<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
<TABLE>
<C> <S>
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
FROM TO
COMMISSION FILE NUMBER: 0-21924
</TABLE>
METROCALL, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 54-1215634
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6677 RICHMOND HIGHWAY, ALEXANDRIA, VIRGINIA 22306
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, including area code: (703) 660-6677
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT AUGUST 1, 1998
----- -----------------------------
<S> <C>
Common Stock, $.01 par value 40,956,827
</TABLE>
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<PAGE> 2
METROCALL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, December 31, 1997 and
June 30, 1998............................................. 3
Condensed Consolidated Statements of Operations for the
three and six month periods ended June 30, 1997 and
1998...................................................... 4
Condensed Consolidated Statement of Stockholders' Equity for
the six month period ended June 30, 1998.................. 5
Condensed Consolidated Statements of Cash Flows for the six
month periods ended June 30, 1997 and 1998................ 6
Notes to Condensed Consolidated Financial Statements........ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 23
Item 2. Changes in Securities....................................... 24
Item 3. Defaults Upon Senior Securities............................. 24
Item 4. Submission of Matters to a Vote of Security Holders......... 24
Item 5. Other Information........................................... 24
Item 6. Exhibits and Reports on Form 8-K............................ 24
SIGNATURES.............................................................. 29
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 24,896 $ 4,456
Accounts receivable, less allowance for doubtful accounts
of $6,843 as of December 31, 1997 and $5,709 as of June
30, 1998................................................ 30,208 35,046
Prepaid expenses and other current assets................. 18,372 20,700
---------- ----------
Total current assets............................... 73,476 60,202
---------- ----------
PROPERTY AND EQUIPMENT:
Land, buildings and leasehold improvements................ 16,364 16,724
Furniture, office equipment and vehicles.................. 46,588 52,547
Paging and plant equipment................................ 276,993 292,118
Less -- Accumulated depreciation and amortization......... (115,357) (138,749)
---------- ----------
224,588 222,640
---------- ----------
INTANGIBLE ASSETS, net of accumulated amortization of
approximately $58,352 as of December 31, 1997 and $130,248
as of June 30, 1998....................................... 787,003 745,161
OTHER ASSETS................................................ 1,947 976
---------- ----------
TOTAL ASSETS................................................ $1,087,014 $1,028,979
========== ==========
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 952 $ 966
Accounts payable.......................................... 35,160 9,261
Accrued expenses and other current liabilities............ 46,141 47,036
Deferred revenues and subscriber deposits................. 15,854 16,076
---------- ----------
Total current liabilities.......................... 98,107 73,339
---------- ----------
CAPITAL LEASE OBLIGATIONS, net of current portion........... 4,282 3,831
CREDIT FACILITY AND OTHER LONG-TERM DEBT, less current
maturities................................................ 142,173 158,142
SENIOR SUBORDINATED NOTES, due 2005 and 2007................ 452,534 452,534
DEFERRED INCOME TAX LIABILITY............................... 155,930 162,658
MINORITY INTEREST IN PARTNERSHIP............................ 510 510
---------- ----------
Total liabilities.................................. 853,536 851,014
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 5, 6 and 8)
SERIES A CONVERTIBLE PREFERRED STOCK, 14% cumulative; par
value $.01 per share; 810,000 shares authorized; 182,726
and 195,517 shares issued and outstanding as of December
31, 1997 and June 30, 1998, and a liquidation preference
of $46,481 and $49,735 at December 31, 1997 and June 30,
1998, respectively........................................ 37,918 41,566
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK, 14% cumulative,
par value $.01 per share; 9,000 shares authorized; 1,579
and 1,689 shares issued and outstanding as of December 31,
1997 and June 30, 1998 and a liquidation preference of
$16,064 and $17,188 at December 31, 1997 and June 30,
1998, respectively........................................ 16,064 17,188
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share; authorized
80,000,000 shares; 40,548,414 and 40,866,548 shares
issued and outstanding as of December 31, 1997 and June
30, 1998, respectively.................................. 405 409
Additional paid-in capital................................ 336,076 337,492
Accumulated deficit....................................... (156,985) (218,690)
---------- ----------
Total stockholders' equity......................... 179,496 119,211
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $1,087,014 $1,028,979
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1998 1997 1998
------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Service, rent and maintenance
revenues............................. $ 60,021 $ 93,098 $ 118,537 $ 185,135
Product sales........................... 10,276 10,156 18,513 21,449
----------- ----------- ----------- -----------
Total revenues.................. 70,297 103,254 137,050 206,584
Net book value of products sold......... (7,525) (7,428) (13,682) (14,459)
----------- ----------- ----------- -----------
62,772 95,826 123,368 192,125
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Service, rent and maintenance
expenses............................. 14,641 21,659 28,671 45,035
Selling and marketing................... 13,615 16,269 26,168 32,642
General and administrative.............. 17,627 29,144 35,350 57,688
Depreciation............................ 14,199 16,982 26,907 33,539
Amortization............................ 8,632 35,426 16,642 71,013
----------- ----------- ----------- -----------
68,714 119,480 133,738 239,917
----------- ----------- ----------- -----------
Loss from operations............ (5,942) (23,654) (10,370) (47,792)
INTEREST EXPENSE.......................... (7,867) (16,123) (15,907) (31,024)
INTEREST AND OTHER INCOME................. 143 292 60 612
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT............ (13,666) (39,485) (26,217) (78,204)
INCOME TAX BENEFIT........................ 1,362 10,751 2,165 21,270
----------- ----------- ----------- -----------
Net loss........................ (12,304) (28,734) (24,052) (56,934)
PREFERRED DIVIDENDS....................... (1,609) (2,423) (3,169) (4,771)
----------- ----------- ----------- -----------
Loss attributable to common
stockholders.................. $ (13,913) $ (31,157) $ (27,221) $ (61,705)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE
ATTRIBUTABLE TO COMMON STOCKHOLDERS..... $ (0.55) $ (.76) $ (1.09) $ (1.51)
=========== =========== =========== ===========
Weighted-average common shares
outstanding............................. 25,074,059 40,866,548 24,977,724 40,866,548
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL
SHARES PAR PAID-IN ACCUMULATED
OUTSTANDING VALUE CAPITAL DEFICIT TOTAL
----------- ----- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997............. 40,548,414 $405 $336,076 $(156,985) $179,496
Issuance of shares in employee stock
purchase plan (unaudited)............ 48,134 1 204 -- 205
Shares issued in settlement of
litigation related to the ProNet
Merger (unaudited)................... 270,000 3 1,212 -- 1,215
Preferred dividends (unaudited)........ -- -- -- (4,771) (4,771)
Net loss (unaudited)................... -- -- -- (56,934) (56,934)
---------- ---- -------- -------- --------
BALANCE, June 30, 1998 (unaudited)..... 40,866,548 $409 $337,492 $(218,690) $119,211
========== ==== ======== ========= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(24,052) $(56,934)
Adjustments to reconcile net loss to net cash provided by
operating activities--Depreciation and amortization.... 43,549 104,552
Amortization of debt financing costs................... 498 881
Change in deferred income taxes........................ (2,692) (21,270)
Cash provided by (used in) changes in assets and
liabilities:
Accounts receivable.................................... (6,566) (4,838)
Prepaid expenses and other current assets.............. (1,016) (2,328)
Accounts payable....................................... 3,196 (25,899)
Accrued expenses and other current liabilities......... (298) 895
Deferred revenues and subscriber deposits.............. 1,679 222
-------- --------
Net cash provided (used) by operating
activities....................................... 14,298 (4,719)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired.......... (798) --
Proceeds from sale of telemessaging operations............ 10,300 --
Purchases of property and equipment, net.................. (32,501) (31,591)
Additions to intangibles.................................. (678) (839)
Other..................................................... (297) 972
-------- --------
Net cash used in investing activities............. (23,974) (31,458)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 20,000 16,000
Principal payments on long-term debt...................... (650) (468)
Net proceeds from issuance of common stock................ 146 205
Increase in minority interest in partnership.............. 12 --
-------- --------
Net cash provided by financing activities......... 19,508 15,737
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 9,832 (20,440)
CASH AND CASH EQUIVALENTS, beginning of period.............. 10,917 24,896
-------- --------
CASH AND CASH EQUIVALENTS, end of period.................... $ 20,749 $ 4,456
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest................................ $ 13,024 $ 22,742
Cash payments for income taxes............................ $ 527 $ --
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. ORGANIZATION AND RISK FACTORS
Metrocall, Inc. and subsidiaries ("Metrocall" or the "Company"), is a
provider of local, regional and nationwide paging and other wireless messaging
services in the United States. The Company's selling efforts are concentrated in
six operating regions: (i) the Northeast (Massachusetts through Western
Pennsylvania), (ii) the Mid-Atlantic (Eastern Pennsylvania, Delaware, Maryland,
Virginia and the Washington, D.C. metropolitan area), (iii) the Southeast
(including the Carolinas, Georgia, Florida, Alabama, Mississippi and Tennessee),
(iv) the Southwest (primarily Louisiana and Texas), (v) the Mid-West (including
Illinois, Indiana and Wisconsin) and (vi) the West (primarily California, Nevada
and Arizona). Through the Metrocall Nationwide Wireless Network, the Company
provides coverage to over 1,000 cities including the top 100 Standard
Metropolitan Statistical Areas.
Risks and Other Important Factors
The Company sustained net losses of $20.1 million, $49.1 million, $52.5
million and $56.9 million for each of the years ended December 31, 1995, 1996,
1997 and for the six month period ended June 30, 1998, respectively. The
Company's loss from operations for the six month period ended June 30, 1998 was
$47.8 million. In addition, at June 30, 1998, the Company had an accumulated
deficit of $218.7 million and a deficit in working capital of $13.1 million. The
Company's losses from operations and its net losses are expected to continue for
additional periods in the future. There can be no assurance that the Company's
operations will become profitable.
The Company's operations require the availability of substantial funds to
finance the maintenance and growth of its existing paging operations and
customer base, development and construction of future wireless communications
networks, expansion into new markets, and the acquisition of other wireless
communications companies. At June 30, 1998, the Company had incurred
approximately $615.5 million in long-term debt and capital leases. Amounts
available under the Company's credit facility are subject to certain financial
covenants and other restrictions such that as of June 30, 1998, approximately
$74.6 million of additional borrowings were available to the Company under its
credit facility. The Company's ability to borrow additional amounts in the
future is dependent on its ability to comply with the provisions of its credit
facility as well as the availability of financing in the capital markets.
Year 2000 Compliance
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00". This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company utilizes software and related computer technologies essential
to its operations that will be affected by the Year 2000 issue. The Company
recognizes the importance of adequately addressing the Year 2000 issue and has
designated a team of employees to resolve the Year 2000 issues. The Company's
Year 2000 compliance program has been divided into four phases: (1) assessment,
(2) renovation, (3) validation and (4) implementation. Many of the Company's
computer systems, including the Company's primary billing system, have been
enhanced to meet Year 2000 compliance. In addition to implementing a
comprehensive Year 2000 program for the Company's systems, the Company has begun
discussions with significant third parties and vendors to ensure those parties
have assessed the Year 2000 issue's impact on their own systems and are taking
the steps necessary to ensure that their systems will be Year 2000 compliant.
The Company is continuing to review other computer systems, including those
relating to recent and pending mergers and acquisitions, and is developing plans
to address the remaining Year 2000 compliance issues. The costs associated with
these plans are currently being assessed, but are expected to be material.
7
<PAGE> 8
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. ORGANIZATION AND RISK FACTORS -- (CONTINUED)
The Company is also subject to certain additional risks and uncertainties
including, but not limited to, changes in technology, business integration,
competition, regulation, litigation and subscriber turnover.
2. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC") and include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of interim period results. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes, however,
that its disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1997 Annual Report on Form 10-K. The results of
operations for the six month period ended June 30, 1998, are not necessarily
indicative of the results to be expected for the full year.
3. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue under service, rental and maintenance
agreements with customers as the related services are performed. Sales of
equipment are recognized upon delivery.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid investments
purchased with original maturities of three months or less.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives.
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and leasehold improvements........................ 10-31
Furniture and office equipment.............................. 5-10
Vehicles.................................................... 3-5
Subscriber paging equipment................................. 3-5
Transmission and plant equipment............................ 5-12
</TABLE>
The net book value of lost pagers is charged to depreciation expense. New
pagers are depreciated using the half-year convention upon acquisition.
Betterments to acquired pagers are charged to depreciation expense.
8
<PAGE> 9
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Long-Lived Assets
Long-lived assets and identifiable intangibles to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount should be addressed. Impairment is measured by
comparing the book value to the estimated undiscounted future cash flows
expected to result from use of the assets and their eventual disposition. The
Company has determined that there has been no permanent impairment in the
carrying value of long-lived assets reflected in the accompanying balance sheet.
Effective January 1, 1998, the Company reduced the estimated useful lives
of certain intangibles, including goodwill, regulatory licenses issued by the
Federal Communications Commission ("FCC") and subscriber bases recorded in
conjunction with acquisitions from 15 years to 10 years for goodwill, from 25
years to 10 years for FCC licenses and from 5-6 years for subscriber bases to 3
years. The impact of these changes was to increase amortization expense for the
six month period ended June 30, 1998 by approximately $12.0 million.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company adopted SFAS No. 130 for the
three months ended March 31, 1998. The adoption of SFAS No. 130 did not have a
material impact on the Company's results of operations, financial position or
cash flows. The Company will be required to adopt SFAS No. 131 with the issuance
of its financial statements for the year ending December 31, 1998 and is
presently evaluating its potential impact on the results of operations,
financial position and cash flows.
4. LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share" which requires dual presentation of basic and diluted
earnings per share on the face of the statement of operations for all periods
presented. Basic earnings per share excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the Company.
Options and warrants to purchase shares of common stock were not included in the
computation of loss per share as the effect would be antidilutive. As a result,
the basic and diluted earnings per share amounts are identical.
Reclassifications
Certain amounts in the prior periods' consolidated financial statements
have been reclassified to conform with the current periods' presentation.
