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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
Commission File Number: 0-21924
METROCALL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 54-1215634
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
6677 RICHMOND HIGHWAY, ALEXANDRIA, VIRGINIA 22306
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 660-6677
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NOT APPLICABLE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF CLASS
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COMMON STOCK ($.01 PAR VALUE)
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 by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
the Registrant was approximately $564.9 million based on the closing sales price
on March 3, 2000.
COMMON STOCK, PAR VALUE $0.01 -- 43,561,715 SHARES OUTSTANDING ON MARCH 3, 2000
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Annual Meeting of the Registrant to
be held May 3, 2000 which will be filed with the Commission within 120 days
after the close of the fiscal year and are incorporated by reference into Part
III.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1 Business.................................................... 3
Item 2 Properties.................................................. 16
Item 3 Legal Proceedings........................................... 16
Item 4 Submission of Matters to a Vote of Security Holders......... 16
PART II
Item 5 Market for Metrocall's Common Stock and Related Security
Holder Matters.............................................. 17
Item 6 Selected Financial Data..................................... 20
Item 7 Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 22
Item 7A Quantitative and Qualitative Disclosures about Market
Risk........................................................ 40
Item 8 Financial Statements and Supplementary Data................. 42
Item 9 Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure........................................ 42
Item 10 Directors and Executive Officers of the Company............. 43
Item 11 Executive Compensation...................................... 43
Item 12 Security Ownership of Certain Beneficial Owners and
Management.................................................. 43
Item 13 Certain Relationships and Related Transactions.............. 43
Item 14 Exhibits.................................................... 44
Signatures........................................................... 48
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes or incorporates forward-looking
statements. Metrocall has based these forward-looking statements on its current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties and assumptions including, among
other things those discussed under "Business" and "Management's Discussion and
Analysis of Financial Condition, and Results of Operations," and as follows:
- Metrocall's history of net operating losses;
- Metrocall's ability to cover fixed charges;
- Metrocall's high leverage and need for substantial capital;
- Metrocall's ability to service debt;
- the restrictive covenants governing Metrocall's indebtedness;
- the amortization of Metrocall's intangible assets;
- the impact of competition and technological developments;
- satellite transmission failures;
- subscriber turnover;
- regulatory changes;
- Metrocall's ability to implement its business strategies;
- the risks associated with Metrocall's investment in a newly formed
technology-based joint venture;
- dependence on key suppliers; and
- dependence on key management personnel.
Other matters set forth in this Annual Report on Form 10-K may also cause
actual results to differ materially from those described in the forward-looking
statements. Metrocall undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this Annual Report on Form 10-K might not
occur.
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PART I
ITEM 1. BUSINESS
GENERAL
Metrocall is a leading provider of local, regional and national paging and
other wireless messaging services. Through its nationwide wireless network,
Metrocall provides messaging services to over 1,000 U.S. cities, including the
top 100 Standard Metropolitan Statistical Areas (SMSAs). Since 1993, Metrocall's
subscriber base has increased from less than 250,000 to more than 5.9 million.
Metrocall has achieved this growth through a combination of internal growth and
a program of mergers and acquisitions. As of December 31, 1999, Metrocall was
the third largest messaging company in the United States based on the number of
subscribers. Metrocall was formed in October 1982 and had its initial public
offering for its common stock in July 1993.
WIRELESS MESSAGING INDUSTRY OVERVIEW
Metrocall believes that paging and wireless messaging is the most
cost-effective and reliable means of conveying a variety of information rapidly
over a wide geographic area either directly to a person traveling or to various
fixed locations. Traditional paging, as a one-way communications tool, is a way
to communicate at a lower cost than current two-way communication methods, such
as cellular and personal communication services (PCS) telephones. For example,
the paging and messaging equipment and air time required to transmit an average
message cost less than the equipment and air time for cellular and PCS
telephones. Furthermore, pagers operate for longer periods due to superior
battery life, often exceeding one month on a single battery. Numeric and
alphanumeric subscribers generally pay a flat monthly service fee, which covers
a fixed number of messages sent to the subscriber. In addition, these paging and
messaging devices are unobtrusive and portable and historically have withstood
substantial technological advances in the communications industry. Many mobile
telephone customers also use paging and messaging devices in conjunction with
their telephones to screen incoming calls and minimize battery wear and usage
charges.
Although the U.S. one-way paging industry has over 500 licensed paging
companies, Metrocall estimates that the eight largest paging companies,
including Metrocall, currently serve approximately 75% of the total paging
subscribers in the United States. These companies are facilities-based,
Commercial Mobile Radio Service (CMRS) providers, previously classified as
either Radio Common Carrier (RCC) or Private Carrier Paging (PCP) operators,
servicing over 100,000 subscribers each in multiple markets and regions.
Metrocall expects that the future of the one-way paging and messaging industry
will include technological improvements that permit increased service and
applications, and consolidation of smaller, single-market operators and larger,
multi-market paging companies.
Metrocall is seeking to develop and market advanced wireless messaging,
which uses narrowband PCS networks and currently includes two-way messaging and
other short messaging based services and applications. Metrocall believes that
this relatively new method of communication is also a way to communicate at a
lower cost than other forms of two-way wireless communications and for longer
periods of time due to superior battery life. In addition, advanced messaging
devices, which are supported by the ReFLEX(TM) communications technology, cover
a substantially larger geographic area than broadband PCS networks. Because
advanced wireless messaging uses narrowband PCS networks, which utilize a
two-way spectrum, advanced messaging devices offer advantages over the
traditional one-way spectrum that some paging networks use. The two-way spectrum
enables a wireless device to emit a signal that notifies the network of the
device's location and permits the network to send the message to transmitters
closest to the messaging device. In contrast, a one-way spectrum requires the
message to be sent to all transmitters within a geographic area and not
necessarily to those transmitters closest to the messaging device. Therefore, a
two-way spectrum utilizes less air-time of the spectrum and creates more air
time efficiency, particularly in the areas farthest from the messaging device.
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Examples of advanced messaging services include:
- "Confirmation" or "response" messaging, which sends a message back to the
network confirming that a message has been received;
- two-way messaging, which permits users to communicate wirelessly with,
among other things, Internet e-mail, fax machines, one-way alphanumeric
pagers and two-way messaging devices;
- short message "information pulls," which enable subscribers to receive
customized stock quotes/portfolio information, weather reports, Internet
information access, corporate Intranet information retrieval and other
information selected by a subscriber.
Metrocall believes the future of the advanced wireless messaging industry
will include technological improvements and advancements that will provide
greater flexibility and additional wireless applications and content programs.
While these narrowband PCS services have been proven technologically feasible,
their economic viability has not been fully tested based on the cost of
licenses, infrastructure and capital requirements, and increased operating
costs, and competitive, similarly priced two-way broadband PCS and cellular
services.
OUR BUSINESS STRATEGY
Metrocall's business strategy is to increase shareholder value by expanding
its subscriber base and product portfolio, and increasing revenues, cost
efficiencies and operating cash flow. Operating cash flow is defined as EBITDA
(earnings before interest, taxes, depreciation and amortization). The principal
elements of this strategy include the following:
Manage Capital Requirements and Increase Free Cash Flow. Metrocall's key
financial objective is to manage capital requirements and increase free cash
flow. Metrocall defines free cash flow as operating cash flow less capital
expenditures and interest expense. To achieve this objective, Metrocall focuses
on the following:
- primarily selling, rather than leasing, paging and advanced messaging
units to reduce capital expenditure requirements per subscriber;
- increasing revenues and cash flow through sales of value-added advanced
messaging and information services which generate higher average monthly
revenue per unit (ARPU) than traditional paging services; and
- increasing the utilization of Metrocall's developed nationwide network to
serve more customers per frequency and enter new markets with minimal
capital outlay.
Maximize Internal Growth Potential. Metrocall has grown internally by
broadening its distribution network and expanding its target market to
capitalize on the growing appeal of messaging and other wireless products and
services. Since December 31, 1994, Metrocall has added approximately 1.6 million
new subscribers through internal growth. Metrocall has expanded its direct and
indirect distribution channels to gain access to different market segments. As
part of this strategy, Metrocall has formed strategic alliances with:
- local, long-distance, cellular and PCS providers, such as AT&T Wireless
Services, Inc. (AT&T Wireless), Bell Atlantic, Qwest and ALLTEL;
- digital subscriber line (DSL) provider Covad Communications, Inc. and
Internet service provider (ISP) PSINet Inc. (PSINet);
- MicroStrategy Incorporated and Strategy.com for personalized financial
information under "MyOnTheGoPortfolio"(SM) and "OnTheGoInfo"(SM);
- cable television companies, such as Adelphia Cable Communications; and
- retail outlets, such as Circle K Stores, Ritz Camera and Walgreens.
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Metrocall has strategic marketing relationships with America Online,
PageMaster Corporation, a national promotions company, and Washington Gas and
Light Company, which are designed to further enhance its market presence.
Metrocall has a national distribution agreement through 2003 with AT&T Wireless,
which enables Metrocall exclusively to distribute its paging and wireless
messaging products in over 670 AT&T Wireless retail stores. Metrocall also has a
broadband PCS distribution alliance with AT&T Wireless, which has enabled it to
further diversify its product mix by distributing AT&T's digital PCS wireless
products and AT&T's Digital One Rate(SM) service plans via Metrocall's direct
distribution channels. In 2000, Metrocall may continue to expand its
multi-tiered distribution network and marketing relationships. Metrocall
believes that these initiatives will continue to increase its service revenues
and equipment sales and broaden the range and diversity of products that are
currently offered to consumers.
Expand Market Presence through Consolidation and Diversification. Metrocall
has expanded its subscriber base and geographic coverage through consolidation
of other paging and messaging companies. Since 1996, Metrocall has acquired
approximately 3.6 million subscribers through mergers and acquisitions through
December 31, 1999:
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ACQUISITION NO. OF
ACQUIRED COMPANY DATE SUBSCRIBERS
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Parkway Paging, Inc (Parkway).............. July 16, 1996 140,000
Satellite Paging (Satellite)............... August 30, 1996 100,000
A+Network, Inc. (A+Network)................ November 15, 1996 660,000
Page America Group, Inc. (Page America).... July 1, 1997 198,000
ProNet Inc. (ProNet)....................... December 30, 1997 1,286,000
Advanced Messaging Division of AT&T
Wireless (AMD)........................... October 2, 1998 1,215,000
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Total................................. 3,599,000
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</TABLE>
Metrocall believes that its enhanced nationwide coverage gives it a competitive
advantage in gaining additional subscribers. In February 2000, Metrocall agreed
to acquire NationPage, Inc. in a stock purchase transaction with a subsidiary of
AT&T Corp. This acquisition will add approximately 80,000 subscribers located
principally in eastern Pennsylvania, New Jersey and upstate New York.
