COMPANY
Dallas, Texas
February 4, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated March 15, 1996 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 Registration Statement
(Form S-4 filed on February 5, 1997) 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
Hackensack, New Jersey
February 4, 1997