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Pursuant to the Telecommunications Act of 1996 (the "Telecom Act") and
consistent with the FCC's local transport rules, the Company has ceased paying
local exchange carriers ("LECs"), including a number of the Regional Bell
Operating Companies ("RBOCs") in the Company's various service areas for any
facilities used by those LECs to transport local calls to the Company's local
paging networks. The Company has also notified the LECs that it expects to
receive credit from each LEC for any such local transport charges assessed
against the Company by that LEC since November 1, 1996, the effective date for
the FCC's rules
9
<PAGE> 10
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS -- (CONTINUED)
governing local transport. As of December 31, 1997 and June 30, 1998, the
Company has recorded credits receivable from the LECs related to such local
transport charges of approximately $12.1 million and $13.5 million,
respectively. These LEC receivables represent management's estimate, subject to
significant revision, of amounts management believes are fully realizable. These
LEC credit receivables have been classified as Prepaid Expenses and Other
Current Assets in the accompanying balance sheets as of December 31, 1997 and
June 30, 1998 (see Note 8).
6. RECENT AND PENDING ACQUISITIONS
AT&T Wireless -- Messaging Division
On June 26, 1998, the Company entered into a stock purchase agreement with
AT&T Wireless Services, Inc. ("Wireless"), McCaw Communications Companies, Inc.
and AT&T Two Way Messaging Communications, Inc. to acquire the stock of certain
subsidiaries of Wireless that operate the paging and messaging services business
of AT&T Corp. and a 50KHz/50KHz narrowband personal communications services
license. The purchase price for this acquisition is $110.0 million in cash and
$95.0 million in stated value of a new series of convertible preferred stock to
be designated Series C Convertible Preferred Stock (the "Series C Preferred").
The total purchase price to be paid is subject to adjustment, either upward or
downward, based on the performance of the acquired business prior to closing.
Closing of the acquisition is expected in the fourth quarter of 1998. The
transaction is subject to regulatory clearance by the FCC and the United States
Department of Justice. The Company expects this acquisition will be accounted
for as a purchase for financial reporting purposes.
The issuance of the Series C Preferred shares is subject to stockholder
approval and the shares will rank junior to the Company's existing Series A and
B Preferred Stock. The Series C Preferred will be convertible into common stock
beginning five years after issuance. Dividends accrue at a rate of 8% of the
stated value, payable semi-annually, and may be paid either in cash or in
additional shares of Series C Preferred at the Company's option. If the
Company's stockholders do not approve the issuance of the Series C Preferred,
AT&T may terminate the agreement and receive a $9.0 million termination fee from
Metrocall.
ProNet Inc.
On December 30, 1997, The Company completed the merger of ProNet with and
into Metrocall (the "ProNet Merger"), pursuant to the terms of the Agreement and
Plan of Merger dated August 8, 1997. Under the terms of the ProNet Merger,
Metrocall issued 0.90 shares of Metrocall common stock for each share of ProNet
common stock, or approximately 12.3 million shares of Metrocall common stock
(including 630,000 shares remaining to be issued in 1998 as settlement of
certain ProNet litigation). In connection with the ProNet Merger, the Company
assumed ProNet's $100.0 million in 11 7/8% senior subordinated notes, due in
2005 and refinanced indebtedness outstanding, including accrued interest and
bank fees, under ProNet's credit facility with borrowings under the Company's
credit facility. The ProNet Merger has been accounted for as a purchase for
financial reporting purposes.
On March 31, 1998, the Company revised its estimate of the deferred tax
liability associated with the ProNet Merger and accordingly, increased the
goodwill and the deferred income tax liability recorded in the ProNet Merger by
$28.0 million.
7. STOCK AND STOCK RIGHTS
Stock Option Plans
At December 31, 1997, 3,470,655 options were issued and outstanding with a
weighted-average exercise price of approximately $6.84 per share, expiring on
various dates ranging from 2003 through 2007.
10
<PAGE> 11
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCK AND STOCK RIGHTS -- (CONTINUED)
On February 4, 1998, the Board of Directors approved an amendment to the
Company's 1996 Stock Option Plan, as amended, to increase the number of options
issuable under the plan to approximately 6.0 million. During the six months
ended June 30, 1998, the Board of Directors approved grants of options to
purchase 1,678,000 shares of Metrocall common stock to current officers,
employees and directors with exercise prices ranging from $5.13 to $6.75 per
share, a price equal to or greater than the fair market value on the date of
grant.
Employee Stock Purchase Plan
The Metrocall, Inc. Employee Stock Purchase Plan (the "Stock Purchase
Plan"), offers eligible employees the opportunity to purchase an aggregate of
1,000,000 shares of Metrocall common stock through payroll deductions. Each
eligible employee may elect to purchase shares of Metrocall common stock at the
lesser of 85% of the fair market value of Metrocall common stock on either the
first or last trading day for each payroll deduction period. On January 1, 1998,
the Company issued 48,134 shares of Company common stock under the Stock
Purchase Plan with a purchase price of approximately $4.09 per share.
8. COMMITMENTS AND CONTINGENCIES
Legal and Regulatory Matters
The Company is subject to certain legal and regulatory matters in the
normal course of business. In the opinion of management, the outcome of such
matters will not have a material adverse effect on the financial position or
results of operations of the Company.
Interconnect Complaint
Metrocall has filed complaints with the FCC against a number of RBOCs and
the largest independent telephone company for violations of the FCC's
interconnection and local transport rules and the Telecom Act. The complaints
allege that these local telephone companies are unlawfully charging Metrocall
for local transport of the telephone companies' local traffic. Metrocall has
petitioned the FCC to rule that these local transport charges are unlawful and
to award Metrocall a reimbursement for any past charges assessed. Metrocall has
requested that the FCC resolve these complaints. The FCC has established
deadlines for responses to the parties' discovery requests, and for the filing
of motions in this proceeding, in August 1998. A briefing schedule in this
proceeding has been established for September 1998. (see Note 5)
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
financial statements and the notes thereto which appear elsewhere in this
quarterly report and its annual report on Form 10-K for the year ended December
31, 1997.
All statements contained herein that are not historical facts, including
but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's ability to
obtain additional debt, equity or other financing, and the Company's ability to
generate cash from operations, further savings from existing operations
(synergies), and Year 2000 compliance are based on current expectations. These
statements are forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as the introduction
of new technologies and competitors into the paging and wireless communications
industry; pricing pressures which could affect demand for the Company's
services; changes in labor, equipment and capital costs; future acquisitions and
strategic partnerships; general business and economic conditions; and the other
risk factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. The Company wishes to caution readers not to
place undue reliance on any such forward looking statements, which statements
are made pursuant to the Private Securities Litigation Reform Act of 1995 and,
as such, speak only as of the date made.
OVERVIEW
Metrocall is currently the second largest paging company in the United
States based on number of subscribers, with 4,223,980 pagers in service at June
30, 1998. The Company added 107,121 and 193,144 subscribers to its base of
pagers in service for the three and six-month periods ended June 30, 1998,
respectively. The definitions below relate to management's discussion of the
Company's results of operations that follows.
- Service, rent and maintenance revenues: include primarily monthly,
quarterly, semi-annually and annually billed recurring revenue, not
generally dependent on usage, charged to subscribers for paging and
related services such as voice mail and pager repair and replacement.
Service, rent and maintenance revenues also include revenues derived from
telemessaging, tracking, cellular and long distance services.
- Net revenues: include service, rent and maintenance revenues and sales
of customer owned and maintained ("COAM") pagers less net book value of
products sold.
- Service, rent and maintenance expenses: include costs related to the
management, operation and maintenance of the Company's network systems.
- Selling and marketing expenses: include salaries, commissions and
administrative costs for the Company's sales force and related marketing
and advertising expenses.
- General and administrative expenses: include costs related to executive
management, accounting, office telephone, repairs and maintenance,
management information systems, employee benefits and customer support
centers.
The Company derives the majority of its revenues from fixed, periodic
(usually monthly) fees, generally not dependent on usage, charged to subscribers
for paging services. While a subscriber continues to use the Company's service,
operating results benefit from this recurring revenue stream with minimal
requirements for incremental selling expenses or other fixed costs. The
Company's total revenues have increased approximately 47% and 51% to $103.3
million and $206.6 million for the three and the six-month periods ended June
30, 1998, respectively, from $70.3 million and $137.1 million for the three and
the six-month periods ended June 30, 1997, respectively. Overall, subscribers
have increased by approximately 81% to more than
12
<PAGE> 13
4.2 million at June 30, 1998 from approximately 2.3 million at June 30, 1997.
The increase in subscribers is largely due to the acquisition of Page America
Group, Inc. ("Page America") in July 1997, and ProNet in December 1997 together
adding approximately 1.5 million subscribers.
The Company's average monthly paging service, rent and maintenance revenues
per unit ("ARPU") for the three and six-month periods ended June 30, 1998 was
$7.23 and $7.25, respectively. This was a decrease from $8.44 and $8.36,
respectively, for the three and six-month periods ended June 30, 1997. The
decrease in ARPU from 1997 to 1998 is primarily attributable to the ProNet
Merger and to a lesser extent the changing overall distribution mix. In order to
offset declines in ARPU and to capitalize on growth of paging and wireless
messaging services, the Company has expanded its channels of distribution to
include Company-owned and operated retail stores, strategic partnerships and
alliances and internet sales, among others; with each distribution channel
focusing on the sale rather than lease of pagers. Some of these channels tend to
have higher ARPU's than the Company's strategic partners and typical resellers,
who purchase service in quantity at wholesale rates. Furthermore, the Company
has been successful in marketing enhanced services, such as nationwide paging
services, voice mail and other ancillary services which tend to increase ARPU.
The Company's growth, whether internal or through acquisitions, requires
significant capital investments for paging equipment and technical
infrastructure. The Company also purchases pagers for that portion of its
subscriber base that leases pagers from the Company. During the three and
six-month periods ended June 30, 1998 the Company's capital expenditures totaled
$12.5 million and $31.6 million, respectively. This includes approximately $6.4
million and $21.2 million for the three and six-month periods ended June 30,
1998, respectively, for pagers, representing an increase in pagers on hand and
net increases and maintenance to the rental pager base.
The Company's focus is now on completing the final phases of ProNet's
integration, increasing ARPU's, lowering operating costs, increasing utilization
of its nationwide network, expanding its geographic presence and emphasizing
distribution channels through which pagers are sold rather than leased in order
to reduce future capital expenditures. In addition, on June 26, 1998, the
Company entered into an agreement with AT&T Wireless Services, Inc. ("Wireless")
and certain other subsidiaries of AT&T Corp. to acquire Wireless' paging and
messaging operations. The AT&T Wireless Messaging Division acquisition expands
the Company's geographic presence to include the northwest portion of the United
States while adding to the subscriber bases of several of its existing operating
regions. As part of the AT&T Wireless Messaging Division acquisition, the
Company will acquire a 50KHz/50KHz narrowband personal communications services
("NPCS") license which, when constructed, will allow the Company to expand its
capacity to offer value-added enhanced services including two-way paging and
messaging services. The Company may continue to evaluate strategic merger or
acquisition targets in the future but only if such targets satisfy certain
minimum criteria such as geographic coverage, regulatory licenses and other
factors including overall valuation, form of consideration and availability of
financing.
The Company's long-term strategy is to continue to expand its business by
providing paging and other wireless messaging services to an increasingly broad
base of subscribers throughout the United States, while increasing total
revenues and EBITDA and de-emphasizing that portion of the business which has
historically leased pagers. The Company believes that increases in revenues from
the sale of pagers and service revenue from providing paging service to such
pagers will more that make up for the losses of rental revenues derived from
leasing pagers, which has increasingly involved high volume, lower margin
transactions. The Company is seeking to increase its base of subscribers by
expanding its operations in existing, contiguous and other markets, through
start-up operations and internal growth.
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<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net revenues represented by certain items in the Company's Condensed
Consolidated Statements of Operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Service, rent and maintenance............ 95.6% 97.2% 96.1% 96.3%
Product sales............................ 16.4 10.6 15.0 11.2
--------- --------- --------- ---------
Total revenues...................... 112.0 107.8 111.1 107.5
Net book value of products sold.......... (12.0) (7.8) (11.1) (7.5)
--------- --------- --------- ---------
100.0 100.0 100.0 100.0
OPERATING EXPENSES:
Service, rent and maintenance expenses... 23.3 22.6 23.2 23.4
Selling and marketing.................... 21.7 17.0 21.2 17.0
General and administrative............... 28.1 30.4 28.7 30.0
Depreciation............................. 22.6 17.7 21.8 17.5
Amortization............................. 13.8 37.0 13.5 37.0
--------- --------- --------- ---------
Total operating expenses............ 109.5 124.7 108.4 124.9
--------- --------- --------- ---------
Loss from operations................ (9.5) (24.7) (8.4) (24.9)
Interest and other income (expense)........ 0.2 0.3 -- 0.3
Interest expense........................... (12.5) (16.8) (12.9) (16.1)
--------- --------- --------- ---------
Loss before income tax benefit............. (21.8) (41.2) (21.3) (40.7)
Income tax benefit......................... 2.2 11.2 1.8 11.1
--------- --------- --------- ---------
Net loss............................ (19.6) (30.0) (19.5) (29.6)
Preferred dividends........................ (2.6) (2.5) (2.6) (2.5)
--------- --------- --------- ---------
Loss attributable to common
stockholders..................... (22.2)% (32.5)% (22.1)% (32.1)%
========= ========= ========= =========
Units in service (end of period)........... 2,332,006 4,223,980 2,332,006 4,223,980
EBITDA (in thousands)(1)................... $ 16,889 $ 28,754 $ 33,179 $ 56,760
Ratio of EBITDA to net revenues(1)......... 26.9% 30.0% 26.9% 29.5%
ARPU(2).................................... $ 8.44 $ 7.23 $ 8.36 $ 7.25
Average monthly operating cost per
unit(3).................................. $ 6.59 $ 5.36 $ 6.50 $ 5.47
</TABLE>
- ---------------
(1) EBITDA (earnings before interest, taxes, depreciation and amortization),
while not a measure under generally accepted accounting principles ("GAAP"),
is a standard measure of financial performance in the paging industry;
EBITDA should not be considered in isolation or as an alternative to net
income (loss), income (loss) from operations, cash flows from operating
activities or any other measure of performance under GAAP. EBITDA is,
however, an approximation of the primary financial measure by which the
Company's covenants are calculated under its indenture relating to its
senior subordinated notes and its credit facility. See "-- Liquidity and
Capital Resources" for a discussion of significant capital requirements and
commitments.