Metrocall believes that the paging and wireless messaging industry is
likely to undergo additional consolidation and has announced that it intends to
participate in the consolidation process. Potential future consolidations would
be evaluated on several key operating and financial elements including:
- geographic presence;
- Federal Communications Commission (FCC) regulatory licenses held;
- overall valuation of potential target, including subscriber base and
potential synergies;
- consideration to be given;
- potential increase to free cash flow and operating cash flow; and
- availability of financing and the ability to reduce the combined
companies long-term debt.
Any potential transaction 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 Metrocall.
In November 1999, Arch Communications Group, Inc. (Arch), and Paging
Network, Inc. (PageNet) announced that they had agreed to merge. Completion of
this merger is subject to a number of conditions, including agreement by holders
of PageNet's outstanding senior unsecured notes to exchange their notes for Arch
common stock. Metrocall has had and may continue to have informal discussions
with certain holders of these notes about whether Metrocall might be able to
present an alternative consolidation transaction to the Arch merger. Metrocall
has not made any offer with respect to PageNet, and there is no assurance that
Metrocall will make any such proposal or that the proposal would be successful.
Metrocall also engages, from time to time, in discussions with other industry
participants about potential consolidation transactions. Again, there can be no
assurance that any such discussion will lead to a consolidation transaction.
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Metrocall has also sought to increase its market presence through its
recent formation and investment in Inciscent, Inc. (Inciscent). Inciscent is a
technology-based joint venture that Metrocall originally formed in November 1999
under the name Metrocall.net. Inciscent is expected to be a full service
business-to-business wired-to-wireless application service provider (ASP) that
will offer a suite of technology services to small office/home office (SOHO) and
small to medium-sized businesses. These services will include broadband Internet
access, domain hosting, e-mail services, auction notification and confirmation,
data solutions and wireless e-mail. On February 8, 2000, Metrocall, an affiliate
of Hicks, Muse, Tate & Furst Incorporated (HMTF), PSINet and Aether Systems,
Inc. (Aether) agreed to invest in Inciscent through the purchase of Series A
Convertible Preferred Stock of Inciscent for cash, notes, and/or services.
Metrocall believes that its investment in Inciscent will provide financial and
strategic benefits, such as permitting Metrocall to complement its products and
services with those of Inciscent. Metrocall believes the complementary nature of
Inciscent's services with Metrocall's products and services will enable
Metrocall to diversify and expand its market presence to all areas associated
with wireless messaging.
Pursue Cost-Efficient Technological Advances. Metrocall has pursued
technological advances that are proven, cost-efficient and consistent with its
strategy to increase free cash flow. Metrocall has historically concentrated its
capital spending on the development of its local, regional and nationwide
one-way paging networks. Recently, Metrocall began offering advanced messaging
products and services using narrowband PCS now that the technology that has been
proven and gained initial market acceptance. Metrocall was able to begin
offering these services with minimal capital outlay because it acquired an FCC
narrowband PCS license in connection with the AMD acquisition. In 1998,
Metrocall formed a five-year strategic alliance with WebLink Wireless, Inc.
(WebLink, formerly known as PageMart Wireless, Inc.), a leading provider of
paging and messaging services to develop and offer narrowband PCS. Metrocall's
alliance with WebLink consists of two phases: a switch-based resale phase and a
shared network build-out phase. The alliance is currently in its first phase in
which Metrocall provides narrowband PCS using WebLink's advanced messaging
transmit and receive network. Metrocall began offering guaranteed-delivery
messaging during 1999 and launched two-way and data-intensive messaging services
in the first quarter of 2000. In the second phase, Metrocall will install and
operate its own outbound narrowband PCS frequency on its nationwide network and
WebLink will provide turnkey installation and operation of a receiver network.
Metrocall believes this alliance will enable it to comply with the FCC's
mandated narrowband PCS build-out requirements. Under the alliance, Metrocall
shares a portion of capital expenditures and operating expenses. Metrocall
believes that the WebLink alliance has enabled it to provide narrowband PCS in a
faster and more cost-effective manner than if it had developed and funded the
network itself. The development of the narrowband PCS license acquired in the
AMD acquisition and the WebLink alliance will allow Metrocall to increase
capacity and reduce its long-term cost of message delivery through frequency
reuse.
Metrocall has taken other steps to ensure that it is better positioned to
take advantage of technological advances. In mid-1999, Metrocall upgraded its
nationwide network to support new Internet applications, two-way messaging and
enhanced services. The upgrade has permitted Metrocall to offer subscribers
enhanced voicemail, wireless e-mail and Internet-based information services in
addition to its current set of alphanumeric messaging, guaranteed message
delivery and voicemail services. In April 1999, Metrocall and other leading
paging and wireless messaging companies and manufacturers joined forces in a
broad alliance to develop and market devices referred to as personal data
assistants (PDAs) embedded with the ReFLEX(TM) communications technology. This
alliance, named the Personal Communicator Wireless Alliance, will work with PDA
manufacturers to create a variety of handheld messaging devices that provide
two-way wireless messaging for consumers. Metrocall believes this initiative
will further increase its ability to offer more products and services to its
customer base.
Optimize Customer Relationships. Metrocall seeks to maintain a close
relationship with its existing customers and to develop stronger relationships
with the subscribers of newly acquired companies by maintaining decentralized
sales, marketing and customer service operations and providing value-added
services tailored to customers' needs. The value-added services provided by
Metrocall are billed as enhancements to its basic service and generally result
in higher ARPU. Metrocall's specific value-added services include:
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- Direct View, which permits organizations to use Metrocall's wireless
network to broadcast news, sports, stock data and general and customized
information to LED display signs;
- customized information content using Metrocall's OnTheGoInfo(SM) suite of
information services;
- My2Way, which permits subscribers to communicate with other two-way
devices by sending and receiving e-mail, accessing information on demand
and browsing the Internet;
- customized wireless messaging applications for specific segments of the
public, such as the medical community; and
- an enterprise-wide messaging management software and database system.
Maintaining Low Cost Operations and Improve Margins. A key component of
Metrocall's business strategy is to make investments that improve its operating
efficiencies, which lead to margin improvement. During 1999, Metrocall's
operating efficiencies improved because it focused on eliminating redundant
costs within its business as it substantially completed the integration of AMD
and its other acquisitions, and renegotiated several telecommunications and
other contracts, which reduced its service, rent and maintenance costs per
subscriber, particularly in the last half of 1999. Metrocall expects to continue
its cost containment efforts during 2000 as it further identifies redundant
costs within its operations and reduces the number of separate billing systems
it operates.
Metrocall also believes that as use of its strategic alliances and other
indirect distribution channels increase, its operating costs will decrease as
participants in these channels typically bear a portion of Metrocall's sales and
customer service expenses. Similarly, Metrocall believes its focus on maximizing
monthly recurring revenues and promoting value-added services with higher ARPU
will improve operating margins.
METROCALL'S PAGING AND WIRELESS MESSAGING OPERATIONS
Products and Services
Metrocall currently provides four principal paging and wireless messaging
products:
- digital display messaging devices, which permits a subscriber to receive
a telephone number or other numeric coded information and to store
several such numeric messages that the customer can recall when desired;
- alphanumeric display messaging devices, which allows the subscriber to
receive and store text messages from a variety of sources including the
Internet;
- digital broadband and PCS phones and other products of AT&T under a
distribution agreement with AT&T Wireless, which allows users to place
and receive calls under AT&T's Digital One Rate(SM) service plans;
- advanced messaging devices, which provide guaranteed delivery of messages
and two-way messaging.
Metrocall provides digital display and alphanumeric display devices in all
of its markets. At December 31, 1999, approximately 86% of its subscriber
devices in service were digital display devices and approximately 14% were
alphanumeric display devices. Alphanumeric display service, which was introduced
in the mid-1980s, has grown at increasing rates as users and dispatch centers
overcome technical and operational obstacles to sending messages. Currently,
Metrocall markets, under the service mark "Notesender," a computer program
designed for use in transmitting alphanumeric messages from personal computers
to pagers. In addition, alphanumeric paging access is available via its Internet
website, www.metrocall.com, where any Internet user can access Metrocall's
on-line alphanumeric paging and messaging software.
During the first quarter of 2000, Metrocall began deploying two-way
messaging services to its subscribers, which, among other capabilities, gives
subscribers the ability to communicate wirelessly with pagers, fax machines and
Internet e-mail. Metrocall expects to begin offering these subscribers enhanced
services
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including customized content and information services, unified messaging, and
web enabled wireless notification and messaging.
Metrocall also provides enhancements and ancillary services such as:
- personalized automated answering services, which allow a subscriber to
record a message that greets callers who reach the subscriber's voice
mailbox;
- message protection, which allows a subscriber to retrieve any calls that
come in during the period when the subscriber was beyond the reach of
Metrocall's radio transmitters;
- annual loss protection, which allows subscribers of leased messaging
devices to limit their cost of replacement upon loss or destruction of
the device; and
- maintenance services, which are offered to subscribers who own their own
pagers.
Subscribers who use wireless messaging services have traditionally included
small business operators and employees, professionals, medical personnel, sales
and service providers, construction and trades-people, and real estate brokers
and developers. However, the appeal of paging and wireless messaging to the
residential user is growing, with service increasingly being adopted by
individuals for private, non-business uses such as communicating with family
members and friends.
Metrocall subscribers either buy or lease their wireless devices for local,
regional, multi-regional or nationwide service. It receives additional revenue
for enhanced services, such as voice mail, personalized greetings and One
Touch(SM) service. Metrocall typically offers volume discounts on lease payments
and service fees to its large volume subscribers. In some instances, Metrocall's
subscribers are resellers that purchase services at substantially discounted
rates, but are responsible for marketing, billing, collection and related costs
with respect to the resellers' customers. For each of the three years ended
December 31, 1999, over 90% of Metrocall's service, rent and maintenance
revenues were generated from its traditional one-way messaging services.