(2) ARPU (average monthly paging revenue per unit) is calculated by dividing (a)
paging service, rent and maintenance revenues for the period by (b) the
average number of units in service for the period. The calculation of ARPU
excludes revenues derived from non-paging services such as telemessaging,
tracking, long distance and cellular telephone.
(3) Average monthly operating expense per unit is calculated by dividing (a)
total recurring paging operating expenses before depreciation and
amortization for the period by (b) the average number of units in service
for the period. The calculation of average monthly operating expense per
unit for the three and six-month periods ended June 30, 1997 excludes costs
associated with telemessaging operations.
14
<PAGE> 15
THREE-MONTH PERIOD ENDED JUNE 30, 1998 COMPARED WITH 1997
Total revenues increased approximately $33.0 million, or approximately
46.9%, from $70.3 million for the three-month period ended June 30, 1997 ("1997
Quarter") to $103.3 million for the three-month period ended June 30, 1998
("1998 Quarter"). Net revenues increased approximately $33.0 million, or 52.7%,
from $62.8 million in the 1997 Quarter to $95.8 million in the 1998 Quarter. The
increase is attributable to greater service revenues due to the growth of pagers
in service from 2,332,006 at June 30, 1997 to 4,223,980 at June 30, 1998. The
change in total subscribers from June 30, 1997 to June 30, 1998 resulted, in
part, due to the acquisition of Page America and the ProNet Merger on July 1,
1997 and December 30, 1997, respectively. Together, Page America and ProNet
added approximately 1.5 million subscribers. ARPU for paging services decreased
from $8.44 per unit in the 1997 Quarter to $7.23 per unit in the 1998 Quarter
due to the merger with ProNet in December 1997, and the changing subscriber
distribution mix. Factors affecting ARPU in future periods include distribution
mix of new subscribers, competition and new technologies, among others. There
can be no assurance that ARPU will not decline in future periods.
Product sales decreased $0.1 million from $10.3 million in the 1997 Quarter
to $10.2 million in the 1998 Quarter and decreased as a percentage of net
revenues from 16.4% in the 1997 Quarter to 10.6% in the 1998 Quarter. Net book
value of products sold decreased approximately $0.1 million from $7.5 million in
the 1997 Quarter to $7.4 million in the 1998 Quarter principally due to the
decrease in product sales, offset by increased depreciation expense. Pagers are
classified as property and depreciated from the date of acquisition. The gross
margin on products sold increased from 26.8% in the 1997 Quarter to 26.9% in the
1998 Quarter.
Overall, the Company experienced a decrease in average monthly operating
costs per unit in service (operating costs per unit before depreciation and
amortization) from the 1997 Quarter to the 1998 Quarter. Average monthly
operating cost per unit decreased from $6.59 per unit for the 1997 Quarter
(excluding operating costs associated with the telemessaging operations) to
$5.36 per unit for the 1998 Quarter. Each operating expense is discussed
separately below.
Service, rent and maintenance expenses increased approximately $7.1 million
from $14.6 million in the 1997 Quarter to $21.7 million in the 1998 Quarter and
decreased as a percentage of net revenues from 23.3% in the 1997 Quarter to
22.6% in the 1998 Quarter. The overall increase in service, rent and maintenance
expense is attributable to the acquisitions of ProNet ($7.9 million) and Page
America ($0.5 million). The Company has ceased paying local exchange carriers in
the Company's various service areas for any facilities used by those local
exchange carriers to transport local calls to the Company's local paging
networks pursuant to the Telecommunications Act of 1996 (the "Telecom Act") and
the FCC's rules regarding local transport which reduced third-party carrier
costs by approximately $2.8 million in the 1998 Quarter. The Company has filed
complaints with the FCC against a number of Regional Bell Operating Companies
("RBOCs") and the largest independent telephone company for violations of the
FCC's interconnection and local transport rules and the Telecom Act. Metrocall
has petitioned the FCC to rule that these local transport charges are unlawful
and to award Metrocall a reimbursement or credit for any past charges assessed.
The total value of credits receivable from these local exchange carriers at
December 31, 1997 and June 30, 1998 was $12.1 million and $13.5 million,
respectively. These LEC receivables represent management's estimate, subject to
significant revision, of amounts management believes are fully realizable. The
LEC credit receivables have been classified as Prepaid Expenses and Other
Current Assets in the Company's balance sheets as of December 31, 1997 and June
30, 1998. Service, rent and maintenance expense per unit decreased from $2.09
per unit in the 1997 Quarter to $1.73 per unit in the 1998 Quarter.
Selling and marketing expenses increased approximately $2.7 million from
$13.6 million in the 1997 Quarter to $16.3 million in the 1998 Quarter and
decreased as a percentage of net revenues from 21.7% in the 1997 Quarter to
17.0% in the 1998 Quarter. The increase in selling and marketing expenses is
primarily associated with the acquisition of ProNet ($3.6 million) and Page
America ($0.8 million), partially offset by reductions in personnel costs ($0.9
million). Monthly selling and marketing expense per unit decreased from $1.98
per unit in the 1997 Quarter to $1.30 per unit in the 1998 Quarter. Selling and
marketing expenses may increase as a percentage of net revenues as the Company
continues to increase its presence in existing markets and expand geographic
coverage.
15
<PAGE> 16
General and administrative expenses increased $11.5 million from $17.6
million in the 1997 Quarter compared to $29.1 million in the 1998 Quarter, and
increased as a percentage of net revenues from 28.1% in the 1997 Quarter to
30.4% in the 1998 Quarter. General and administrative expenses attributed to the
acquired companies are ProNet ($6.7 million), and Page America ($0.8 million).
General and administrative expenses also increased due to increased expenses for
a variety of professional services ($1.1 million) and, additional operational
personnel ($2.1 million). Monthly general and administrative expense per unit
decreased from $2.52 per unit in the 1997 Quarter to $2.33 per unit in the 1998
Quarter. On a per unit basis, general and administrative expenses are expected
to continue to decline as additional synergies are gained from the Company's
acquisitions.
Depreciation increased approximately $2.8 million from $14.2 million in the
1997 Quarter to $17.0 million in the 1998 Quarter, and decreased as a percentage
of net revenues from 22.6% to 17.7% in the 1997 Quarter and the 1998 Quarter,
respectively. The increase in depreciation expense resulted primarily from
depreciation on equipment attributable to the Page America and ProNet
acquisitions.
Amortization increased significantly in the 1998 Quarter, up $26.8 million
from $8.6 million in the 1997 Quarter to $35.4 million in the 1998 Quarter and
increased as a percentage of net revenues from 13.8% in the 1997 Quarter to
37.0% in the 1998 Quarter. The amortization of intangibles recorded in
conjunction with the ProNet Merger and the acquisition of Page America increased
amortization $19.4 million and $3.2 million, respectively. Additionally,
effective January 1, 1998, the Company reduced the estimated useful lives of
certain intangibles from 15 to 10 years for goodwill, 25 to 10 years for FCC
licenses and from 5 to 6 years for subscriber bases to 3 years. The impact of
these changes was to increase amortization expense in the 1998 Quarter by
approximately $6.0 million.
Interest expense increased approximately $8.2 million, from $7.9 million in
the 1997 Quarter to $16.1 million in the 1998 Quarter. Interest expense
increased due to higher average level of debt, including debt assumed in the
ProNet Merger, during the 1998 Quarter primarily associated with the financing
of the acquisitions of Page America and ProNet and working capital requirements.
Net loss increased $16.4 million from approximately $12.3 million in the
1997 Quarter to $28.7 million in the 1998 Quarter primarily due to the increase
in interest expense and amortization of intangible assets, offset partially by
the benefit for income taxes. Net losses are expected to continue in future
periods.
Loss attributable to common stockholders increased $17.3 million from $13.9
million in the 1997 Quarter to $31.2 million in the 1998 Quarter primarily due
to increased amortization of intangible assets ($26.8 million) and increased
interest expense ($8.2 million) partially offset by an increase in the benefit
for income taxes ($9.4 million).
EBITDA increased approximately $11.9 million to $28.8 million in the 1998
Quarter from $16.9 million in the 1997 Quarter. As a percentage of net revenues,
EBITDA increased from 26.9% in the 1997 Quarter to 30.0% in the 1998 Quarter.
SIX-MONTH PERIOD ENDED JUNE 30, 1998 COMPARED WITH 1997
Total revenues increased approximately $69.5 million from $137.1 million
for the six months ended June 30, 1997 ("1997") to $206.6 million for the six
months ended June 30, 1998 ("1998"). Service, rent and maintenance revenues
increased approximately $66.6 million in 1998 from $118.5 million in 1997 to
$185.1 million in 1998. The increase in revenues is attributed to greater
service revenues due to the growth of pagers from 2,332,006 at June 30, 1997 to
4,223,980 at June 30, 1998. Monthly ARPU for paging services decreased from
$8.36 per unit in 1997 to $7.25 per unit in 1998 primarily due to the merger
with ProNet in December 1997 and the changing subscriber distribution mix.
Product sales increased $2.9 million from $18.5 million in 1997 to $21.4
million in 1998 and decreased as a percentage of total revenues from 15.0% in
1997 to 11.2% in 1998. Net book value of products sold increased approximately
$0.8 million from $13.7 million in 1997 to $14.5 million in 1998 principally due
to the increase in product sales, partially offset by increased depreciation
expense. Pagers are classified as property and
16
<PAGE> 17
depreciated from the date of acquisition. The gross margin on products sold
increased from 26.1% in 1997 to 32.6% in 1998.
Overall, the Company experienced a decrease in average monthly operating
costs per unit in service (operating costs per unit before depreciation and
amortization) from 1997 to 1998. Average monthly operating costs per unit
decreased from $6.50 in 1997 to $5.47 in 1998. Each operating expense is
discussed separately below.
Service, rent and maintenance expenses increased approximately $16.3
million from $28.7 million in 1997 to $45.0 million in 1998 and increased as a
percentage of net revenues from 23.2% in 1997 to 23.4% in 1998. The overall
increase in service, rent and maintenance expense is attributable to the
acquisitions of ProNet ($15.8 million ) and Page America ($2.0 million)
completed in 1997. The Company has ceased paying local exchange carriers in the
Company's various service areas for any facilities used by those local exchange
carriers to transport local calls to the Company's local paging networks
pursuant to the Telecom Act and the FCC's rules regarding local transport.
Metrocall has petitioned the FCC to rule that these local transport charges are
unlawful and to award Metrocall a reimbursement or credit for any past due
charges assessed. The impact of these interconnect credits was to reduce
third-party carrier costs by approximately $6.3 million in 1998. Service, rent
and maintenance expense per unit decreased from $2.04 per unit in 1997 to $1.82
per unit in 1998.
Selling and marketing expenses increased approximately $6.4 million, from
$26.2 million in 1997 to $32.6 million in 1998 and decreased as a percentage of
net revenues from 21.2% in 1997 to 17.0% in 1998. The increase in selling and
marketing expenses is primarily associated with the ProNet Merger ($7.2 million)
and the acquisition of Page America ($1.4 million), partially offset by
reductions in personnel costs ($1.4 million), advertising expenses ($0.4
million) and other administrative costs ($0.3 million). Monthly selling and
marketing expense per unit decreased from $1.93 per unit in 1997 to $1.32 per
unit in 1998. Selling and marketing expense may increase as a percentage of net
revenues as the Company continues to increase its presence in existing markets
and expand geographic coverage.
General and administrative expenses increased approximately $22.3 million,
from $35.4 million in 1997 to $57.7 million in 1998 and increased as a
percentage of net revenues from 28.7% in 1997 to 30.0% in 1998. The increase in
general and administrative expenses is primarily associated with the companies
acquired in 1997. Selling and marketing expenses attributed to the acquired
companies are ProNet ($13.4 million), and Page America ($1.3 million). General
and administrative expenses also increased due to increased expenses for a
variety of professional services($2.8 million), additional operational personnel
($3.8 million), and various facility and administrative costs ($1.1 million).
Monthly general and administrative expense per unit decreased from $2.53 per
unit in 1997 to $2.33 per unit in 1998. On a per unit basis general and
administrative expenses are expected to continue to decline as additional
synergies are gained from the Company's acquisitions.
Depreciation increased approximately $6.6 million from $26.9 million in
1997 to $33.5 million in 1998, and decreased as a percentage of net revenues
from 21.8% in 1997 to 17.5% in 1998. The increase in depreciation expense
resulted primarily from the depreciation on equipment attributable to the
acquisition of Page America and the ProNet Merger.
Amortization increased approximately $54.4 million from $16.6 million in
1997 to $71.0 million in 1998, and increased as a percentage of net revenues
from 13.5% in 1997 to 37.0% in 1998. The amortization of intangibles recorded in
conjunction with the ProNet Merger and the acquisition of Page America increased
amortization $38.8 million and $6.4 million, respectively. Additionally,
effective January 1, 1998, the Company reduced the estimated useful lives of
certain intangibles from 15 to 10 years for goodwill, 25 to 10 years for FCC
licenses and from 5 to 6 years for subscriber bases to 3 years. The impact of
these changes was an increase in amortization expense in 1998 by approximately
$12.0 million.
Interest expense increased approximately $15.1 million from $15.9 million
in 1997 to $31.0 million in 1998. Interest expense increased due to higher
average level of debt during 1998 primarily associated with the financing of the
1997 acquisitions of ProNet and Page America and general working capital
requirements.
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<PAGE> 18
Net loss increased from approximately $24.1 million in 1997 to $56.9
million in 1998 primarily due to the increase in interest expense and the
amortization of intangible assets, offset partially by a benefit for income
taxes. Net losses are expected to continue in future periods.
Loss attributable to common shareholders increased $34.5 million from $27.2
million in 1997 to $61.7 million in 1998 primarily due to the increase in
interest expense and the amortization of intangible assets, offset partially by
the benefit for income taxes.
EBITDA increased approximately $23.6 million to $56.8 million in 1998 from
$33.2 million in 1997. As a percentage of revenues, EBITDA increased from 26.9%
in 1997 to 29.5% in 1998.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company adopted SFAS No. 130 for the
three months ended March 31, 1998. The adoption of SFAS No. 130 did not have a
material impact on the Company's results of operations, financial position or
cash flows. The Company will be required to adopt SFAS No. 131 with the issuance
of its financial statements for the year ending December 31, 1998 and is
presently evaluating its potential impact on the results of operations,
financial position and cash flows.