Sales and Marketing
Metrocall's sales and marketing strategy incorporates a multi-tiered
distribution system designed to maximize internal growth and geographic
presence. At December 31, 1999, Metrocall through more than 230 sales and
administrative offices and retail outlets, employed a sales force of over 1,500
sales representatives, including its direct sales staff, telemarketing
professionals and sales representatives who call on retailers and resellers.
Metrocall's major distribution channels are described briefly below.
Direct Distribution Channels
- Direct Sales. Metrocall's direct sales personnel sell its messaging
services and products primarily to businesses, placing special emphasis
on key strategic accounts. Metrocall's direct sales personnel generally
target businesses that have multiple work locations or have highly mobile
employees. Metrocall's sales compensation plans are designed to motivate
direct sales personnel to focus on selling rather than leasing one-way
pagers and advanced messaging devices, which reduces capital
requirements, and to increase sales of higher revenue product
enhancements, such as nationwide coverage, alphanumeric service, voice
mail, One Touch(SM) service and My2Way service.
- Database Telemarketing. Metrocall's internal, professionally trained
staff generates sales by utilizing computerized lead management and
telemarketing techniques combined with its proprietary lead screening and
development protocol. Using acquired lists to focus its efforts,
Metrocall's internal staff targets groups of consumers and small
businesses who have a propensity to use paging and messaging services but
are either in a region where Metrocall does not have a direct sales
effort or has not been reached by other distribution channels. In
Metrocall's marketing efforts, it uses only commercially available public
information to analyze and target new customers and does not use
"Customer Proprietary Network Information" in a way that would conflict
with applicable law or FCC rules.
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- Company-Owned Retail Stores. At December 31, 1999, Metrocall had over 120
company-owned retail outlets. Metrocall's retail outlets are designed to
sell higher ARPU services to the consumer market segment directly while
providing Metrocall with a point of presence to enhance its brand
recognition. These retail outlets take a variety of forms, such as mall
stores, kiosks, mall carts, retail merchandising units and mall center
locations. Products sold to consumers at these locations include paging,
messaging, cellular, narrowband, broadband and PCS services and related
accessories. Many of these locations function as customer service and
payment centers in addition to offices for direct sales representatives.
Indirect Distribution Channels
- Resellers. Metrocall sells resellers bulk paging and messaging services
for resale to the resellers' own business clients and individual
customers. Metrocall issues one monthly bill to each reseller who is
responsible for marketing, billing and collection, and equipment
maintenance. Through this channel, Metrocall achieves high network
utilization at low incremental cost, but realizes much lower ARPU than
through other distribution channels.
- Retail Outlets. Metrocall sells paging and other messaging devices on a
wholesale basis to retail outlets, such as office supply, electronics and
general merchandise chains, for resale to their customers. Metrocall
selects these outlets based on factors such as the number of stores in a
region and the extent of their advertising. These outlets then sell the
devices and provide limited customer service to the consumer. Metrocall
provides sales incentives and advertising support and trains sales
personnel to enhance a retail outlet's effectiveness and to ensure that
the customer is well educated regarding the product.
- Dealer Network. Metrocall contracts with independent dealers,
representatives and agents, including such outlets as small cellular
phone dealers and independent specialty electronics stores. Metrocall
typically uses these dealers to reach specific consumer niches (e.g.,
ethnic or non-English speaking communities) and small businesses that are
more efficiently accessed through this channel than through Metrocall's
other distribution channels. In addition to selling the paging and other
wireless devices, independent dealers assist the subscriber in choosing a
service plan and collect the initial payments. Metrocall pays independent
dealers commissions based on their sales of Metrocall services.
- Strategic Partners. Metrocall has entered into contractual agreements
with several selected national distribution partners who market its
services to their existing and future customers. Metrocall supplies many
of these partners with custom branded turnkey solutions for network
services, products, customer services, billing, collections and
fulfillment. Metrocall's strategy is to provide these value-added
services to enhance the business relationship and margin opportunities
for both parties. Metrocall has entered into alliances with companies in
the long distance, local exchange, cable, Internet, retail, direct
response and multi-level marketing businesses and believes that these
programs will help deliver paging and advanced messaging services to
market segments that its other distribution channels may not reach
cost-effectively.
- Affiliates. Metrocall operates a network of paging and messaging carriers
or affiliates that resell services on the 152.480 MHz private carrier
paging frequency. These affiliates are independent owners of paging and
messaging systems in various markets throughout the nation who sell
expanded coverage to their customers. Utilizing Metrocall's
infrastructure, these independent networks provide wide area and
nationwide paging on a single channel.
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Subscribers by Geographic Region. Set forth below is the number of
messaging devices that Metrocall has in service by geographic region.
NUMBER OF PAGERS AND WIRELESS DEVICES IN SERVICE
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997(1) 1998(2) 1999
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<S> <C> <C> <C>
Northeast........................................ 714,363 772,463 781,663
Mid-Atlantic..................................... 623,077 693,631 799,775
Southeast........................................ 1,094,313 1,179,548 1,261,545
Midwest.......................................... 232,105 400,150 431,072
Southwest........................................ 756,459 1,356,218 1,448,090
West............................................. 610,519 768,829 750,000
Northwest........................................ -- 488,711 455,794
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Total....................................... 4,030,836 5,659,550 5,927,939
========= ========= =========
</TABLE>
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(1) Includes approximately 1.5 million pagers in service acquired from its 1997
merger and acquisition.
(2) Includes approximately 1.2 million pagers in service acquired in the AMD
acquisition.
Subscribers by Distribution Channel. Set forth below is the respective
numbers and percentages of messaging devices that Metrocall services through its
distribution channels:
OWNERSHIP OF PAGERS AND WIRELESS DEVICES IN SERVICE
<TABLE>
<CAPTION>
1997(1) 1998(2) 1999
---------------------- ---------------------- ----------------------
FOR THE YEARS ENDED DECEMBER 31, NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
- -------------------------------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
DIRECT CHANNELS:
Company-owned and leased to
subscribers.............. 1,184,193 29% 1,980,297 35% 1,925,903 33%
Subscriber-owned (COAM)..... 430,582 11 629,352 11 616,829 10
Company-owned retail stores.. 223,510 6 207,493 4 184,010 3
INDIRECT CHANNELS:
Resellers................... 1,965,354 49 2,369,686 42 2,579,286 44
Strategic Partners and
affiliates............... 140,625 3 274,844 5 475,487 8
Retail...................... 86,572 2 197,878 3 146,424 2
--------- --- --------- --- --------- ---
Total.................... 4,030,836 100 5,659,550 100 5,927,939 100
========= === ========= === ========= ===
</TABLE>
- ---------------
(1) Includes approximately 1.5 million pagers in service acquired from its 1997
merger and acquisition.
(2) Includes approximately 1.2 million pagers in service acquired in the AMD
acquisition.
Network and Equipment
Metrocall has developed a state-of-the-art paging and messaging system
utilizing current narrowband PCS technology, which achieves superior building
penetration, wide-area coverage and the ability to deliver new and enhanced
messaging services. This existing transmission equipment has significant
capacity to support future growth.
Metrocall's messaging services are initiated when telephone calls or short
message based text services are placed to its company-maintained paging and
messaging terminals. These terminals have a modular design that allows
significant future expansion by adding or replacing modules rather than
replacing the entire terminal. Metrocall's terminals direct pages and other
messages from the Public Switched Telephone Network
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<PAGE> 11
(PSTN) or from the Internet to Metrocall's primary satellite transmission hub,
which signals terrestrial network transmitters providing coverage throughout the
service area.
Metrocall has three exclusive nationwide one-way frequencies and a
nationwide 50/50 KHz narrowband personal communication (NPCS) license issued by
the FCC and is operating in each of the largest 100 SMSAs. Metrocall began
operating its nationwide network on one of the three one-way frequencies in
November 1993. Metrocall developed a special home gateway switch that allows all
of Metrocall's existing regional based paging and messaging terminals to route
two-way messaging data to this centralized gateway for delivery into the two-way
ReFLEX(TM) network. Metrocall is also capable of providing local paging and
messaging in many markets served by its nationwide network by using nationwide
transmitters to carry local messages. Services provided through the nationwide
network are marketed to subscribers directly through Metrocall's sales force and
indirectly through retailers and resellers. Metrocall also operates a series of
regional operating systems or networks serving Arizona, California, Utah, Texas,
Florida, Illinois, Oregon, Washington, Colorado and Nevada; the area from Boston
to the Virginia/North Carolina border; and a ten state region in the Southeast
United States.
In addition, Metrocall transmits a majority of its paging and messaging
traffic through its "Global Messaging Gateway," which is a satellite uplink
facility located in Stockton, California. The facility operates 24 hours per
day, seven days per week. The use of this facility permits Metrocall to save
costs as it phases out operating agreements with three commercially owned
satellite uplink facilities and increases Metrocall control over its network
infrastructure.
Metrocall does not manufacture any of the messaging devices or
infrastructure equipment used in its operations. Although several entities sell
the equipment used in Metrocall's operations, Metrocall has historically limited
the number of suppliers to achieve volume cost savings, and, therefore, depends
on a few suppliers to obtain sufficient inventory. Metrocall purchases most of
its pagers and messaging devices from Motorola, Inc. Metrocall purchases its
transmitters and terminals from Motorola and Glenayre Electronics. Metrocall
anticipates that equipment and messaging devices will continue to be available
to it in the foreseeable future, consistent with normal manufacturing and
delivery lead times, but cannot assure you that it will not experience
unexpected delays in obtaining one-way and two-way messaging devices and
infrastructure equipment in the future. A significant number of delays could
have an adverse effect on Metrocall's operations, network development plans and
future revenues. Metrocall continually evaluates new developments in wireless
messaging technology in connection with the design and enhancement of its
messaging systems and selection of products to be offered to subscribers.
Management Systems and Billing
Metrocall has centralized certain operating functions and utilizes common
billing and subscriber management systems. This permits Metrocall to reduce
costs, increase operating efficiencies, obtain synergies from acquisitions, and
focus regional management on sales and distribution.
The functions Metrocall has centralized into its national operations center
in Alexandria, Virginia include accounting, management information systems, and
inventory and order fulfillment. It has also integrated the information systems
of the acquired companies into its structure.
Metrocall also maintains three national call centers, which are critical
factors in marketing and servicing the nationwide network to all markets in the
United States. Metrocall's centers handle customer inquiries from existing and
potential customers and support its distribution channels initiatives. Its three
centers are staffed with approximately 385 employees. Each center offers a
toll-free access number. One of these centers is open seven days per week, 24
hours per day. The other two centers are open six days a week and provide
emergency service seven days a week, 24 hours a day. Metrocall attempts to
satisfy customers upon initial inquiry to avoid repeat calls, thereby increasing
customer satisfaction and decreasing costs. Metrocall employs state-of-the-art
call management equipment (such as an automated call distribution system and
interactive voice response capabilities) to provide quality customer service and
to track both the productivity and the quality of the performance of its
customer service representatives.
11
<PAGE> 12
COMPETITION
The wireless communications industry is very competitive. Metrocall has
competed by maintaining competitive pricing of its products and services, by
providing a broad assortment of coverage options using its own messaging network
infrastructure and through quality, reliable customer service. Metrocall
competes with hundreds of companies that provide only local basic one-way paging
service. Metrocall also offers enhanced and advanced messaging services, such as
alphanumeric messaging, guaranteed messaging, voice mail, two-way messaging,
customized information content delivery services and broadband PCS telephones.
The products and services that Metrocall offers compete directly and
indirectly with a myriad of wireless communication products and services. For
instance, product bundling of PCS telephones with short messaging services is
becoming more common. In addition, the pricing of flat rate digital broadband
PCS services is declining to a level that competes directly with the traditional
paging services Metrocall offers.
Although some of Metrocall's competitors are small, privately owned
companies servicing one market, others are large diversified telecommunications
companies that serve several markets. Some of these competitors possess
financial, technical and other resources greater than those of Metrocall. Major
wireless messaging providers that Metrocall competes with in more than one
market include: PageNet, Arch, WebLink, Skytel, a subsidiary of MCIWorldcom,
Inc., Airtouch/Vodafone, Nextel Communications, Inc., BellSouth Wireless Data,
Bell Atlantic, SBC Communications, Inc. and American Mobile Satellite
Corporation.
In November 1999, PageNet and Arch announced their intention to merge.
After completion of this merger, the combined company is expected to have
approximately 15.7 million subscribers and a significantly reduced leverage,
which may place Metrocall at a competitive disadvantage.
The intensity of competition for communication service customers will
continue to increase as wireless communications products and technologies
continue to be developed and offer new and different services and applications.
In addition, FCC regulation concerning auctioning of new spectrum for wireless
communication services has created additional potential sources of competition.
Furthermore, entities offering service on wireless two-way communications
technology, including cellular, digital broadband PCS, narrowband PCS and
providers of specialized mobile radio and mobile satellite services, also
compete with the services Metrocall provides. There can be no assurance that
such product and technology developments and regulatory processes will not
adversely affect Metrocall.
Metrocall holds one narrowband PCS license and offers narrowband PCS
services in connection with its alliance with WebLink. Some of Metrocall's
competitors also hold narrowband PCS licenses. Two competitors, PageNet and
Skytel currently offer narrowband PCS data services from their own networks.
Metrocall expects that the services that will be provided by these entities will
compete with the narrowband PCS and other paging and messaging services it
provides.
GOVERNMENT REGULATION
From time to time, federal and state legislators propose legislation that
could affect Metrocall's business, either beneficially or adversely, such as by
increasing competition or affecting the cost of its operations. Additionally,
the FCC and, to a lesser extent, state regulatory bodies, may adopt rules,
regulations or policies that may affect Metrocall's business. Metrocall cannot
predict the impact of such legislative actions on its operations. The following
description of certain regulatory factors does not purport to be a complete
summary of all present and proposed legislation and regulations pertaining to
Metrocall's operations.
Federal. Metrocall's operations are subject to extensive regulation by the
FCC under the Communications Act of 1934, as amended (the "Communications Act").
Under the Communications Act, Metrocall is required to obtain FCC licenses for
the use of radio frequencies to conduct its operations within specified
geographic areas. These licenses set forth the technical parameters, such as
maximum power and tower height, under which Metrocall may use such frequencies.
Metrocall has historically provided paging services as both a RCC operator and a
PCP operator. Traditionally, RCC frequencies were assigned on an exclusive basis
to a single licensee in a service area. RCCs were subject to regulation by the
states as well as by the FCC and were required to provide service to anyone
requesting such service. PCP frequencies were assigned on a
12
<PAGE> 13
shared basis (i.e., multiple parties in the same area could apply for and obtain
a license to use the same frequency). There were restrictions on eligibility of
PCP customers. The states were preempted from regulating such matters as PCP
entry, rates, operation and terms of service. The historical distinctions
between RCC and PCP paging have been largely eliminated by the 1993 Omnibus
Budget Reconciliation Act (the "1993 Budget Act"), which amended the
Communications Act to, among other things, replace the prior RCC and PCP
definitions with two newly defined categories of mobile radio services: CMRS and
Private Mobile Radio Service (PMRS). The CMRS definition essentially supplanted
the prior RCC definition. The FCC has classified both PCP and RCC paging
services as CMRS, and adopted rules applicable to CMRS carriers, which became
effective in 1996.
In 1993, the FCC adopted new rules to provide "channel exclusivity" to
paging operators operating on certain 929 MHz frequencies if they met certain
qualifications. Metrocall has obtained nationwide exclusivity on two of its 929
MHz frequencies and one 931 MHz frequency. Under the FCC's current rules, no
other entity may apply anywhere in the United States to operate on these
frequencies. However, any incumbent paging licensees, other than Metrocall, on
Metrocall's two nationwide 929 MHz frequencies may continue to operate on these
frequencies, but those other licensees are not allowed to expand their paging
services beyond their existing coverage areas. Additionally, on Metrocall's
other 929 MHz frequencies, it has local exclusivity in the Chicago, Illinois
area, and regional exclusivity in the Northeast, Mid-Atlantic, and Southeast
regions of the United States.
Certain paging channels below 900 MHz are still allocated on a shared
basis. Metrocall acquired a 152.480 MHz shared frequency network through its A+
Network merger. Applications for those frequencies are first processed through a
frequency coordinator, who attempts to minimize overcrowding on a given
frequency. The coordinator then files the applications with the FCC, which
processes them on a first-come, first-served basis. So long as a given paging
frequency is not congested with multiple licensees, the subscriber would not
perceive any differences between shared paging services and exclusive paging
services. In most areas of the country where Metrocall holds shared paging
licenses, it is the only paging operator, or one of only a few operators,
licensed on that particular frequency in that area.
The FCC also requires paging licensees to construct their stations and
begin service to the public within a specified period of time (under the
site-specific rules, one year), and failure to do so results in termination of
the authorization. Under the traditional site-specific approach to paging
licensing, a licensee received a construction permit for facilities at a
specific site, and that permit automatically terminated if the facilities were
not timely constructed (paging licensees authorized under Part 22 of the FCC's
Rules were also required to notify the FCC upon commencement of service) and the
licensee failed to request an extension prior to the deadline. The failure to
construct some facilities did not, however, affect other facilities in a
licensee's system that had been timely constructed and placed into operation.
However, certain services that Metrocall has recently begun to offer are subject
to harsher penalties for failure to construct. For example, the NPCS license
Metrocall acquired in the AMD acquisition is subject to the condition that
Metrocall build sufficient stations to cover 750,000 square kilometers, or 37.5%
of the U.S. population, by the fifth anniversary of the initial license grant.
By the tenth anniversary of the grant, it must build sufficient stations to
cover 1,500,000 square kilometers, or 75% of the U.S. population. As a result of
the WebLink alliance, Metrocall has met the first construction benchmark and
expects to meet the FCC's 10-year build out requirements.
Under the 1993 Budget Act, the FCC has "forbearance" authority, which means
it need not enforce against all CMRS licensees the following common carrier
regulations under Title II of the Communications Act: any interstate tariff
requirements, including regulation of CMRS rates and practices; the collection
of intercarrier contracts; certification concerning interlocking directorates;
and FCC approval relating to market entry and exit. Additionally, the 1993
Budget Act preempted state authority over CMRS entry and rate regulation. The
Telecommunications Act of 1996 (the "1996 Act") provided the FCC with additional
forbearance authority with regard to all telecommunications services. Pursuant
to that authority, the FCC has forborne from requiring wireless carriers to
receive prior FCC approval for certain non-substantial corporate stock transfers
and reorganizations.
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<PAGE> 14
Paging licenses are issued by the FCC for 10-year terms. Metrocall's
current licenses have expiration dates ranging from 2000 to 2010. The FCC must
approve renewal applications. In the past, the FCC has routinely granted
Metrocall's FCC renewal applications. Metrocall is also required to obtain prior
FCC approval for its acquisition of radio licenses held by other companies, as
well as transfers of controlling interests of any entities that hold radio
licenses. Although there can be no assurance that any future renewal or transfer
applications Metrocall files will be approved or acted upon in a timely manner
by the FCC, Metrocall knows of no reason to believe such applications would not
be approved or granted, based upon its experience to date.
The Communications Act also places limitations on foreign ownership of CMRS
licenses. These foreign ownership restrictions limit the percentage of Metrocall
common stock that may be owned or voted, directly or indirectly, by aliens or
their representatives, foreign governments or their representatives, or foreign
corporations. Metrocall's certificate of incorporation permits the redemption of
its common stock from stockholders where necessary to protect its compliance
with these requirements.
The FCC has authority to restrict the operation of licensed radio
facilities or to revoke or modify such licenses. The FCC may adopt changes to
its radio licensing rules at any time, and may impose fines for violations of
its rules. Some of Metrocall's license applications were deemed "mutually
exclusive" with those of other paging companies. In the past, the FCC would have
selected among the mutually exclusive applicants by lottery; however, the FCC
recently dismissed all pending mutually exclusive paging applications, including
Metrocall's, to facilitate its transition to wide area licensing and auctions
for paging frequencies. As a result, the FCC will award exclusive paging
frequencies through an auction process.