YEAR 2000 COMPLIANCE
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00". This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company utilizes software and related computer technologies essential
to its operations that will be affected by the Year 2000 issue. The Company
recognizes the importance of adequately addressing the Year 2000 issue and has
designated a team of employees to resolve the Year 2000 issues. The Company's
Year 2000 compliance program has been divided into four phases: (1) assessment,
(2) renovation, (3) validation and (4) implementation. Many of the Company's
computer systems, including the Company's primary billing system, have been
enhanced to meet Year 2000 compliance. In addition to implementing a
comprehensive Year 2000 program for the Company's systems, the Company has begun
discussions with significant third parties and vendors to ensure those parties
have assessed the Year 2000 issue's impact on their own systems and are taking
the steps necessary to ensure that their systems will be Year 2000 compliant.
The Company is continuing to review other computer systems, including those
relating to recent and pending mergers and acquisitions, and is developing plans
to address the remaining Year 2000 compliance issues. The costs associated with
these plans are currently being assessed, but are expected to be material.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require the availability of substantial funds to
finance the growth of its existing operations and customer base, development and
construction of future wireless communications networks, expansion into new
markets, and the acquisition of other wireless communications companies. Further
cash requirements include debt service, working capital and general corporate
requirements.
The Company has financed its internal growth in 1998 through its operating
cash flow, available cash on hand and borrowings under the Company's credit
facility. Net cash provided by operating activities decreased from $14.3 million
to negative $4.7 million for the six-month periods ended June 30, 1997 and 1998,
respectively, primarily due to the increase in interest expense for 1998 and a
decrease in accounts payable funded through borrowings under the Company's
credit facility.
At June 30, 1998, the Company had a working capital deficit of
approximately $13.1 million compared to $24.6 million at December 31, 1997. The
Company has experienced such deficits in prior periods and such deficits are
likely to continue. The Company attempts, whenever possible, to finance its
growth through operating cash flow and available cash balances rather than
incurring additional indebtedness. As a result,
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<PAGE> 19
purchases of noncurrent assets, including pagers and other network and
transmission equipment, may be financed with current liabilities (e.g. accounts
payable), causing a deficit in working capital. The Company currently has
sufficient borrowing capacity available under its credit facility, discussed
below, to fund the working capital deficit at June 30, 1998.
Cash flows used in investing activities were primarily to fund purchases of
property and equipment. Capital expenditures were approximately $32.5 million
and $31.6 million for the six-month periods ended June 30, 1997 and 1998,
respectively. Capital expenditures for the six-month period ended June 30, 1998
included approximately $21.2 million for pagers, representing increases in
pagers on hand and net increases and maintenance to the rental subscriber base.
The balance of capital expenditures included $5.5 million for information
systems and computer related equipment, $4.8 million for network construction
and development and $0.1 million for general purchases including leasehold
improvements and office equipment.
Cash flows provided by financing activities for the six month period ended
June 30, 1998, included borrowings under the Company's credit facility of $16.0
million primarily to fund working capital requirements and capital expenditures.
Total capital expenditures for the year ending December 31, 1998 are estimated
to be approximately $80.0 million, including the impact of the acquisition of
AT&T Wireless' Messaging Division but excluding the build-out of 50KHz/50KHz
narrowband personal Communications Services license, primarily for the
acquisition of pagers, paging and transmission equipment and information systems
enhancement. The Company estimates capital expenditures to meet the minimum
build-out requirements to maintain the narrowband personal communications
license to be approximately $8.1 million. The Company expects that its capital
expenditures for the year ending December 31, 1998, will be financed through a
combination of operating cash flow and borrowings. Projected capital
expenditures are subject to change based on the Company's internal growth,
general business and economic conditions and competitive pressures. Additional
future cash requirements include debt service costs, primarily interest and the
cash portion of the pending acquisition, discussed below.
There are no significant principal payments required under the Company's
debt agreements during the year ending 1998. Additionally, dividends on the
Company's Series A Preferred and Series B Junior Convertible Preferred Stock
accrue at a rate of 14% of the stated value per year. Dividends may be paid in
either cash or additional shares of Series A and Series B Preferred Stock at the
Company's option. Through June 30, 1998, the Company has opted to pay all
dividends on the Series A and B Preferred Stock in additional shares. Under
certain circumstances, as defined in the certificate of designation, the
dividend rate on the Series A Preferred may increase to 16% per year. Further,
Metrocall is required to redeem all outstanding shares of Series A and Series B
Preferred (including dividend shares) in November 2008 and July 2009
respectively, unless the holders have previously converted such shares to common
stock. Accrued but unpaid dividends at June 30, 1998, were approximately $0.9
million and $0.3 million on the Series A and B Preferred, respectively.
Subject to certain conditions, the Company may borrow up to $300.0 million
under its credit facility. At June 30, 1998, approximately $157.2 million was
outstanding under the credit facility, and the Company borrowed an additional
$7.0 million in July 1998. As of June 30, 1998 approximately $74.6 million of
additional borrowings were available to the Company under its credit facility.
The Company has the ability to fund the cash portion of the AT&T Wireless
Messaging Division acquisition discussed below with borrowings under the
Company's existing credit facility. The Company is exploring alternatives for
financing this cash component and restructuring its existing long-term debt.
PENDING ACQUISITION
AT&T Wireless -- Messaging Division
On June 26, 1998, the Company entered into a stock purchase agreement with
Wireless, McCaw Communications Companies, Inc. and AT&T Two Way Messaging
Communications, Inc. to acquire the stock of certain subsidiaries of Wireless
that operate the paging and messaging services business of AT&T Corp. and a
50KHz/50KHz narrowband personal communications services license. The purchase
price for
19
<PAGE> 20
this acquisition is $110.0 million in cash and $95.0 million in stated value of
a new series of convertible preferred stock to be designated Series C
Convertible Preferred Stock (the "Series C Preferred"). The total purchase price
to be paid is subject to adjustment, either upward or downward, based on the
performance of the acquired business prior to closing. Closing of the
acquisition is expected in the fourth quarter of 1998. The transaction is
subject to regulatory clearance by the FCC and the United States Department of
Justice. The Company expects this acquisition will be accounted for as a
purchase for financial reporting purposes.
The issuance of the Series C Preferred Shares is subject to stockholder
approval and the shares will rank junior to the Company's existing Series A and
B Preferred Stock. The Series C Preferred will be convertible into common stock
beginning five years after issuance. Dividends accrue at a rate of 8% of the
stated value, payable semi-annually, and may be paid either in cash or in
additional shares of Series C Preferred at the Company's option. If the
Company's stockholders do not approve the issuance of the Series C Preferred,
AT&T may terminate the agreement and receive a $9.0 million termination fee from
Metrocall.
ADDITIONAL FACTORS AFFECTING FUTURE OPERATING RESULTS AND FINANCIAL CONDITION
The ability of the Company to meet its debt service and other obligations
will be dependent upon the future performance of the Company 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.
Management believes that funds generated from the Company's operations and funds
available under its credit facility will be sufficient to meet projected capital
expenditures and debt service requirements and to fund the Company's operations
for the foreseeable future. Management plans to continue to expand its
geographic service areas through internal growth and will continue to evaluate
potential strategic acquisition targets in the future which may result in
substantial capital requirements for which additional financing may be required.
No assurance can be given that such additional financing would be available on
terms satisfactory to the Company. Additionally, the following important
factors, among others, could cause the Company's operating results and financial
condition to differ materially from those indicated or suggested by forward
looking statements made in this quarterly report.
Substantial Indebtedness
At June 30, 1998, the Company had outstanding approximately $615.5 million
in long-term debt consisting of bank loans, senior subordinated notes, mortgage
indebtedness and capital leases. The Company increased its borrowings
outstanding under its credit facility by $7.0 million in July 1998, primarily to
fund working capital requirements. Additionally, the Company expects to incur
additional indebtedness (in the form of draws under the credit facility) to meet
working capital needs, to fund the cash portion of the AT&T Wireless Messaging
Division acquisition and other purposes. This substantial indebtedness, along
with the net losses and working capital deficits sustained by the Company in
recent periods, may have consequences for the Company, including the following:
(i) the ability of the Company to obtain additional financing for working
capital, capital expenditures, debt service requirements or other purposes may
be impaired; (ii) a substantial portion of the Company's cash flow from
operations will be required to be dedicated to the payment of interest expense;
(iii) indebtedness under the credit facility bears interest at floating rates,
which will cause the Company to be vulnerable to increases in interest rates;
(iv) the Company may be more highly leveraged than companies with which it
competes, which may place it at a competitive disadvantage; and (v) the Company
may be more vulnerable in the event of a downturn in its business or in general
economic conditions. In addition, the ability of the Company to access
borrowings under its credit facility and to meet its debt service and other
obligations (including compliance with financial covenants) will be dependent
upon the future performance of the Company 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 the Company 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.
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<PAGE> 21
Growth Strategy
Historically, Metrocall has grown substantially through acquisitions. The
Company intends to pursue internal growth through expansion of its paging
operations. The Company's internal growth will depend, in part, upon its ability
to attract and retain skilled employees, its increasing reliance on strategic
alliances and the ability of the Company's officers and key employees to
maintain effective quality controls, manage successfully rapid growth and
implement appropriate management information systems and controls. If the
Company were unable to attract and retain skilled employees, rely upon its
strategic alliances, maintain effective quality controls, manage successfully
rapid growth and/or implement appropriate systems and controls, the Company's
operations could be adversely affected.
Possible Impact of Competition and Technological Change
The Company 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 one of the primary means of differentiation among
providers of numeric messaging services which account for the substantial
majority of the Company's current revenues. Some of the Company's competitors
and potential competitors, which include regional and national paging companies,
possess greater financial, personnel, technical, marketing and other resources
than those of the Company, as well as other competitive advantages. 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 possess greater financial, technical, marketing and
other resources that Metrocall. In addition, other entities offering wireless
two-way communications technology, including cellular telephone, specialized
mobile radio services and personal communications services, compete with the
paging services provided by Metrocall. 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 and
regional Bell operating companies have begun marketing, or have announced their
intention to begin marketing 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 services and products.
Moreover, changes in technology could lower the cost of competitive
services and products to a level where Metrocall's services and products would
become less competitive or to where Metrocall would be required to reduce the
prices of its services and products. There can be no assurance that Metrocall
will be able to develop or introduce new services and products on a timely basis
and at competitive prices, if at all, or that Metrocall's margins, inventory
costs and cash flows will not be adversely affected in the event of such
technological developments.
Technological changes 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 capital
expenditures if it were required to replace its subscribers' pagers.
History of Net Losses
Metrocall has sustained net losses of $20.1 million, $49.1 million and
$52.5 million for the years ended December 31, 1995, 1996 and 1997 and $56.9
million for the six-month period ended June 30, 1998. No assurance can be given
that losses can be reversed in the future. In addition, at June 30, 1998,
Metrocall's accumulated deficit was $218.7 million and Metrocall had a deficit
in net working capital of $13.1 million. Metrocall's business has historically
required substantial funds for capital expenditures and acquisitions that result
in significant depreciation and amortization charges in future periods.
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.
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<PAGE> 22
Challenges of Systems Integration
The Company's acquisitions require integration of each company's
administrative, finance, sales and marketing organizations, as well as the
integration of each company's communication networks and the coordination of its
sales efforts. Specifically, this will involve, among other things, integration
of computer operating hardware and software systems, including each company's
billing and subscriber maintenance processes, some of which are incompatible
with the Company's existing systems. These integration efforts will require
substantial management attention and Company resources.
Satellite Transmission Interruption
The Company relies on satellite facilities operated by other carriers to
control many of the Company's transmitters on its nationwide and wide-area
networks. The Company has no control over the operation and maintenance of those
satellite facilities. The Company also uses terrestrial communications
facilities (e.g., microwave stations and landline telephone facilities) to
connect and control the paging base station transmitters in its networks. The
failure or disruption of transmissions by the satellite facilities used in the
Company's paging operations may cause disruptions of the Company's paging
services over the networks whose transmitters are controlled via satellite. The
Company has taken certain measures to mitigate the adverse effects of satellite
transmission disruptions to the Company and its subscribers, such as
implementation of a contingency plan, which is activated in periods of
interruption of service and involves reallocating transmissions to other
satellites. Such measures, however, cannot fully protect against the disruption
of paging service due to unexpected satellite transmission failure or
interruption. Recently, the Company initiated paging service through its "Global
Messaging Gateway," a satellite uplink facility located in California. The
Company expects to transmit a majority of its paging traffic via this facility
by the end of 1998. Any unmitigated interruptions of satellite service and the
Company's uplink facilities could adversely affect the Company's business and
results of operations.
Litigation
Metrocall has filed complaints with the FCC against a number of RBOCS and
the largest independent telephone company for violations of the FCC's
interconnection and local transport rules and the Telecom Act. The complaints
allege that these local telephone companies are unlawfully charging Metrocall
for local transport of the telephone companies' local traffic. Metrocall has
petitioned the FCC to rule that these local transport charges are unlawful and
to award Metrocall a reimbursement or credit for any past charges assessed.
Metrocall has requested that the FCC resolve these complaints. The FCC has
established deadlines for responses to the parties' discovery requests, and for
the filing of motions in this proceeding, in August 1998. A briefing schedule in
this proceeding has been established for September 1998.
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
the Company's paging business or the allocation of radio spectrum for services
that compete with the Company's business could adversely affect the Company's
results of operations. For example, the FCC has adopted rules under which it
will issue paging licenses on a wide-area basis by competitive bidding (i.e.
auctions). Although Metrocall believes that these rule changes may simplify the
Company's regulatory compliance burdens,
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<PAGE> 23
particularly regarding adding or relocating transmitter sites, those rule
changes may also increase the Company's cost of obtaining or renewing paging
licenses.
Dependence on Key Suppliers
The Company does not manufacture any of the subscriber units or
infrastructure equipment used in its operations. The Company buys paging units
primarily from Motorola as well as some other manufacturers and is therefore
dependent on such manufacturers to obtain sufficient inventory for new
subscriber and replacement needs. The Company purchases terminals, transmitters,
receivers and other infrastructure equipment primarily from Motorola and
Glenayre Electronics, Incorporated and thus is dependent on such manufacturers
for sufficient infrastructure equipment to meet its expansion and replacement
requirements. There can be no assurance that the Company will not experience
significant delays in obtaining paging units and infrastructure equipment in the
future. Such delays could have an adverse effect on the Company's operations and
network development plans.
Reliance on Key Personnel
Metrocall is dependent on the efforts and abilities of a number of its
current key management, sales, support and technical personnel, including
William L. Collins, III, Steven D. Jacoby and Vincent D. Kelly. The success of
the Company 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 the
Company's inability to retain or attract key employees in the future could have
an adverse effect on the Company's operations. Metrocall has employment
contracts with each of the individuals named above.
Intangible Assets
At June 30, 1998, the Company's total assets of approximately $1,029.0
million included net intangible assets of approximately $745.2 million.
Intangible assets include FCC licenses and certificates, customer lists, debt
financing costs, goodwill and certain other intangibles. Long-lived assets and
identifiable intangibles to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
should be addressed. Impairment is measured by comparing the book value to the
estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition The Company's estimates of anticipated
gross revenues, the remaining estimated lives of tangible and intangible assets,
or both could be reduced significantly in the future due to changes in
technology, regulation, available financing and competitive pressures in any of
the Company's individual markets. As a result, the carrying amount of long-lived
assets and intangible assets including goodwill could be reduced materially in
the future. Because a majority of the Company's assets are intangible, the
assets of the Company would not be sufficient to repay all of the Company's
indebtedness in the event secured creditors foreclose on the assets pledged to
them.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to certain legal and regulatory matters in the
normal course of business. In the opinion of management, the outcome of such
assertions will not have a material adverse effect on the financial position or
the results of operations of the Company.
Interconnect Complaint
Metrocall has filed complaints with the FCC against a number of RBOCs and
the largest independent telephone company for violations of the FCC's
interconnection and local transport rules and the Telecom Act. The complaints
allege that these local telephone companies are unlawfully charging Metrocall
for local transport of the telephone companies' local traffic. Metrocall has
petitioned the FCC to rule that these local transport charges are unlawful and
to award Metrocall a reimbursement for any past charges assessed. Metrocall has
requested that the FCC resolve these complaints. The FCC has established
deadlines for responses to the parties' discovery requests, and for the filing
of motions in this proceeding, in August 1998. A briefing schedule in this
proceeding has been established for September 1998.
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ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on May 6, 1998 the
following proposals were adopted by the vote specified below:
<TABLE>
<CAPTION>
WITHHELD/ BROKER
PROPOSAL FOR AGAINST ABSTAIN NONVOTES
-------- ---------- --------- ------- --------
<S> <C> <C> <C> <C>
Election of four directors:
1. Ronald V. Aprahamian.................................. 34,361,791 526,298 -- N/A
2. Ryal R. Poppa......................................... 34,669,995 218,094 -- N/A
3. Elliott H. Singer..................................... 34,500,580 387,509 -- N/A
4. Max D. Hopper......................................... 34,667,343 220,746 -- N/A
Ratification of Arthur Andersen LLP as independent public
accountants............................................ 34,809,987 58,981 19,121 N/A
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of
Metrocall, as amended.(g)
3.3 Seventh Amended and Restated Bylaws of Metrocall.+
4.1 Indenture for Metrocall 10 3/8% Senior Subordinated Notes
due 2007 dated September 27, 1995 including form of
Notes.(h)
4.2 Indenture for A+ Network, Inc. 11 7/8% Senior Subordinated
Notes due 2005 ("A+ Notes") dated October 24, 1995.(i)
4.3 First Supplemental Indenture dated November 14, 1996, for A+
Notes.(j)
4.4 Second Supplemental Indenture dated November 15, 1996, for
A+ Notes.(j)
4.5 Indenture for 9 3/4% Senior Subordinated Notes due 2007
dated October 21, 1997, including form of Notes.(k)
4.6 Indenture for ProNet Inc. 11 7/8% Senior Subordinated Notes
due 2005 ("ProNet Notes") dated June 15, 1995.(t)
4.7 Second Supplemental Indenture dated December 30, 1997, for
ProNet Notes.(aa)
10.1 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.
(collectively "Page America") and Metrocall, Inc.
("Metrocall") dated as of January 30, 1997.(a)
10.2 Amendment to Asset Purchase Agreement by and among Page
America and Metrocall dated as of March 28, 1997.(a)
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
10.3 Form of Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other
Rights of Series A Convertible Preferred Stock of
Metrocall(b)
10.4 Form of Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other
Rights of Series B Junior Convertible Preferred Stock of
Metrocall(c)
10.5 Registration Rights Agreement dated July 1, 1997 by and
between Page America Group, Inc. and Metrocall.(d)
10.6 Registration Rights Agreement dated July 1, 1997 by and
among Page America and Metrocall.(d)
10.7 Indemnity Escrow Agreement dated July 1, 1997 by and among
Page America, Metrocall and First Union National Bank of
Virginia.(d)
10.8 Agreement and Plan of Merger dated as of August 8, 1997,
between Metrocall and ProNet Inc. ("ProNet")(e)
10.9 Stockholders Voting Agreement dated as of August 8, 1997,
among ProNet Inc. and certain stockholders of Metrocall
listed therein.(e)
10.10 Option Agreement dated as of August 8, 1997, between
Metrocall and ProNet(e)
10.11 Amendment to Option Agreement dated as of August 29, 1997,
between Metrocall and ProNet(f)
10.12 Stock Purchase Agreement by and among Metrocall and AT&T
Wireless Services, Inc., McCaw Communications Companies,
Inc. and AT&T Two Way Messaging Communications, Inc. dated
June 26, 1998.(ab)
10.13 Form of Certificate of Designation, Number, Powers,
Preferences and Relative Participating, Optional and Other
Rights of Series C Convertible Preferred Stock of
Metrocall.(ab)
10.14 Stockholders Voting Agreement and Proxy between AT&T
Wireless Services, Inc., and certain stockholders of
Metrocall dated June 26, 1998.(ab)
10.15 Voting Agreement between AT&T Wireless Services, Inc., and
Page America Group, Inc. dated June 26, 1998.(ab)
10.16 Agreement and Plan of Merger dated as of May 16, 1996,
between Metrocall and A+ Network, Inc.(u)
10.17 Amendment to Agreement and Plan of Merger between Metrocall
and A+ Network, Inc.(l)
10.18 Shareholders' Option Sale Agreement dated as of May 16, 1996
between Metrocall and certain shareholders of A+ Network,
Inc. listed therein.(u)
10.19 Metrocall Stockholders Voting Agreement dated as of May 16,
1996 between A+ Network, Inc. and certain stockholders of
Metrocall listed therein.(u)
10.20 Agreement and Plan of Merger entered into effective May 16,
1996 between A+ Network, Inc. ("ACOM"), a Louisiana
corporation to be formed as a wholly-owned subsidiary of
ACOM, Radio and Communications Consultants, Inc., Advanced
Cellular Telephone, Inc., Leroy Faith, Sr. and Eddie Ray
Faith, DeWayne Faith and Leroy Faith Jr.(l)
10.21 Agreement of Merger by and among Metrocall, PPI Acquisition
Corp., Parkway Paging, Inc., certain shareholders of Parkway
Paging, Inc., and George W. Bush, dated February 26,
1996.(v)
10.22 Asset Purchase Agreement by and among O.R. Estman, Inc.
d/b/a Satellite Paging, Dana Paging, Inc., d/b/a Message
Network, Bertram M. Wachtel, Edward R. Davalos, Kevan D.
Bloomgren and Metrocall, dated February 28, 1996. (A portion
of this Exhibit has been omitted pursuant to a request for
confidential treatment. The omitted material has been filed
separately with the Commission.)(v)
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
10.23 Amendment to Asset Purchase Agreement dated as of August 30,
1996 by and among O.R. Estman, Inc. d/b/a Satellite Paging,
Dana Paging, Inc. d/b/a Message Network, Bertman M. Wachtel,
Edward R. Davalos and Kevan D. Bloomgren, and Metrocall.(w)
10.24 Employment Agreement between Metrocall and William L.
Collins, III.(l)
10.25 Employment Agreement between Metrocall and Steven D.
Jacoby.(l)
10.26 Employment Agreement between Metrocall and Vincent D.
Kelly.(l)
10.27 Change of Control Agreement between Metrocall and William L.
Collins, III.(l)
10.28 Change of Control Agreement between Metrocall and Steven D.
Jacoby.(l)
10.29 Change of Control Agreement between Metrocall and Vincent D.
Kelly.(l)
10.30 Noncompetition Agreement dated as of August 8, 1997, between
Metrocall and Jackie R. Kimzey.(m)
10.31 Noncompetition Agreement dated as of August 8, 1997, between
Metrocall and David J. Vucina.(m)
10.32 Letter Agreement dated August 8, 1997, between Metrocall and
Jackie R. Kimzey.(m)
10.33 Letter Agreement dated August 8, 1997, between Metrocall and
David J. Vucina.(m)
10.34 Letter Agreement dated August 8, 1997, between Metrocall and
Jan E. Gaulding.(m)
10.35 Letter Agreement dated August 8, 1997, between Metrocall and
Mark A. Solls.(m)
10.36 Letter Agreement dated August 8, 1997, between Metrocall and
Jeffery A. Owens.(m)
10.37 Amendment to Employment Agreement between Metrocall and
William L. Collins, III.(s)
10.38 Second Amendment to Employment Agreement between Metrocall
and William L. Collins, III.+
10.39 Amendment to Employment Agreement between Metrocall and
Steven D. Jacoby.(s)
10.40 Second Amendment to Employment Agreement between Metrocall
and Steven D. Jacoby.+
10.41 Amendment to Employment Agreement between Metrocall and
Vincent D. Kelly.(s)
10.42 Second Amendment to Employment Agreement between Metrocall
and Vincent D. Kelly.+
10.43 Directors' Stock Option Plan, as amended.(n)
10.44 Metrocall 1996 Stock Option Plan.(z)
10.45 Metrocall 1996 Stock Option Plan, as amended.(n)
10.46 Metrocall Amended Employee Stock Purchase Plan.(r)
10.47 Variable Common Rights Agreement between Metrocall and First
Union National Bank of Virginia, Rights Agent, dated as of
November 15, 1996, including Form of Certificate
representing Variable Common Rights.(o)
10.48 Unit Purchase Agreement dated as of November 15, 1996, among
Metrocall and Certain Purchasers.(p)
10.49 Warrant Agreement dated as of November 15, 1996, between
Metrocall and the First National Bank of Boston, Warrant
Agent.(p)
10.50 Second Amended and Restated Loan Agreement dated as of
October 21, 1997, among Metrocall, the financial
institutions signatory thereto, and Toronto-Dominion
(Texas), Inc., as Administrative Agent.(q)
10.51 Registration Rights Agreement, dated October 21, 1997
between Metrocall and Morgan Stanley & Co. Incorporated, TD
Securities (USA), Inc., First Union Capital Markets Corp.
and Nationsbank Montgomery Securities, Inc.(g)
</TABLE>
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<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
10.52 Deed of Lease between Douglas and Joyce Jemal, as landlord,
and Metrocall, as tenant, dated April 14, 1994.(x)
10.53 Lease Agreement dated December 20, 1983 between Beacon
Communications Associates, Ltd. and a predecessor of
Metrocall.(y)
10.54 Agreement dated May 16, 1996 among Metrocall and Ray D.
Russenberger and Elliott H. Singer regarding voting for
director.(u)
10.55 Non-disclosure/No Conflict Agreement dated May 16, 1996
between Metrocall and Ray D. Russenberger.(u)
10.56 Non-disclosure/No Conflict Agreement dated May 16, 1996
between Metrocall and Elliott H. Singer.(u)
10.57 Employment Agreement dated May 16, 1996 between Metrocall
and Charles A. Emling III.(u)
11.1 Statement re computation of per share earnings.+
27.1 Financial Data Schedule.+
</TABLE>
- ---------------
+ Filed herewith.
(a) Incorporated by reference to Metrocall's Registration Statement on Form
S-4, as amended (File No. 333-21231), initially filed with the Commission
on February 5, 1997.
(b) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
(c) Incorporated by reference to Metrocall's Registration Statement, Amendment
No. 1, on Form S-4 (File No. 333-21231) filed with the Commission on April
15, 1997.
(d) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on July 14, 1997.
(e) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on August 12, 1997.
(f) Incorporated by reference to Metrocall's Current Report on Form 8-K, as
amended, filed with the Commission on September 8, 1997.
(g) Incorporated by reference to Metrocall's Registration Statement on Form
S-4, as amended (File No. 333-44329), filed with the Commission on January
15, 1998.
(h) Incorporated by reference to Metrocall's Registration Statement on Form
S-1, as amended (File No. 33-96042), filed with the Commission on September
27, 1995.
(i) Incorporated by reference to the Registration Statement on Form S-1 of A+
Communications, Inc., as amended (File No. 33-95208), filed with the
Commission on September 18, 1995.
(j) Incorporated by reference to Metrocall's Annual Report on Form 10-K for the
year ended December 31, 1996, filed with the Commission on March 31, 1997.
(k) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on October 23, 1997.
(l) Incorporated by reference to Metrocall's Registration Statement on Form
S-4, as amended (File No. 333-06919), filed with the Commission on June 27,
1996.
(m) Incorporated by reference to Metrocall's Registration Statement on Form
S-4, as amended (File No. 333-36079), filed with the Commission on
September 22, 1997.
(n) Incorporated by reference to Metrocall's Proxy Statement filed for the
Annual Meeting of Stockholders held on May 7, 1997.
27
<PAGE> 28
(o) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A for
the year ended December 31, 1996, filed with the Commission on May 9, 1997.
(p) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
(q) Incorporated by reference to Metrocall's Registration Statement, Amendment
No. 2, on Form S-4 (File No. 333-36079) filed with the Commission on
November 5, 1997.
(r) Incorporated by reference to Metrocall's Registration Statement, Amendment
No. 1, on Form S-4 (File No. 333-36079) filed with the Commission on
October 27, 1997.
(s) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed with the Commission on November
14, 1997.