Paging licenses have traditionally been issued on a site-specific basis. In
February 1997, the FCC adopted rules to issue most paging licenses for large,
FCC-defined service areas. Although the rules are subject to pending appeals,
the following changes have been made subject to those appeals. Licenses for 929
MHz and 931 MHz frequencies will be issued for "Major Economic Area" or "MEA"
geographic areas; licenses for exclusive paging frequencies in lower frequency
bands will be licensed in "Economic Areas" or "EAs." Shared paging frequencies
will continue to be allocated on a shared basis and licensed in accordance with
existing, site-specific procedures; however, the FCC is considering changes to
the application and licensing rules for these frequencies. Mutually exclusive
geographic area applications for all exclusive paging frequencies will be
awarded through an auction process. The FCC has recently dismissed all pending
mutually exclusive applications for these frequencies, as well as all
applications filed after July 31, 1996 regardless of mutual exclusivity. A
filing "freeze" is in effect for the non-nationwide, exclusive paging
frequencies. Licensing for those frequencies is now governed by the FCC's
auction process. The auction for 929 MHz and 931 MHz MEA licenses ended on March
2, 2000. Metrocall was the high bidder on 145 "MEA" licenses, with winning bids
totaling $681,800. In February 2000, Metrocall had submitted an "up-front"
payment of $650,000, which will be credited toward the amount of its winning
bids. Metrocall must now submit formal "long form" applications for the MEA
licenses on which it was high bidder and will be required to pay the balance of
its winning bids before those MEA licenses will be issued. Metrocall will timely
file its "long form" applications and pay the balance of its winning bids.
Metrocall knows of no reason why its "long form" applications would not be
granted.
Future auctions will be held for the paging frequencies below 900 MHz, and
for the 929-931 MHz licenses on which no party bid during the recently completed
auction. Neither of those future auctions has yet been scheduled. Incumbent
licensees that have not or do not bid (or who bid unsuccessfully) at the
applicable auction will be able to trade in their existing licenses for a single
"wide-area" license based upon their current coverage. Incumbents are entitled
to interference protection from the auction winners and will be able to modify
their facilities within that area, but they will not be permitted to expand
their existing coverage.
Because auctions are new to the paging industry, Metrocall cannot predict
their impact on its business. At least initially, competitive bidding increaseS
the costs of obtaining licenses. The FCC's wide-area licensing and auction rules
may also serve as entry barriers to new participants in the industry. In any
service area where Metrocall was the successful bidder, or where it bids
successfully in a future auction, or where it trades in its licenses for
"wide-area" licenses, Metrocall will save on the application costs associated
with modifying and
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<PAGE> 15
adding facilities within its service areas, and no other entity will be able to
apply for its frequencies within those areas. Conversely, in geographic areas
where it is not the high bidder, Metrocall's ability to expand its service
territories in those geographic areas will be curtailed. Metrocall's three
nationwide frequencies will not be subject to competitive bidding; although, the
FCC is considering imposing additional "build-out" requirements on nationwide
licensees.
The 1996 Act imposes a duty on all telecommunications carriers to provide
interconnection to other carriers, and requires local exchange carriers (LECs)
to, among other things, establish reciprocal compensation arrangements for the
transport and termination of calls and provide other telecommunications carriers
access to the network elements on an unbundled basis on reasonable and
non-discriminatory rates, terms and conditions. The LECs are now prohibited from
charging paging carriers for the transport and termination of LEC-originated
local calls. This prohibition could lead to substantial cost savings for
Metrocall. Moreover, under the 1996 Act and the FCC's rules, paging carriers are
entitled to compensation from any local exchange carrier for local calls that
terminate on a paging network, which has already led to additional revenues for
Metrocall.
The 1996 Act also requires the FCC to appoint an impartial entity to
administer telecommunications numbering and to make numbers available on an
equitable basis. In addition, the 1996 Act requires that state and local zoning
regulations shall not unreasonably discriminate among providers of functionally
equivalent wireless services, and shall not have the effect of prohibiting the
provision of personal wireless services. The 1996 Act provides for expedited
judicial review of state and local zoning decisions. Additionally, state and
local governments may not regulate the placement, construction and modification
of personal wireless service facilities on the basis of the environmental
effects of radio frequency emissions, if the facilities comply with the FCC's
requirements. Other provisions of the 1996 Act, however, may increase
competition, such as the provisions which allow the FCC to forbear from applying
regulations and provisions of the Communications Act to any class of carriers,
not only to CMRS, and the provisions allowing public utilities to provide
telecommunications services directly. These provisions may impose additional
regulatory costs (for example, provisions requiring contributions to universal
service by providers of interstate telecommunications). Some of these FCC rules
are subject to pending petitions for reconsideration and court appeals.
Metrocall cannot predict the final outcome of any FCC proceeding or the possible
impact of future FCC proceedings.
State. The 1993 Budget Act preempts all state and local rate and entry
regulation of all CMRS operators. Entry regulations typically refer to the
process whereby a CMRS operator must apply to the state to obtain a certificate
to provide service in that state. Rate regulation typically refers to the
requirement that CMRS operators file a tariff describing billing rates, terms
and conditions by which operators provide paging services. Apart from rate and
entry regulations, some states may continue to regulate other aspects of
Metrocall's business in the form of zoning regulations (subject to the 1996
Act's prohibition on discrimination against or among wireless telecommunications
carriers), or health and safety measures. The 1993 Budget Act does not preempt
state authority to regulate such matters. Although there can be no assurances
given with respect to future state regulatory approvals, based on Metrocall's
experience to date, it knows of no reason to believe such approvals would not be
granted.
In 1997, the FCC held that the Budget Act does not prohibit states from
imposing requirements of CMRS carriers to contribute to funding "universal"
telephone service within the states. Approximately 25 states now impose such
"universal service fund" obligations. The FCC's determination that the states
may impose those obligations was upheld on appeal by the U.S. Court of Appeals
for the Fifth Circuit; a petition requesting the U.S. Supreme Court's review of
the Fifth Circuit's decision has been filed. If the Fifth Circuit's decision is
upheld, Metrocall will continue to incur additional costs in contributing to
state universal service funds, which Metrocall typically passes through to its
subscribers.
Litigation. Metrocall 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 1996 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
15
<PAGE> 16
reimbursement or credit for any past charges assessed by the respective carriers
since November 1, 1996, the effective date of the FCC's transport rules. The
briefing schedule for these complaint proceedings ended in September 1998. The
complaints remain pending before the FCC. On January 25, 1999, the U.S. Supreme
Court concluded that the FCC had the authority under the Communications Act to
adopt rules necessary to carry out Sections 251 and 252 of the 1996 Act.
Metrocall believes the Supreme Court's ruling appears to validate the FCC's
"proxy" pricing rules for LEC/CMRS interconnection. In addition, the Supreme
Court also ruled that the FCC had the authority to preempt any state or local
tariffs or interconnection agreements contrary to those rules. Metrocall
believes the Supreme Court rulings may support its complaints filed with the
FCC. In addition, a recent Ninth Circuit decision, Pacific Bell v. Cook Telecom,
Inc., held in favor of a paging company on not only the issues that are pending
in Metrocall's FCC complaints, but also on paging carriers' rights to receive
compensation from the LECs for paging carriers' termination of local traffic.
Furthermore, in mid-1999, Metrocall signed interconnection agreements with Bell
Atlantic, signifying resolution of the interconnection issue with at least one
RBOC.
SEASONALITY
Generally, Metrocall's operating results are not significantly affected by
seasonal factors.
TRADEMARKS AND SERVICE MARKS
Metrocall uses the following trademarks and service marks:
- "Metrocall" -- a registered trademark and service mark with the U.S.
Patent and Trademark Office;
- "Datacall," "Metronet," "Metromessage," "In-Touch," "Metrofax," "The
Power in Paging," "Message Track" and "One Touch" -- service marks under
which Metrocall markets its paging , messaging and personalized
information services;
- "Metrotext" -- a computer program designed for use in transmitting
alphanumeric messages from personal computers to pagers (copyright
registration has been granted);
- "America's Wireless Network," "Notesender," "MyOnTheGoPortfolio" and
"OnTheGoInfo" -- service marks (applications with the U.S. Patent and
Trademark Office are pending).
EMPLOYEES
As of December 31, 1999, Metrocall employed approximately 3,571 full and
part-time people none of whom is represented by a labor union. Metrocall
believes that its relationship with its employees is good.
ITEM 2. PROPERTIES
Metrocall does not hold title to any significant real property; although,
Metrocall and its affiliates own interests in certain properties. At December
31, 1999, Metrocall leased commercial office and retail space, including its
executive offices, at more than 300 locations used in its operations. These
office leases provided for monthly payments ranging from approximately $300 to
$108,700 and expire, subject to renewal options, on various dates through
December 2010.
Metrocall also leases numerous sites under long-term leases for its
transmitters on commercial broadcast towers, buildings and other fixed
structures. At December 31, 1999, Metrocall leased these transmitter sites for
monthly rentals ranging from approximately $420 to $5,700 that expire, subject
to renewal options, on various dates through June 2029.
ITEM 3. LEGAL PROCEEDINGS
Information regarding contingencies and legal proceedings is included in
Note 8 of the Notes to the Consolidated Financial Statements for the year ended
December 31, 1999, which is included under Item 8 of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE> 17
PART II
ITEM 5. MARKET FOR METROCALL'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
STOCK TRADING
Metrocall's common stock is traded on the Nasdaq SmallCap Market under the
symbol "MCLL."
COMMON STOCK PRICE RANGES
<TABLE>
<CAPTION>
1998 1999
------------ ------------
HIGH LOW HIGH LOW
---- ----- ---- -----
<S> <C> <C> <C> <C>
Quarter ended March 31...................................... $7 1/2 $4 5/8 $5 3/4 $2 11/16
Quarter ended June 30....................................... 7 5/8 5 3/8 4 2 1/16
Quarter ended September 30.................................. 7 7/16 4 1/2 4 3/8 1 3/16
Quarter ended December 31................................... 6 1/16 2 11/16 3 1/8 1 1/8
</TABLE>
On March 3, 2000, the last reported sales price of Metrocall's common stock
on the Nasdaq SmallCap Market was $14.00 per share, and there were 1,705
registered stockholders of record.
DIVIDEND POLICY
Metrocall has not declared or paid any cash dividends or distributions on
its common stock since its initial public offering of common stock in July 1993.
Metrocall does not anticipate paying any cash dividends on its common stock in
the foreseeable future. Future cash dividends, if any, will be determined by its
Board of Directors. Certain covenants in Metrocall's credit facility, its
indentures and the terms of its Series A Convertible Preferred Stock (the
"Series A Preferred") restrict or prohibit the payment of cash dividends on
Metrocall's common stock. In addition, if Metrocall pays or sets aside for
payment any dividend or distribution on its common stock (other than dividends
or distributions paid solely in shares of common stock or rights, options or
warrants to purchase common stock) before October 2, 2003, holders of the Series
C Convertible Preferred Stock (the "Series C Preferred") also will be entitled
to receive a certain amount of those payments.
As discussed below, Metrocall has issued shares of each of its series of
preferred stock to the respective holders of those series of preferred stock in
lieu of cash dividends.
UNREGISTERED SECURITIES
Series A Preferred. On November 15, 1996, Metrocall issued 159,600 shares
of the Series A Preferred and 159,600 warrants representing the right to
purchase an aggregate of 2.915 million shares of common stock (the "Warrants").
The aggregate purchase price for the Series A Preferred and the Warrants was
$39.9 million. The purchasers of these securities were John Hancock Mutual Life
Insurance Company, SunAmerica, Inc. and UBS Capital, LLC. Because the securities
were sold to qualified institutional buyers in a transaction not involving a
public offering, the sale was exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act").
Each share of the Series A Preferred has a stated value of $250 per share,
a liquidation preference and redemption value equal to its stated value, certain
redemption rights and the right to elect two directors (subject to increase upon
the occurrence of certain events) to Metrocall's Board of Directors. The Series
A Preferred carries a dividend of 14% (subject to increase upon the occurrence
of certain events), payable semi-annually in cash or in additional shares of the
Series A Preferred, at Metrocall's option. In addition, beginning November 15,
2001, holders of the Series A Preferred have the right to convert their Series A
Preferred (including shares issued as dividends) into shares of common stock
based upon the market price of common stock at the time of conversion. The
Series A Preferred may, at the option of holders, be converted sooner upon
certain change of control events of Metrocall, as defined in the Certificate of
Designation for the
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<PAGE> 18
Series A Preferred. During 1998 and 1999, Metrocall issued 26,477 and 30,314
additional shares, respectively, of the Series A Preferred as dividends to the
holders of the Series A Preferred.
Through February 1, 2000, each Warrant represented the right of the holder
to purchase 18.266 shares of common stock, or an aggregate of 2.915 million
shares. The exercise price per share was $7.40. The Warrants expire November 15,
2001. Metrocall has registered the resale of 2.915 million shares that may be
obtained upon exercise of the Warrants under the Securities Act.
The exercise price of the Warrants is subject to adjustment in the event
Metrocall sells common stock in private transactions for less than 80% of the
exercise price. In this event, the exercise price in effect will be reduced to
125% of the price at which the new equity is sold. The Warrants also include
other customary anti-dilution provisions. As a result of the agreements for
common stock investments in Metrocall entered into on February 2, 2000, as
further described below and in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, the exercise price of the
Warrants and the number of shares of common stock that may be purchased upon
exercise of the Warrants have been adjusted. The exercise price of the Warrants
was reduced to $2.74 per share. Under the anti-dilution provisions of the
Warrants, the number of shares of common stock that may be purchased upon
exercise of each Warrant increased to 18.531 shares of common stock, or an
aggregate of 2.958 million shares. The exercise price of the Warrants and number
of shares of common stock that may be purchased upon exercise of the Warrants
may be further adjusted in the future as a result of anti-dilution and other
provisions of the Warrants.
Series C Preferred. On October 2, 1998, Metrocall issued 9,500 shares of
the Series C Preferred in connection with the AMD acquisition to AT&T Wireless,
the sole holder of the Series C Preferred. Each share of the Series C Preferred
has a stated value of $10,000 per share and a liquidation preference, which is
junior to the Series A Preferred but senior to the shares of common stock, equal
to its stated value. The Series C Preferred carries a dividend of 8% of the
stated value per year, payable semiannually in cash or in additional shares of
the Series C Preferred, at Metrocall's option. Metrocall did not register the
Series C Preferred under the Securities Act. Since this issuance, Metrocall has
issued stock dividends of 95 shares and 783 shares of additional shares of
Series C Preferred during 1998 and 1999, respectively. Metrocall has not
registered these shares.
As further described in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," on February 2, 2000, Metrocall
and AT&T Wireless entered into a Securities Exchange Agreement under which AT&T
Wireless agreed to exchange its shares of Series C Preferred for 13,250,000
shares of Metrocall common stock and, if applicable, non-voting common stock
equivalents in the form of a new series of Metrocall preferred stock. AT&T
Wireless' voting interest in Metrocall will be limited to 19.9% of the total
issued and outstanding shares of Metrocall common stock. To the extent
13,250,000 shares of Metrocall common stock exceeds 19.9% of the total issued
and outstanding shares of Metrocall common stock after consummation of the
exchange, AT&T Wireless will receive shares of Series D Non-Voting Participating
Convertible Preferred Stock (the "Series D Preferred"). The Series D Preferred
will have rights substantially equivalent to those of the common stock, except
that it will have limited voting rights. AT&T Wireless may convert the Series D
Preferred shares at any time. Metrocall has the right to convert the Series D
Preferred into common stock so long as the number of converted shares of common
stock does not equal or exceed 20% of the issued and outstanding common stock at
the time of the conversion. Metrocall has agreed to register for resale the
shares of Metrocall common stock AT&T Wireless receives or can receive upon
conversion of the Series D Preferred from the exchange within 180 days after
consummation of the exchange. If the three common stock investments described
below close substantially simultaneously with the closing of the exchange of the
Series C Preferred, Metrocall will not issue any shares of the Series D
Preferred. Because the exchange is a transaction not involving a public
offering, the transaction is exempt from registration pursuant to Section 4(2)
of the Securities Act.
Common Stock. On November 1, 1999, Metrocall issued 40,000 shares of
common stock as a performance award under the Pinnacle Reseller Program between
ProNet, predecessor-in-interest to Metrocall, and Coldwell Communications, Inc.
Metrocall has not registered these shares, but is obligated to do so.
18
<PAGE> 19
Because the issuance did not involve a public offering, the issuance was exempt
from registration under Section 4(2) of the Securities Act.
As further described in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," on February 2, 2000, Metrocall
entered into common stock purchase agreements with each of three equity
investors: HMTF, PSINet and Aether. Each of the three companies will acquire
approximately 7.8 million shares of common stock. Each investor will pay $2.19
per share, or a total of approximately $17.0 million or $51.0 million in the
aggregate. Each of the three investors will have the right to nominate a
representative to Metrocall's Board of Directors. Metrocall will use the
proceeds from the sale of its common stock to reduce outstanding debt.
Metrocall also granted HMTF two options to purchase additional shares of
Metrocall common stock. Metrocall granted an option to purchase 8,333,333 shares
of common stock (Option I), at an exercise price of $3.00 per share, subject to
adjustment under certain events. Option I may be exercised by HMTF in whole but
not in part, at any time on or before the first anniversary of the closing.
Metrocall also granted HMTF (i) an option to purchase 12,500,000 shares of
common stock at an exercise price of $4.00 per share plus (ii) if HMTF has not
exercised Option I, 8,333,333 shares of common stock at an exercise price per
share of $3.00, in each case subject to adjustment under certain events
(collectively, Option II). Option II may be exercised in whole or in part but
only in connection with the issuance of new equity for cash to finance a
business combination or acquisition (by means of merger, consolidation,
exchange, or acquisition of assets, or otherwise) involving Metrocall or any of
its subsidiaries and an aggregate transactional consideration to the other
entity or its equity and debt holders or to Metrocall and its equity and debt
holders having a fair value (as determined in good faith by Metrocall's Board of
Directors) of at least $50 million (a Qualified Transaction). Option II will
terminate on the second anniversary of the closing, except that it can be
extended if there are pending active discussions with respect to a potential
Qualified Transaction or material changes in the terms of a Qualified
Transaction. The Option I and Option II transactions are subject to the
expiration of the applicable Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the HSR Act) waiting period, the receipt of any required
consent of the FCC, and other customary closing conditions.
Metrocall has agreed to register for resale the shares of common stock that
each of the three equity investors will receive, subject in each case to certain
conditions and limitations. Because the common stock investments are
transactions not involving a public offering, each investment is exempt from
registration pursuant to Section 4(2) of the Securities Act.
19
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected financial and other data of
Metrocall. The historical financial data has been derived from the audited
consolidated financial statements and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and Metrocall's consolidated financial statements,
related notes to the consolidated financial statements and other financial
information included in the consolidated financial statements.
The consolidated statements of operations data for fiscal years 1996, 1997
and 1998 presented below include the results of operations of the acquired
companies from their respective acquisition dates. In May 1997 and November
1999, Metrocall sold the assets of its telemessaging operations and its
electronic tracking business, which were acquired through mergers on November
15, 1996 and December 30, 1997, respectively. Therefore, the results of
operations for fiscal years 1997 and 1999 include the results of operations of
these operations through their respective disposition dates. Consolidated
statements of operations data for fiscal year 1997 exclude the operations of
ProNet because this merger was completed on December 30, 1997. Units in service
at December 31, 1997 include approximately 1.3 million units acquired in the
ProNet merger.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ----------- -----------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE, UNIT, AND PER UNIT DATA
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Service, rent and maintenance revenues........... $ 92,160 $124,029 $249,900 $ 416,352 $ 548,700
Product sales.................................... 18,699 25,928 39,464 48,372 61,487
-------- -------- -------- --------- ---------
Total revenues............................. 110,859 149,957 289,364 464,724 610,187
Net book value of products sold.................. (15,527) (21,633) (29,948) (31,791) (39,071)
-------- -------- -------- --------- ---------
95,332 128,324 259,416 432,933 571,116
Operating expenses:
Service, rent and maintenance.................... 20,080 29,696 69,254 115,432 146,961
Selling and marketing............................ 15,546 24,101 53,802 73,546 97,051
General and administrative(a).................... 33,985 42,905 73,753 121,644 170,591
Depreciation and amortization.................... 31,504 58,196 91,699 234,948 307,344
-------- -------- -------- --------- ---------
Loss from operations............................. (5,783) (26,574) (29,092) (112,637) (150,831)
Interest and other income (expense)(b)........... 314 (607) 156 849 407
Interest expense................................. (12,533) (20,424) (36,248) (64,448) (85,115)
-------- -------- -------- --------- ---------
Loss before income tax benefit and extraordinary
item........................................... (18,002) (47,605) (65,184) (176,236) (235,539)
Income tax provision benefit..................... 595 1,021 4,861 47,094 63,055
-------- -------- -------- --------- ---------
Loss before extraordinary item................... (17,407) (46,584) (60,323) (129,142) (172,484)
Extraordinary item(b)............................ (2,695) (3,675) -- -- --
-------- -------- -------- --------- ---------
Net loss....................................... (20,102) (50,259) (60,323) (129,142) (172,484)
Preferred dividends.............................. -- (780) (7,750) (11,767) (16,462)
Gain on repurchase of preferred stock............ -- -- -- -- 2,208
-------- -------- -------- --------- ---------
Loss attributable to common stockholders....... $(20,102) $(51,039) $(68,073) $(140,909) $(186,738)
======== ======== ======== ========= =========
Loss per share attributable to common
stockholders:
Loss per share before extraordinary item
attributable to common stockholders.......... $ (1.49) $ (2.91) $ (2.51) $ (3.43) ($ 4.47)
Extraordinary item, net of income tax
benefit...................................... (0.23) (0.23) -- -- --
-------- -------- -------- --------- ---------
Loss per share attributable to common
stockholders................................. $ (1.72) $ (3.14) $ (2.51) $ (3.43) $ (4.47)
======== ======== ======== ========= =========
</TABLE>
- ---------------
a) Includes the impact of one-time, non-recurring charges for severance and
other compensation costs incurred as part of a management reorganization of
approximately $2.0 million in fiscal year 1995.
b) In fiscal years 1994 and 1995, Metrocall refinanced balances outstanding
under its then existing credit facilities and recorded extraordinary items of
$1.3 million and $2.7 million, respectively, representing charges to expense
unamortized deferred financing costs and other costs, net of any income tax
benefits, related to those credit facilities. In 1996, Metrocall recorded an
extraordinary item for costs of approximately $3.7 million paid to purchase
the A+ Network 11 7/8% senior subordinated notes outstanding. In 1995,
Metrocall incurred breakage fees of approximately $1.7 million associated
with the termination of two interest rate swap agreements, which have been
included in interest and other income (expense).