(t) Incorporated by reference to ProNet's Current Report on Form 8-K filed with
the Commission on July 5, 1995.
(u) Incorporated by reference to Metrocall's Tender Offer Statement on Schedule
14D-1, filed with the Commission on May 22, 1996.
(v) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 filed with the Commission on May 15, 1996.
(w) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on September 13, 1996, as amended on October 1, 1996.
(x) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994, filed with the Commission on November
14, 1994.
(y) 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.
(z) Incorporated by reference to Metrocall's Proxy Statement filed for the
Annual Meeting of Stockholders held on May 1, 1996.
(aa) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998 filed with the Commission on May 15, 1998.
(ab) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
July 7, 1998.
(b) Reports on Form 8-K
On July 7, 1998 the Company filed a Report on Form 8-K reporting an
agreement entered into with AT&T Wireless Services, Inc. ("Wireless"), McCaw
Communications Companies, Inc. and AT&T Two Way Messaging Communications, Inc.
to acquire the stock of certain subsidiaries of Wireless that operate the paging
and messaging services business of AT&T Corp.
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1998 METROCALL, INC.
/s/ VINCENT D. KELLY
--------------------------------------
Vincent D. Kelly
Chief Financial Officer,
Treasurer and Executive Vice President
29
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of
Metrocall, as amended.(g)
3.3 Seventh Amended and Restated Bylaws of Metrocall.+
4.1 Indenture for Metrocall 10 3/8% Senior Subordinated Notes
due 2007 dated September 27, 1995 including form of
Notes.(h)
4.2 Indenture for A+ Network, Inc. 11 7/8% Senior Subordinated
Notes due 2005 ("A+ Notes") dated October 24, 1995.(i)
4.3 First Supplemental Indenture dated November 14, 1996, for A+
Notes.(j)
4.4 Second Supplemental Indenture dated November 15, 1996, for
A+ Notes.(j)
4.5 Indenture for 9 3/4% Senior Subordinated Notes due 2007
dated October 21, 1997, including form of Notes.(k)
4.6 Indenture for ProNet Inc. 11 7/8% Senior Subordinated Notes
due 2005 ("ProNet Notes") dated June 15, 1995.(t)
4.7 Second Supplemental Indenture dated December 30, 1997, for
ProNet Notes.(aa)
10.1 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.
(collectively "Page America") and Metrocall, Inc.
("Metrocall") dated as of January 30, 1997.(a)
10.2 Amendment to Asset Purchase Agreement by and among Page
America and Metrocall dated as of March 28, 1997.(a)
10.3 Form of Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other
Rights of Series A Convertible Preferred Stock of
Metrocall(b)
10.4 Form of Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional and Other
Rights of Series B Junior Convertible Preferred Stock of
Metrocall(c)
10.5 Registration Rights Agreement dated July 1, 1997 by and
between Page America Group, Inc. and Metrocall.(d)
10.6 Registration Rights Agreement dated July 1, 1997 by and
among Page America and Metrocall.(d)
10.7 Indemnity Escrow Agreement dated July 1, 1997 by and among
Page America, Metrocall and First Union National Bank of
Virginia.(d)
10.8 Agreement and Plan of Merger dated as of August 8, 1997,
between Metrocall and ProNet Inc. ("ProNet")(e)
10.9 Stockholders Voting Agreement dated as of August 8, 1997,
among ProNet Inc. and certain stockholders of Metrocall
listed therein.(e)
10.10 Option Agreement dated as of August 8, 1997, between
Metrocall and ProNet(e)
10.11 Amendment to Option Agreement dated as of August 29, 1997,
between Metrocall and ProNet(f)
10.12 Stock Purchase Agreement by and among Metrocall and AT&T
Wireless Services, Inc., McCaw Communications Companies,
Inc. and AT&T Two Way Messaging Communications, Inc. dated
June 26, 1998.(ab)
10.13 Form of Certificate of Designation, Number, Powers,
Preferences and Relative Participating, Optional and Other
Rights of Series C Convertible Preferred Stock of
Metrocall.(ab)
10.14 Stockholders Voting Agreement and Proxy between AT&T
Wireless Services, Inc., and certain stockholders of
Metrocall dated June 26, 1998.(ab)
10.15 Voting Agreement between AT&T Wireless Services, Inc., and
Page America Group, Inc. dated June 26, 1998.(ab)
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
10.16 Agreement and Plan of Merger dated as of May 16, 1996,
between Metrocall and A+ Network, Inc.(u)
10.17 Amendment to Agreement and Plan of Merger between Metrocall
and A+ Network, Inc.(l)
10.18 Shareholders' Option Sale Agreement dated as of May 16, 1996
between Metrocall and certain shareholders of A+ Network,
Inc. listed therein.(u)
10.19 Metrocall Stockholders Voting Agreement dated as of May 16,
1996 between A+ Network, Inc. and certain stockholders of
Metrocall listed therein.(u)
10.20 Agreement and Plan of Merger entered into effective May 16,
1996 between A+ Network, Inc. ("ACOM"), a Louisiana
corporation to be formed as a wholly-owned subsidiary of
ACOM, Radio and Communications Consultants, Inc., Advanced
Cellular Telephone, Inc., Leroy Faith, Sr. and Eddie Ray
Faith, DeWayne Faith and Leroy Faith Jr.(l)
10.21 Agreement of Merger by and among Metrocall, PPI Acquisition
Corp., Parkway Paging, Inc., certain shareholders of Parkway
Paging, Inc., and George W. Bush, dated February 26,
1996.(v)
10.22 Asset Purchase Agreement by and among O.R. Estman, Inc.
d/b/a Satellite Paging, Dana Paging, Inc., d/b/a Message
Network, Bertram M. Wachtel, Edward R. Davalos, Kevan D.
Bloomgren and Metrocall, dated February 28, 1996. (A portion
of this Exhibit has been omitted pursuant to a request for
confidential treatment. The omitted material has been filed
separately with the Commission.)(v)
10.23 Amendment to Asset Purchase Agreement dated as of August 30,
1996 by and among O.R. Estman, Inc. d/b/a Satellite Paging,
Dana Paging, Inc. d/b/a Message Network, Bertman M. Wachtel,
Edward R. Davalos and Kevan D. Bloomgren, and Metrocall.(w)
10.24 Employment Agreement between Metrocall and William L.
Collins, III.(l)
10.25 Employment Agreement between Metrocall and Steven D.
Jacoby.(l)
10.26 Employment Agreement between Metrocall and Vincent D.
Kelly.(l)
10.27 Change of Control Agreement between Metrocall and William L.
Collins, III.(l)
10.28 Change of Control Agreement between Metrocall and Steven D.
Jacoby.(l)
10.29 Change of Control Agreement between Metrocall and Vincent D.
Kelly.(l)
10.30 Noncompetition Agreement dated as of August 8, 1997, between
Metrocall and Jackie R. Kimzey.(m)
10.31 Noncompetition Agreement dated as of August 8, 1997, between
Metrocall and David J. Vucina.(m)
10.32 Letter Agreement dated August 8, 1997, between Metrocall and
Jackie R. Kimzey.(m)
10.33 Letter Agreement dated August 8, 1997, between Metrocall and
David J. Vucina.(m)
10.34 Letter Agreement dated August 8, 1997, between Metrocall and
Jan E. Gaulding.(m)
10.35 Letter Agreement dated August 8, 1997, between Metrocall and
Mark A. Solls.(m)
10.36 Letter Agreement dated August 8, 1997, between Metrocall and
Jeffery A. Owens.(m)
10.37 Amendment to Employment Agreement between Metrocall and
William L. Collins, III.(s)
10.38 Second Amendment to Employment Agreement between Metrocall
and William L. Collins, III.+
10.39 Amendment to Employment Agreement between Metrocall and
Steven D. Jacoby.(s)
10.40 Second Amendment to Employment Agreement between Metrocall
and Steven D. Jacoby.+
10.41 Amendment to Employment Agreement between Metrocall and
Vincent D. Kelly.(s)
10.42 Second Amendment to Employment Agreement between Metrocall
and Vincent D. Kelly.+
10.43 Directors' Stock Option Plan, as amended.(n)
10.44 Metrocall 1996 Stock Option Plan.(z)
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S> <C>
10.45 Metrocall 1996 Stock Option Plan, as amended.(n)
10.46 Metrocall Amended Employee Stock Purchase Plan.(r)
10.47 Variable Common Rights Agreement between Metrocall and First
Union National Bank of Virginia, Rights Agent, dated as of
November 15, 1996, including Form of Certificate
representing Variable Common Rights.(o)
10.48 Unit Purchase Agreement dated as of November 15, 1996, among
Metrocall and Certain Purchasers.(p)
10.49 Warrant Agreement dated as of November 15, 1996, between
Metrocall and the First National Bank of Boston, Warrant
Agent.(p)
10.50 Second Amended and Restated Loan Agreement dated as of
October 21, 1997, among Metrocall, the financial
institutions signatory thereto, and Toronto-Dominion
(Texas), Inc., as Administrative Agent.(q)
10.51 Registration Rights Agreement, dated October 21, 1997
between Metrocall and Morgan Stanley & Co. Incorporated, TD
Securities (USA), Inc., First Union Capital Markets Corp.
and Nationsbank Montgomery Securities, Inc.(g)
10.52 Deed of Lease between Douglas and Joyce Jemal, as landlord,
and Metrocall, as tenant, dated April 14, 1994.(x)
10.53 Lease Agreement dated December 20, 1983 between Beacon
Communications Associates, Ltd. and a predecessor of
Metrocall.(y)
10.54 Agreement dated May 16, 1996 among Metrocall and Ray D.
Russenberger and Elliott H. Singer regarding voting for
director.(u)
10.55 Non-disclosure/No Conflict Agreement dated May 16, 1996
between Metrocall and Ray D. Russenberger.(u)
10.56 Non-disclosure/No Conflict Agreement dated May 16, 1996
between Metrocall and Elliott H. Singer.(u)
10.57 Employment Agreement dated May 16, 1996 between Metrocall
and Charles A. Emling III.(u)
11.1 Statement re computation of per share earnings.+
27.1 Financial Data Schedule.+
</TABLE>
- ---------------
+ Filed herewith.
(a) Incorporated by reference to Metrocall's Registration Statement on Form
S-4, as amended (File No. 333-21231), initially filed with the Commission
on February 5, 1997.
(b) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
(c) Incorporated by reference to Metrocall's Registration Statement, Amendment
No. 1, on Form S-4 (File No. 333-21231) filed with the Commission on April
15, 1997.
(d) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on July 14, 1997.
(e) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on August 12, 1997.
(f) Incorporated by reference to Metrocall's Current Report on Form 8-K, as
amended, filed with the Commission on September 8, 1997.
(g) Incorporated by reference to Metrocall's Registration Statement on Form
S-4, as amended (File No. 333-44329), filed with the Commission on January
15, 1998.
(h) Incorporated by reference to Metrocall's Registration Statement on Form
S-1, as amended (File No. 33-96042), filed with the Commission on September
27, 1995.
<PAGE> 1
EXHIBIT 3.3
SEVENTH AMENDED AND RESTATED BYLAWS
OF
METROCALL, INC.
(Effective February 4, 1998)
1. OFFICES
1.1. REGISTERED OFFICE.
The initial registered office of the Corporation shall be in Dover,
Delaware, and the initial registered agent in charge thereof shall be United
States Corporation Company.
1.2. OTHER OFFICES.
The Corporation may also have offices at such other places, both
within and without the State of Delaware, as the Board of Directors may from
time to time determine or as may be necessary or useful in connection with the
business of the Corporation.
2. MEETINGS OF STOCKHOLDERS
2.1. PLACE OF MEETINGS.
All meetings of the stockholders shall be held at such place as may be
fixed from time to time by the Board of Directors.
2.2. ANNUAL MEETINGS.
The Corporation shall hold annual meetings of stockholders on the
first Wednesday in May at 11 a.m. or at such other date and time as shall be
designated from time to time by the Board of Directors, at which stockholders
shall elect directors and transact such other business as may properly be
brought before the meeting.
2.3. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or the Corporation's Amended and
Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), may be called by (a) the Chairman, (b) a majority of the
directors in office, whether or not a quorum, or (c) the holder of not less
than 35% of the
<PAGE> 2
total number of votes of the then outstanding shares of stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
2.4. NOTICE OF MEETINGS.
Notice of any meeting of stockholders, stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called
shall be given to each stockholder entitled to vote at such meeting not less
than 10 days nor more than 60 days before the date of the meeting (except to
the extent that such notice is waived or is not required as provided in the
General Corporation Law of the State of Delaware (the "Delaware General
Corporation Law")). Such notice shall be given in accordance with, and shall be
deemed effective as set forth in, Section 222 (or any successor section) of the
Delaware General Corporation Law.
2.5. WAIVERS OF NOTICE.
Whenever the giving of any notice is required by statute, the
Certificate of Incorporation or these Bylaws, a waiver thereof, in writing and
delivered to the corporation, signed by the person or persons entitled to said
notice, whether before or after the event as to which such notice is required,
shall be deemed equivalent to notice. Attendance of a stockholder at a meeting
shall constitute a waiver of notice (a) of such meeting, except when the
stockholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) of consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the stockholder objects to considering the matter at
the beginning of the meeting.
2.6. BUSINESS AT ANNUAL MEETING.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors or (e) otherwise properly brought
before the meeting by a stockholder.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary. To be timely, a stockholder's notice must be received at the
principal executive offices of the Corporation no later than the date
designated for receipt of stockholders' proposals in a prior public disclosure
made by the Corporation. If there has been no such prior public disclosure,
then to be timely, a
2
<PAGE> 3
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the annual meeting; provided, however, that in the event
that less than 70 days' notice of the date of this annual meeting is given to
stockholders or prior public disclosure of the date of the meeting is made,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the date on which such notice of
the date of the annual meeting was mailed or such public disclosure was made.
A stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reason
for conducting such business at the annual meeting, (b) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, (d) any material interest of the
stockholder in such business and (e) the same information required by clauses
(b), (c) and (d) above with respect to any other stockholder that, to the
knowledge of the stockholder proposing such business, supports such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 2.6. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the annual meeting that a matter of
business was not properly brought before its meeting in accordance with the
provisions of this Section 2.6, and if the Chairman should so determine, the
Chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
2.7. LIST OF STOCKHOLDERS.
After the record date for a meeting of stockholders has been fixed, at
least 10 days before such meeting, the officer who has charge of the stock
ledger of the Corporation shall make a list of all stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, either at a place in the city
where the meeting is to be held, which place is to be specified in the notice
of the meeting, or at the place where the meeting is to be held. Such list,
also shall, for the duration of the meeting, be produced and kept open to the
examination of any stockholder who is present at the time and place of the
meeting. The stock ledger of the Corporation shall be the only evidence as to
the stockholders entitled to examine the list required by Section 2.7 hereof or
to vote in person or by proxy at any meeting of stockholders.
3
<PAGE> 4
2.8. QUORUM AT MEETINGS.
Stockholders may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Except as otherwise provided by statute or
by the Certificate of Incorporation, the holders of a majority of the stock
issued and outstanding and entitled to vote at the meeting, and, who are
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business. Once a share is
represented for any purpose at a meeting (other than solely to object (a) to
holding the meeting or transacting business at the meeting or (b) to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice), it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of
that meeting unless a new record date is or must be set for the adjourned
meeting. The holders of a majority of the voting shares represented at a
meeting, whether or not a quorum is present, may adjourn such meeting from time
to time. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
2.9. VOTING AND PROXIES.
Unless otherwise provided in the Delaware General Corporation Law or
in the Certificate of Incorporation, and subject to the other provisions of
these Bylaws, each stockholder shall be entitled to one vote on each matter, in
person or by proxy, for each share of the Corporation's capital stock that has
voting power and that is held by such stockholder. No proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed appointment of proxy shall be irrevocable if
the appointment form states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power.
2.10. REQUIRED VOTE.
If a quorum exists, action on a matter (other than the election of
directors) is approved if the votes cast favoring the action exceed the votes
cast opposing the action, unless the Certificate of Incorporation or the
Delaware General Corporation Law requires a greater number of affirmative votes
(in which case such different requirement shall apply). Directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election (provided a quorum exists), and the election of directors need not be
by written ballot. The Board of Directors, in its discretion, may require that
any votes cast at such meeting shall be cast by written ballot.
4
<PAGE> 5
2.11. ACTION WITHOUT A MEETING.
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders, and may not be effected by any consent in writing by such
stockholders, unless such written consent is unanimous, and the writing or
writings are delivered to the Corporation for inclusion in the Minute Book of
the Corporation.
2.12. INSPECTORS OF ELECTION.
The director or the person presiding at the meeting shall appoint one
or more inspectors of election and any substitute inspectors to act at the
meeting or any adjournment thereof. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the beat of his or her ability. The inspectors shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum, the
validity and effect of proxies and ballots, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, determine and retain for a reasonable period a record of
the disposition of any challenges made to any determination by the inspectors,
certify their determination of the number of shares represented at the meeting,
and their count of all votes and ballots, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. The inspectors
may appoint and retain other persons or entities to assist the inspectors in
the performance of the duties of the inspectors. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
3. DIRECTORS
3.1. POWERS.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, subject to
any limitation set forth in the Certificate of Incorporation, these Bylaws or
agreements among stockholders which are otherwise lawful.
5
<PAGE> 6
3.2. NUMBER AND ELECTION.
The number of directors which shall constitute the whole board shall
not be fewer than three nor more than 14. If, but only for so long as, any
shares of Series A Convertible Preferred Stock are outstanding, then, if a
"Triggering Event," as that term is defined in the Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and other
Rights of Series A Convertible Preferred Stock (the "Certificate of
Designation") occurs and is continuing, the maximum number of directors shall
be increased to such number, not to exceed 20, that is sufficient to enable the
holders of Series A Convertible Preferred Stock to designate such number of
additional directors to the Board of Directors as permitted upon the occurrence
of a Triggering Event. Within the limits specified, the number of directors
shall be determined by resolution of the Board of Directors. Except as
otherwise provided in the Certificate of Designation, directors shall be
elected only by stockholders at annual meetings of stockholders, other than the
initial board of directors and except as provided in Section 3.3 hereof in the
case of vacancies and newly created directorships. Each director elected shall
hold office for the term for which such director is elected and until such
director's successor is elected and qualified or until such director's earlier
resignation or removal.
3.3. VACANCIES.
Except as otherwise provided in the Certificate of Designation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors shall be filled, for the unexpired term, by the
concurring vote of a majority of the directors then in office, whether or not a
quorum, and any director so chosen shall hold office for the remainder of the
full term of the class of directors in which the new directorship was created
or the vacancy occurred and until such director's successor shall have been
elected and qualified or until such director's earlier death, resignation or
removal.
3.4. CLASSES; TERMS OF OFFICE.
Unless otherwise provided in the Certificate of Incorporation or the
Certificate of Designation, the Board of Directors shall divide the directors
into three classes; and, when the number of directors is changed, shall
determine the class or classes to which the increased or decreased number of
directors shall be apportioned; provided, however, that no decrease in the
number of directors shall affect the term of any director then in office. At
each annual meeting of stockholders, directors elected to succeed those whose
terms are expiring shall be elected for a term of office expiring at the annual
meeting of stockholders held in the third year following their election and
until their respective successors are elected and qualified, or until such
director's earlier death, resignation or removal.
6
<PAGE> 7
3.5. NOMINATION OF DIRECTORS.
Except as otherwise provided in the Certificate of Designation,
nominations of persons for election to the Board of Directors may be made by
the Board of Directors, or by any stockholder of the Corporation entitled to
vote for the election of directors at the annual meeting who complies with the
notice procedures set forth in this Section 3.5. Nominations by stockholders
shall be made pursuant to timely notice in writing to the Secretary. To be
timely, a stockholder's notice shall be received at the principal executive
offices of the Corporation no later than the date designated for receipt of
stockholders' proposals in a prior public disclosure made by the Corporation.
If there has been no such prior public disclosure, then to be timely, a
stockholders nomination must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the annual meeting; provided, however, that in the event
that less than 70 days' notice of the date of the meeting is given to
stockholders or prior public disclosure of the date of the meeting is made,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares
of the Corporation which are beneficially owned by such person, and (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent to
being named in the proxy statement as a nominee and to serving as a director
if elected); and (b) as to the stockholder giving notice (i) the name and
address, as they appear on the Corporation's books, of the stockholder
proposing such nomination, and (ii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder. No person shall
be eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 3.5. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the annual
meeting that a nomination was not made in accordance with the provisions of
this Section 3.5, and if the Chairman should so determine, the Chairman shall
so declare to the meeting and the defective nomination shall be disregarded.
3.6. MEETINGS.
(a) REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
7
<PAGE> 8
(b) SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the
Chairman, the Vice Chairman, a majority of the Board of Directors or Chief
Executive Officer on one day's notice to each director, either personally or by
telephone, express delivery service (so that the scheduled delivery date of the
notice is at least one day in advance of the meeting), telegram or facsimile
transmission, and on five days' notice by mail (effective upon deposit of such
notice in the mail). The notice need not describe the purpose of a special
meeting.
(c) TELEPHONE MEETINGS.
Members of the Board of Directors may participate in a meeting of the
Board of Directors by means of conference telephone or similar communications
equipment by means of which all participating directors can simultaneously hear
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
(d) ACTION WITHOUT MEETING.
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if all members of the Board
of Directors consent thereto in writing, and the writing or writings are
delivered to the Corporation for inclusion in the Minute Book of the
Corporation.
(e) WAIVER OF NOTICE OF MEETING; PRESUMPTION OF
ASSENT.
A director may waive any notice required by statute, the Certificate
of Incorporation or these Bylaws before or after the date and time stated in
the notice. Except as set forth below, the waiver must be in writing, signed
by the director entitled to the notice, and delivered to the Corporation for
inclusion in the Minute Book of the Corporation. Notwithstanding the
foregoing, a director's attendance at or participation in a meeting waives any
required notice to the director of the meeting unless the director at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to action taken at
the meeting. A director who is present at a meeting is presumed to have
assented to any action taken unless such director enters a dissent or
abstention in the minutes of the meeting or files a written dissent to such
action no later than five days after such director receives a copy of the
minutes of the meeting, provided that the right to dissent shall not apply to a
director who votes in favor of such action.
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(f) QUORUM AND VOTE AT MEETINGS.
At all meetings of the Board of Directors, a quorum of the Board of
Directors consists of a majority of the total number of directors prescribed
pursuant to Section 3.2 hereof (or, if no number is prescribed, the number in
office immediately before the meeting begins). The vote of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation or by these Bylaws. In the
absence of a quorum for any meeting of the Board of Directors, a majority of
the directors present thereat may adjourn such meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
3.7. COMPENSATION OF DIRECTORS.
The Board of Directors shall have the authority to fix the
compensation of directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
4. COMMITTEES
4.1. CREATION OF COMMITTEES.
The Board of Directors may by resolution create one or more committees
including, but not limited to, an Executive Committee, and appoint members of
the Board of Directors to serve on them. The Board of Directors shall create
(a) an Audit Committee for the purpose of examining and considering matters
relating to the financial affairs of the Corporation, and (b) a Compensation
Committee for the purpose of establishing and implementing an executive
compensation policy. Each committee may have one or more members, who serve at
the pleasure of the Board of Directors, provided that the Audit Committee and
the Compensation Committee shall consist of at least a majority of non-employee
directors. The creation of a committee and appointment of members to it shall
be approved by a majority of all the directors in office when the action is
taken, whether or not a quorum. The same rules that govern meetings, action
without meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members as
well.
4.2. COMMITTEE AUTHORITY.
To the extent specified by the Board of Directors or in the
Certificate of Incorporation, each committee may exercise the authority of the
Board of Directors, except that a committee
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<PAGE> 10
may not: (i) approve or recommend to stockholders action that is required by
law to be approved by stockholders; (ii) fill vacancies on the Board of
Directors or on any of its committees; (iii) amend the Certificate of
Incorporation; (iv) adopt, amend or repeal these Bylaws; (v) approve a plan of
merger not requiring stockholder approval; (vi) authorize or approve a
distribution, except according to a general formula or method prescribed by the
Board of Directors; or (vii) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that the
Board of Directors may authorize a committee, or a senior executive officer of
the Corporation, to do so within the limits specifically prescribed by the
Board of Directors.
5. OFFICERS
5.1. POSITIONS.
The officers of the Corporation shall be a Chairman, Vice Chairman, a
Chief Executive Officer, a Chief Financial Officer, a Chief Operating Officer,
a President, a Secretary and a Treasurer, and such other officers as the Board
of Directors (or an officer authorized by the Board of Directors) from time to
time may appoint, including one or more Executive Vice Presidents, Vice
Presidents, Assistant Secretaries and Assistant Treasurers. Each such officer
shall exercise such powers and perform such duties as shall be set forth below
and such other powers and duties as from time to time may be specified by the
Board of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the duties of such other officers. Any number of offices may be held
by the same person.
5.2. POWERS.
(a) Each officer shall have, in addition to the duties and
powers set forth herein, such duties and powers as are commonly incident to
such officer's office and such additional duties and powers as the Board of
Directors may from time to time authorize.
(b) Powers of attorney, proxies, waivers of notice of meetings,
consents and other instruments relating to securities or partnership interests
owned by the Corporation may be executed in the name of and on behalf of the
Corporation by the Chairman, the Chief Executive Officer or the President and
any such officer may, in the name of and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by
proxy at any meeting of security holders of any corporation in which the
Corporation may own securities, or at any meeting of any partnership in which
the Corporation owns an interest at any such meeting, and shall possess and may
exercise any and all rights and powers incident to the
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<PAGE> 11
ownership of such securities or partnership interest and which, as the owner
thereof, the Corporation might have possessed and exercised if present.
5.3. CHAIRMAN.
The Chairman shall (when present) preside at all meetings of the Board
of Directors and stockholders, and shall ensure that all orders and resolutions
of the Board of Directors and stockholders are carried into effect. The
Chairman may execute bonds, mortgages and other contracts, under the seal of
the Corporation, if required, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
5.4. VICE CHAIRMAN.
The Vice Chairman shall, in the absence of the Chairman, preside at
all meetings of the Board of Directors and stockholders and, without limiting
the foregoing, shall when serving in such capacity exercise the powers vested
in the Chairman in Sections 2.6 and 3.5. The Vice Chairman may execute bonds,
mortgages and other contracts, under the seal of the Corporation, if required,
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors to some other officer or agent of the Corporation.
5.5. CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer of the Corporation shall have overall
responsibility and authority for the Corporation's strategic planning and for
evaluating potential mergers and acquisitions and new business opportunities,
subject to the authority of the Board of Directors and the Management
Operations Committee. The Chief Executive Officer may execute bonds, mortgages
and other contracts, under the seal of the Corporation, if required, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation,
provided that the Chief Executive, in the absence of the President, may sign or
execute any document or instrument where the signing and execution thereof
shall be expressly delegated to the "President" of the Corporation.
5.6. CHIEF OPERATING OFFICER.
The Chief Operating Officer of the Corporation shall have overall
responsibility and authority for the technical systems, sales and marketing and
customer service operations of the
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Corporation, subject to the authority of the Board of Directors and the
Management Operations Committee.
5.7. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer of the Corporation shall have overall
responsibility and authority for the financial affairs of the Corporation
including, without limitation, oversight of the Corporation's accounting,
inventory, management information systems, internal audit and billing
functions, subject to the authority of the Board of Directors and the
Management Operations Committee.
5.8. PRESIDENT.
The President, subject to the authority of the Board of Directors,
shall have general charge and supervision of the business of the Corporation,
and shall have such duties and powers as shall be designated from time to time
by the Board of Directors. The President may execute bonds, mortgages and
other contracts, under the seal of the Corporation, if required, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
5.9. VICE PRESIDENT.
Any Vice President shall have such duties and powers as shall be set
forth in these Bylaws or as shall be designated from time to time by the Board
of Directors or by the Chairman, the Chief Executive Officer or the President.
Any Vice President may execute bonds, mortgages and other documents under the
seal of the Corporation, except where required or permitted by law to be
otherwise executed and except where the execution thereof shall be expressly
delegated by the Board of Directors to some other officer or agent of the
Corporation.