20
<PAGE> 21
You should find the following definitions below useful in understanding
Metrocall's operating and other data:
- EBITDA means earnings before interest, taxes, depreciation and
amortization, and certain one-time charges. While not a measure under
generally accepted accounting principles, EBITDA is a standard measure of
financial performance in the paging and wireless messaging industry.
Metrocall believes EBITDA can be used to measure its ability to service
debt, fund capital expenditures and expand its business. EBITDA as
defined by Metrocall is used in its credit facility and indentures as
part of the tests to determine its ability to incur debt and make
restricted payments. EBITDA as defined by Metrocall may not be comparable
to similarly titled measures reported by other companies since all
companies do not calculate EBITDA in the same manner. 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 generally accepted accounting
principles (GAAP). Cash expenditures for various long-term assets,
interest expense and income taxes that have been, and will be, incurred
are not reflected in the EBITDA presentations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial condition Liquidity and Capital Resources" for
discussion of significant capital requirements and commitments. In 1995,
EBITDA excludes non-recurring charges of approximately $2.0 million
incurred as part of a management reorganization.
- EBITDA margin is calculated by dividing (a) EBITDA by (b) the amount of
total revenues less the net book value of products sold.
- ARPU is average monthly paging revenue per unit. ARPU is calculated by
dividing (a) service, rent and maintenance revenues for the period by (b)
the average number of units in service for the period. The ARPU
calculation excludes revenues derived from non-paging services such as
telemessaging and long distance services.
- Average monthly operating expense per unit is calculated by dividing (a)
total recurring operating expenses before depreciation and amortization
for the period by (b) the average number of units in service for the
period. For this calculation, operating expenses exclude non-recurring
charges for severance and other compensation costs incurred as part of a
management reorganization of approximately $2.0 million in 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ----------- ----------- ----------- ------------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE, UNIT, AND PER UNIT DATA
<S> <C> <C> <C> <C> <C>
OPERATING AND OTHER DATA:
Net cash provided by operating activities...... $ 14,000 $ 15,608 $ 27,166 $ 41,154 $ 64,534
Net cash used in investing activities.......... $(44,528) $(327,904) $(176,429) $(191,747) $ (88,228)
Net cash provided by financing activities...... $151,329 $ 199,639 $ 163,242 $ 134,133 $ 18,045
EBITDA......................................... $ 27,771 $ 31,622 $ 62,607 $ 122,311 $ 156,513
EBITDA margin.................................. 29.1% 24.6% 24.1% 28.3% 27.4%
ARPU........................................... $ 9.15 $ 8.01 $ 8.25 $ 7.57 $ 7.86
Average monthly operating expense per unit..... $ 6.71 $ 6.35 $ 6.74 $ 5.71 $ 5.95
Units in service (end of period)............... 944,013 2,142,351 4,030,836 5,659,550 5,927,939
Units in service per employee (end of
period)...................................... 1,047 1,086 1,366 1,512 1,660
Capital expenditures........................... $ 44,058 $ 62,110 $ 69,935 $ 78,658 $ 93,327
-------- --------- --------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
-------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit)....................... $116,009 $(8,396) $ (36,747) $ (41,828) $ (36,908)
Cash and cash equivalents....................... 123,574 10,917 24,896 8,436 2,787
Total assets.................................... 340,614 645,488 1,078,023 1,251,038 1,025,547
Total long-term debt, net of current portion.... 153,803 327,092 598,989 742,563 776,984
Total stockholders' equity/(deficit)............ 155,238 165,169 170,505 33,780 (152,134)
-------- ------- ---------- ---------- ----------
</TABLE>
21
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis of the financial
condition and results of operations of Metrocall together with the Consolidated
Financial Statements and the notes to the Consolidated Financial Statements
included elsewhere in this Annual Report and the description of Metrocall's
business in "Business."
OVERVIEW
Metrocall is a leading provider of local, regional and national paging and
other wireless messaging services. Through its nationwide wireless network,
Metrocall provides messaging services to over 1,000 U.S. cities, including the
top 100 SMSAs. Since 1993, Metrocall's subscriber base has increased from less
than 250,000 to more than 5.9 million. Metrocall has achieved this growth
through a combination of internal growth and a program of mergers and
acquisitions. As of December 31, 1999, Metrocall was the third largest messaging
company in the United States based on the number of subscribers.
Metrocall derives a majority of its revenues from fixed, periodic (usually
monthly) fees, generally not dependent on usage, charged to subscribers for
paging and wireless messaging services. While a subscriber continues to use its
services, operating results benefit from this recurring stream with minimal
requirements for incremental selling expenses or fixed costs. Metrocall has
grown internally by broadening its distribution network and expanding its target
market to capitalize on the growing appeal of messaging and other wireless
products and services, to gain access to different market segments and to
increase the penetration and utilization of its nationwide network. Since
December 31, 1994, Metrocall has added approximately 1.6 million new subscribers
through internal growth. Over the past three years, Metrocall has emphasized a
number of distribution channels that are characterized by lower ARPU, such as
resellers, and correspondingly lower operating costs. To offset declines in ARPU
and to capitalize on the growth of paging and other wireless messaging services,
Metrocall has expanded its channels of distribution to include, among others,
company-owned and-operated retail outlets, strategic partnerships and alliances,
Internet sales, with each distribution channel focusing on the sale rather than
the lease of pagers. Some of these channels tend to have higher ARPU's than
Metrocall's strategic partners and typical resellers, who purchase service in
quantity at wholesale rates. Furthermore, Metrocall has been successful in
marketing enhanced services, such as nationwide paging services, voice mail and
other ancillary services for its strategic partners and other alliances.
Metrocall has also grown significantly through mergers and acquisitions.
Since July 1996, Metrocall has added approximately 3.6 million subscribers to
its subscriber base through mergers and acquisitions through December 31, 1999:
<TABLE>
<CAPTION>
ACQUISITION NUMBER OF
ACQUIRED COMPANY DATE SUBSCRIBERS
---------------- ----------------- -----------
<S> <C> <C>
Parkway.................................... July 16, 1996 140,000
Satellite.................................. August 30, 1996 100,000
A+ Network................................. November 15, 1996 660,000
Page America............................... July 1, 1997 198,000
ProNet..................................... December 30, 1997 1,286,000
AMD........................................ October 2, 1998 1,215,000
-----------
Total................................. 3,599,000
===========
</TABLE>
Metrocall believes that its enhanced nationwide coverage gives it a competitive
advantage in gaining additional subscribers. In February 2000, Metrocall agreed
to acquire NationPage, Inc. in a stock purchase transaction with a subsidiary of
AT&T Corp. This acquisition will add approximately 80,000 subscribers located
principally in eastern Pennsylvania, New Jersey and upstate New York.
22
<PAGE> 23
Metrocall believes that the paging and wireless messaging industry is
likely to undergo additional consolidation and has announced that it intends to
participate in the consolidation process. Potential future consolidations would
be evaluated on several key operating and financial elements including:
- geographic presence;
- FCC regulatory licenses held;
- overall valuation of potential target, including subscriber base and
potential synergies;
- consideration to be given;
- potential increase to free cash flow and operating cash flow, and;
- availability of financing and the ability to reduce the combined
companies long-term debt.
Any potential transaction 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 Metrocall.
In November 1999, Arch and PageNet announced that they had agreed to merge.
Completion of this merger is subject to a number of conditions, including
agreement by holders of PageNet's outstanding senior unsecured notes to exchange
their notes for Arch common stock. Metrocall has had and may continue to have
informal discussions with certain holders of these notes about whether Metrocall
might be able to present an alternative to the Arch merger. Metrocall has not
made any offer with respect to PageNet, and there is no assurance that Metrocall
will make any such proposal or that the proposal would be successful. Metrocall
also engages, from time to time, in discussions with other industry participants
about potential consolidation transactions. Again, there can be no assurance
that any such discussion will lead to a consolidation transaction.
Metrocall's growth, whether internal or through consolidation, requires
significant capital investment for messaging equipment and technical
infrastructure. Metrocall also purchases pagers and messaging devices for that
portion of its subscriber base to which it leases pagers and messaging devices.
During the year ended December 31, 1999, capital expenditures totaled
approximately $93.3 million, which included approximately $59.9 million for
subscribers equipment, representing increases in pagers and messaging devices on
hand and net increases and maintenance to the pager and messaging base.
Metrocall estimates capital expenditures for the year ending December 31, 2000
will approximate $90.0 million, primarily for paging and messaging equipment,
transmission equipment and information system enhancements.