5.10. SECRETARY.
The Secretary shall have responsibility for preparation of minutes of
meetings of the Board of Directors and of the stockholders and for
authenticating records of the Corporation. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the Board of Directors. The Secretary or an Assistant Secretary also may
attest all instruments signed by any other officer of the Corporation.
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<PAGE> 13
5.11. ASSISTANT SECRETARY.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there
shall have been no such determination, then in the order of their election),
shall, in the absence of the Secretary or in the event of the Secretary's
inability or refusal to act, perform the duties and exercise the powers of the
Secretary.
5.12. TREASURER.
The Treasurer shall have responsibility for the custody of the
corporate funds and securities and shall see to it that full and accurate
accounts of receipts and disbursements are kept in books belonging to the
Corporation. The Treasurer shall render to the Chairman, the Vice Chairman,
the Chief Executive Officer, the President, the Vice President, and the Board
of Directors, upon request, an account of all financial transactions and of
the financial condition of the Corporation.
5.13. ASSISTANT TREASURER.
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors (or if
there shall have been no such determination, than in the order of their
election), shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer.
5.14. MANAGEMENT OPERATIONS COMMITTEE.
The Management Operations Committee shall be comprised of the Vice
Chairman, who shall serve as the Chairman of such Committee, the Chief
Executive Officer, the Chief Operating Officer and the Chief Financial Officer.
The responsibilities of the Management Operations Committee shall include
development of a business plan of the Corporation which addresses acquisition,
strategies, the integration of the businesses of the Corporation and that of
any acquired entities, including FirstPAGE USA, Inc. and MetroPaging, Inc.
(formerly AllCity Paging, Inc.), development of a strategy for exploitation of
nationwide licenses held by the Corporation, development of sales, marketing
and distribution strategies of the Corporation, coordination of the integrated
management and daily operations of the Corporation and in general recommend to
the Board of Directors of such other initiatives as the Management Operations
Committee considers appropriate to further the growth and successful operations
of the Corporation, subject to the authority of the Board of Directors.
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<PAGE> 14
5.15. TERM OF OFFICE.
The officers of the Corporation shall hold office until their
successors are chosen and qualified or until their death, earlier resignation
or removal. Any officer may resign at any time upon written notice to the
Corporation. Any officer elected or appointed by the Board of Directors may be
removed at any time, with or without cause, by the affirmative vote of a
majority of the Board of Directors
5.16. COMPENSATION.
The compensation of officers of the Corporation shall be fixed by the
Compensation Committee of the Board of Directors.
5.17. FIDELITY BONDS.
The Corporation may secure the fidelity of any or all of its officers
or agents by bond or otherwise.
6. CAPITAL STOCK.
6.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES.
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in
the name of the Corporation by the Chairman, the Vice Chairman, the Chief
Executive Officer, the President, or any Vice President, and by the Treasurer,
Secretary or any Assistant Treasurer or Assistant Secretary. Any or all the
signatures on the certificate may be facsimile. In case any officer, transfer
agent or registrar whose signature or facsimile signature appears on a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
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<PAGE> 15
6.2. LOST CERTIFICATES.
The Board of Directors, Chairman, Vice Chairman, Chief Executive
Officer, President or Secretary may direct a new certificate of stock to be
issued in place of any certificate theretofore issued by the Corporation and
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming that the certificate of stock has been
lost, stolen or destroyed. When authorizing such issuance of a new
certificate, the Board of Directors or any such officer may, as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or such owner's legal representative, to
advertise the same in such manner as the Board of Directors or such officer
shall require and/or to give the Corporation a bond, in such sum as the Board
of Directors or such officer may direct, as indemnity against any claim that
may be made against the Corporation on account of the certificate alleged to
have been lost, stolen or destroyed or an account of the issuance of such new
certificate or uncertified shares.
6.3. RECORD DATE.
(a) ACTIONS BY STOCKHOLDERS.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders (or to take any other
action), the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors and shall not be less than 10 nor more than
60 days before the meeting or action requiring a determination of stockholders.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action without a meeting, the Board of Directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and
shall not be more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting, unless the Board of Directors fixes a new record date.
If no record date is fixed by the Board of Directors, the record date
shall be at the close of business on the day next preceding the day on which
the notice is given, or if notice is not required or is waived, at the close of
business on the day next preceding the day on which the meeting is held or such
other action is taken, except that (if no record date is established by the
Board of Directors) the record date for determining stockholders entitled to
consent to corporate
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<PAGE> 16
action without a meeting is the first date on which a stockholder delivers a
signed written consent to the Corporation for inclusion in the Minute Book of
the Corporation.
(b) PAYMENTS.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
(c) STOCKHOLDERS OF RECORD.
The Corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends,
to receive notifications, to vote as such owner, and to exercise all the rights
and powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise may be provided by the Delaware General Corporation Law.
7. INSURANCE
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation
(or is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise) against liability
asserted against or incurred by such person in such capacity or arising from
such person's status as such (whether or not the corporation would have the
power to indemnify such person against the same liability).
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8. INDEMNIFICATION
8.1. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether criminal, administrative or investigative) by
reason of fact that such person is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against 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 if such person acted in good faith and in a manner which 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, had no
reasonable cause to believe that such conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
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, had
unreasonable cause to believe that such conduct was unlawful.
(b) This Corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that such person is or was an employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against 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, if such person acted in good faith and in a manner which
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, had
no reasonable cause to believe that such conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which 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, had reasonable cause to believe that such conduct was unlawful.
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8.2. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION.
(a) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation. No such indemnification shall be made 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 only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
(b) The Corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or
was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation. No such indemnification shall be made 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 only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
8.3. AUTHORIZATION OF INDEMNIFICATION.
Any indemnification under this Section 8 shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person or persons have met the applicable standard
of conduct set forth in Sections 8.1 and 8.2 hereof. Such determination shall
be made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who
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were not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel, in a written opinion, or (c) by a
majority of the stockholders entitled to vote generally in the election of
directors.
8.4. ADVANCEMENT OF EXPENSES.
The Corporation may advance expenses (including attorneys' fees)
incurred by a director or officer in advance of the final disposition of such
action, suit or proceeding upon the receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately be
determined that such director or officer is not entitled to indemnification.
The Corporation may advance expenses (including attorneys' fees)
incurred by any employee or agent in advance of the final disposition of such
action, suit or proceeding upon such terms and condition, if any, as the Board
of Directors deems appropriate.
9. GENERAL PROVISIONS
9.1. INSPECTION OF BOOKS AND RECORDS.
Any stockholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during
the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records, and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act an behalf of the stockholder. The demand under oath shall be
directed to the Corporation at its registered office or at its principal place
of business.
9.2. DIVIDENDS.
The Board of Directors may declare dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation
and the laws of the State of Delaware.
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9.3. RESERVES.
The Board of Directors may set apart, out of the funds of the
Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
9.4. EXECUTION OF INSTRUMENTS.
All checks, drafts or other orders for the payment of money, and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
designate.
9.5. FISCAL YEAR.
The fiscal year of the Corporation shall begin on January 1 and end on
December 31.
9.6. SEAL.
The corporate seal shall be in such form as the Board of Directors
shall approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
10. AMENDMENTS TO BYLAWS
The Board of Directors may from time to time adopt, amend and repeal
these Bylaws. Such action by the Board of Directors shall require the
affirmative vote of at least a majority of the directors then in office.
Stockholders may from time to time adopt, amend and repeal these Bylaws by the
affirmative vote of the majority of shares present in person or represented by
proxy and entitled to vote on the matter at a stockholders meeting, voting
together as a single class.
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CERTIFICATE
The undersigned, being the duly appointed Assistant Secretary of
Metrocall, Inc. (the "Corporation"), hereby certifies the foregoing to be the
Bylaws of the Corporation as in effect on February 4, 1998.
-----------------------------
Shirley B. White
21
<PAGE> 1
EXHIBIT 10.38
CONFIDENTIAL
[ ] Collins' Copy
[ ] Company's Copy
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
To WILLIAM L. COLLINS, III:
By signing below, you agree to an amendment (the "Amendment") to your Employment
Agreement with Metrocall, Inc. (the "Company") dated as of May 15, 1996 (the
"Employment Agreement") as amended January 1, 1997. The Second Amendment is
effective as of January 1, 1998.
New language in the Employment Agreement is shown double underlined,
deleted language is shown in strikeout, and language that is unchanged is
indicated by plain text or an ellipsis (. . .); provided, however, that the
deleted language, double underlining, and ellipses are for convenience only and
are not part of the Employment Agreement as amended:
Section 4, as amended, reads:
4. Salary, Bonus, and Expenses.
(a) In consideration for the Executive's services, the Company shall pay
to the Executive an annual base salary (the "Base Salary") from
January 1, 1998 equal to Five Hundred Thousand Dollars
($500,000). . . .
(b) . . .
(f) Executive will be eligible for a fifty percent (50%) of Base Salary
target bonus for 1998.
The Employment Agreement, except as amended and modified above, remains in
effect.
<TABLE>
<S> <C> <C> <C>
METROCALL, INC.
Date: June 18, 1998 By: /s/ RICHARD M. JOHNSTON
------------------------------------ ----------------------------------------------
Richard M. Johnston
Chairman
Date: April 19, 1998 /s/ WILLIAM L. COLLINS, III
------------------------------------ ----------------------------------------------
William L. Collins, III
</TABLE>
<PAGE> 1
EXHIBIT 10.40
CONFIDENTIAL
[ ] Jacoby's Copy
[ ] Company's Copy
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
To STEVEN D. JACOBY:
By signing below, you agree to an amendment (the "Amendment") to your Employment
Agreement with Metrocall, Inc. (the "Company") dated as of May 15, 1996 (the
"Employment Agreement") as amended January 1, 1997. The Second Amendment is
effective as of January 1, 1998.
New language in the Employment Agreement is shown double underlined,
deleted language is shown in strikeout, and language that is unchanged is
indicated by plain text or an ellipsis (. . .); provided, however, that the
deleted language, double underlining, and ellipses are for convenience only and
are not part of the Employment Agreement as amended:
Section 4, as amended, reads:
4. Salary, Bonus, and Expenses.
(a) In consideration for the Executive's services, the Company shall pay
to the Executive an annual base salary (the "Base Salary") from
January 1, 1998 equal to Three Hundred Twenty-Five Thousand Dollars
($325,000). . . .
(b) . . .
(e) Executive will be eligible for a fifty percent (50%) of Base Salary
target Bonus for 1998.
The Employment Agreement, except as amended and modified above, remains in
effect.
<TABLE>
<S> <C> <C> <C>
METROCALL, INC.
Date: June 18, 1998 By: /s/ RICHARD M. JOHNSTON
------------------------------------ ----------------------------------------------
Richard M. Johnston
Chairman
Date: /s/ STEVEN D. JACOBY
------------------------------------ ----------------------------------------------
Steven D. Jacoby
</TABLE>
<PAGE> 1
EXHIBIT 10.42
CONFIDENTIAL
[ ] Kelly's Copy
[ ] Company's Copy
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
To VINCENT D. KELLY:
By signing below, you agree to an amendment (the "Amendment") to your Employment
Agreement with Metrocall, Inc. (the "Company") dated as of May 15, 1996 (the
"Employment Agreement") as amended January 1, 1997. The Second Amendment is
effective as of January 1, 1998.
New language in the Employment Agreement is shown double underlined,
deleted language is shown in strikeout, and language that is unchanged is
indicated by plain text or an ellipsis (. . .); provided, however, that the
deleted language, double underlining, and ellipses are for convenience only and
are not part of the Employment Agreement as amended:
Section 4, as amended, reads:
4. Salary, Bonus, and Expenses.
(a) In consideration for the Executive's services, the Company shall pay
to the Executive an annual base salary (the "Base Salary") from
January 1, 1998 equal to Three Hundred Twenty-Five Thousand Dollars
($325,000). . . .
(b) . . .
(f) Executive will be eligible for a fifty percent (50%) of Base Salary
target bonus for 1998.
The Employment Agreement, except as amended and modified above, remains in
effect.
<TABLE>
<S> <C> <C> <C>
METROCALL, INC.
Date: June 18, 1998 By: /s/ RICHARD M. JOHNSTON
------------------------------------ ----------------------------------------------
Richard M. Johnston
Chairman
Date: /s/ VINCENT D. KELLY
------------------------------------ ----------------------------------------------
Vincent D. Kelly
</TABLE>
<PAGE> 1
EXHIBIT 11.1
METROCALL, INC.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------- ---------------------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (12,304) $ (28,734) $ (24,052) $ (56,934)
Preferred dividends (1,609) (2,423) (3,169) (4,771)
----------- ----------- ----------- -----------
Net loss attributable to common stockholders $ (13,913) $ (31,157) $ (27,221) $ (61,705)
=========== =========== =========== ===========
Weighted-average shares outstanding:
Shares outstanding, beginning of period 24,521,135 40,548,414 24,521,135 40,548,414
Shares issued in acquisitions 516,633 - 421,054 -
Share issued for exercise of stock options 1,521 - 765
Shares issued in settlement of litigation - 270,000 - 270,000
Shares issued in employee stock purchase plan 34,770 48,134 34,770 48,134
----------- ----------- ----------- -----------
Weighted-average shares outstanding 25,074,059 40,866,548 24,977,724 40,866,548
=========== =========== =========== ===========
Loss per share attributable to common stockholders $ (0.55) $ (0.76) $ (1.09) $ (1.51)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,456
<SECURITIES> 0
<RECEIVABLES> 40,755
<ALLOWANCES> 5,709
<INVENTORY> 2,605
<CURRENT-ASSETS> 60,202
<PP&E> 361,389
<DEPRECIATION> 138,749
<TOTAL-ASSETS> 1,028,979
<CURRENT-LIABILITIES> 73,339
<BONDS> 615,473
58,754
0
<COMMON> 409
<OTHER-SE> 118,802
<TOTAL-LIABILITY-AND-EQUITY> 1,028,979
<SALES> 21,449
<TOTAL-REVENUES> 206,584
<CGS> 14,459
<TOTAL-COSTS> 239,917
<OTHER-EXPENSES> (612)
<LOSS-PROVISION> 6,605
<INTEREST-EXPENSE> 31,024
<INCOME-PRETAX> (78,204)
<INCOME-TAX> (21,270)
<INCOME-CONTINUING> (56,934)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,705)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