Exchange of the Series C Preferred
On February 2, 2000, Metrocall and AT&T Wireless entered into a Securities
Exchange Agreement under which AT&T Wireless, as the sole holder of Metrocall's
Series C Preferred, agreed to exchange 10,378 shares of Series C Preferred,
representing all of the issued and outstanding shares of the Series C Preferred,
for 13,250,000 shares of Metrocall common stock and, if applicable, non-voting
common stock equivalents in the form of a new series of Metrocall preferred
stock. AT&T Wireless' voting interest in Metrocall will be limited to 19.9% of
the total issued and outstanding shares of Metrocall common stock. To the extent
13,250,000 shares of Metrocall common stock exceeds 19.9% of the total issued
and outstanding shares of Metrocall common stock, AT&T Wireless will receive
shares of the Series D Preferred. The Series D Preferred will have rights
substantially equivalent to those of the common stock, except that it will have
limited voting rights. AT&T Wireless may convert the Series D Preferred shares
at any time. Metrocall has the right to convert the Series D Preferred into
common stock so long as the number of converted shares of common stock does not
equal or exceed 20% of the issued and outstanding common stock at the time of
the conversion.
The consummation of the exchange is subject to the expiration of the
applicable HSR Act waiting period, the receipt of any required FCC consent and
other customary closing conditions. Metrocall expects that these conditions will
be satisfied and that the exchange will be consummated on or before March 31,
2000.
23
<PAGE> 24
AT&T Wireless has agreed to deliver to Metrocall an irrevocable proxy
granting a person designated by Metrocall full power and authority, for one year
commencing on the consummation of the exchange, to vote all shares of Metrocall
common stock that AT&T Wireless receives from the exchange in accordance with
the recommendation of the Board of Directors for Metrocall. This proxy will not
apply to any matter to which a holder of the Series D Preferred has the right to
vote under the Certificate of Designation for that series or applicable law.
AT&T Wireless has limited rights to sell all or a portion of the shares it
receives from the exchange at any time more than six months after consummation
of the exchange in privately negotiated sales to any person or group that
Metrocall and AT&T Wireless has not designated as restricted and subject to
Metrocall's right of negotiation and the transferee's consent to be bound by the
Securities Exchange Agreement. In addition, AT&T Wireless may sell all or
portion of the shares of Metrocall common stock it receives from the exchange at
any time more than twelve months after consummation of the exchange in one or
more sales in any available over-the-counter market for the common stock and/or
through any exchange on which the common stock is then traded, subject to the
following permitted period sales: 2,650,000 shares of common stock beginning 12
months after consummation of the exchange; an additional 2,650,000 shares of
common stock beginning 18 months after consummation of the exchange; an
additional 2,650,000 shares beginning 24 months after consummation of the
exchange; and the remaining 5,300,000 shares of common stock beginning 30 months
after consummation of the exchange.
Metrocall has agreed to register for resale the shares of Metrocall common
stock AT&T Wireless receives or can receive upon conversion of the Series D
Preferred from the exchange within 180 days after consummation of the exchange.
If the three common stock investments described below close substantially
simultaneously with the closing of the exchange of the Series C Preferred,
Metrocall will not issue any shares of the Series D Preferred.
The Series C Preferred had a carrying value of approximately $104.8 million
at December 31, 1999. Based on this carrying value, Metrocall expects to record
a credit of approximately $77.0 million to its accumulated deficit on the
exchange, excluding transaction costs, in fiscal year 2000. In addition, this
amount also will be reflected as a gain for purposes of determining Metrocall's
net income (loss) attributable to common stockholders in fiscal year 2000.
Common Stock Investments
On February 2, 2000, Metrocall entered into common stock purchase
agreements with each of three equity investors: HMTF, PSINet and Aether. Each of
the three companies will acquire approximately 7.8 million shares of common
stock. Each investor will pay $2.19 per share or a total of approximately $17.0
million or $51.0 million in the aggregate. Each of the three investors will have
the right to nominate a representative to Metrocall's Board of Directors.
Metrocall will use the proceeds from the sale of its common stock to reduce
outstanding debt.
Each transaction is subject to the completion of the exchange of the Series
C Preferred, the expiration of the applicable HSR Act waiting period, the
receipt of any required consent of the FCC, the completion of the other common
stock equity investments and other customary closing conditions. Metrocall
expects that these conditions will be satisfied and that the transactions will
be consummated on or before March 31, 2000.
Metrocall also granted HMTF two options to purchase additional shares of
Metrocall common stock. Metrocall granted an option to purchase 8,333,333 shares
of common stock (Option I), at an exercise price of $3.00 per share, subject to
adjustment under certain events. Option I may be exercised by HMTF in whole but
not in part, at any time on or before the first anniversary of the closing.
Metrocall also granted HMTF (i) an option to purchase 12,500,000 shares of
common stock at an exercise price of $4.00 per share plus (ii) if HMTF has not
exercised Option I, 8,333,333 shares of common stock at an exercise price per
share of $3.00, in each case subject to adjustment under certain events
(collectively, Option II). Option II may be exercised in whole or in part but
only in connection with the issuance of new equity for cash to finance a
business combination or acquisition (by means of merger, consolidation,
exchange, or acquisition of assets, or otherwise) involving Metrocall or any of
its subsidiaries and an aggregate transactional consideration to the
24
<PAGE> 25
other entity or its equity and debt holders or to Metrocall and its equity and
debt holders having a fair value (as determined in good faith by Metrocall's
Board of Directors) of at least $50 million (a Qualified Transaction). Option II
will terminate on the second anniversary of the closing, except that it can be
extended if there are pending active discussions with respect to a potential
Qualified Transaction or material changes in the terms of a Qualified
Transaction. The Option I and Option II transactions are subject to the
expiration of the applicable HSR Act waiting period, the receipt of any required
consent of the FCC, and other customary closing conditions.
PSINet and Aether will each deliver to Metrocall irrevocable proxies
pursuant to which their respective shares will be voted for the nominees of
Metrocall's Board of Directors for the election to the Board for the twelve
month period following the closing. PSINet and Aether will not, directly or
indirectly, sell, transfer or otherwise dispose of their shares for a period of
twelve months after the closing, with certain exceptions, unless the investor
has first delivered to Metrocall an offer for Metrocall to repurchase such
shares.
Each of the three equity investors also agreed to certain limitations, for
a period of twenty-four months after the closing. These limitations include the
following: each investor will not, directly or indirectly, (i) increase its
beneficial ownership of any securities or rights or options to acquire
beneficial ownership of any securities of Metrocall, except by way of stock
dividends, stock splits or distributions made by Metrocall to holders of common
stock (Aether may acquire up to 15% of the issued and outstanding common stock,
and HMTF may acquire up to 15% of the issued and outstanding common stock, which
15% ownership limit does not include the shares issuable under or purchased
pursuant to the Option Agreement); (ii) make any public announcement with
respect to or submit to Metrocall any proposal for the acquisition of securities
of Metrocall or for any merger, consolidation, or business combination involving
Metrocall or its affiliates or for a any purchase of a substantial portion of
the assets of Metrocall or its affiliates; (iii) make, or in any way participate
in, any "solicitation" of "proxies" to vote any voting securities of Metrocall
or become a participant in any "election contest" (as those terms are defined in
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
Exchange Act)); (iv) form, join, or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of Metrocall; or (v) seek to influence or influence the management or
policies of Metrocall, with the exception of the investor's designee on the
Board of Directors may act to take action in his capacity as a director of
Metrocall.
Metrocall has agreed to register for resale the shares of Metrocall common
stock that each of the three equity investors will receive, subject in each case
to certain conditions and limitations.
Formation of Inciscent
Inciscent is a technology-based joint venture that Metrocall originally
formed in November 1999 under the name Metrocall.net. Inciscent is expected to
be a full service business-to-business wired-to-wireless application service
provider (ASP) that will offer a suite of technology services to small
office/home office (SOHO) and small to medium-sized businesses. These services
will include broadband Internet access, domain hosting, unified messaging,
filtered wireless content, auction notification and confirmation, data solutions
and wireless e-mail. In addition, Inciscent will offer hosting and delivery of
enterprise applications via the Internet and wireless data networks.
25
<PAGE> 26
On February 8, 2000, Metrocall and the following investors entered into an
agreement to purchase a percentage of the Series A Convertible Preferred Stock
of Inciscent for cash, notes and/or services totaling an aggregate value of
$30.0 million. The ownership splits for Inciscent's preferred stock will be as
follows:
<TABLE>
<CAPTION>
INVESTORS PERCENTAGE
--------- ----------
<S> <C>
Metrocall................................................... 50.0%
Aether...................................................... 33.0
HMTF........................................................ 6.3
PSINet...................................................... 6.3
DB Capital Partners, Inc. .................................. 2.7
Other investors............................................. 1.7
-----
Total.................................................. 100.0%
=====
</TABLE>
The investments by Aether, HMTF and PSINet are in addition to their
investments in Metrocall's common stock. Inciscent also issued shares of its
common stock to key personnel of Inciscent and Metrocall. Metrocall will not
receive any of the proceeds received by Inciscent for Inciscent's preferred
stock. Metrocall will provide Inciscent with air-time and other services and
access to its subscriber base in exchange for its 50% interest in Inciscent's
Series A Convertible Preferred Stock. Inciscent will have a seven person board
of directors, three of whom will be appointed by Metrocall, two by Aether, and
one each by PSINet and HMTF.
RESULTS OF OPERATIONS
The definitions below will be helpful in understanding the discussion of
Metrocall's results of operations.
- 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
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 primarily related
to the management, operation and maintenance of Metrocall's network
systems and infrastructure.
- Selling and marketing expenses: include salaries, commissions and
administrative costs of our sales force and related marketing and
advertising expenses.
- General and administrative expenses: include costs related to executive
management, accounting, office telephone, management information systems,
facilities and employee benefits.
Year Ended December 31, 1999 Compared With December 31, 1998
The following table sets forth the amount of revenues and the percentage of
net revenues (defined as total revenues less the net book value of products
sold) represented by certain items in Metrocall's Consolidated Statements of
Operations and certain other information for fiscal years 1999 and 1998.
<TABLE>
<CAPTION>
% OF % OF
REVENUES 1998 REVENUES 1999 REVENUES INCREASE
-------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Service, rent and maintenance............. $ 416,352 96.2 $ 548,700 96.0 $132,348
Product sales............................. 48,372 11.1 61,487 10.8 13,115
---------- -------- ---------- -------- --------
Total revenues....................... 464,724 107.3 610,187 106.8 145,463
Net book value of products sold........... (31,791) (7.3) (39,071) (6.8) (7,280)
---------- -------- ---------- -------- --------
Net revenues......................... $ 432,933 100.0 $ 571,116 100.0 138,183
========== ======== ========== ======== ========
ARPU...................................... $ 7.57 $ 7.86 $ 0.29
Number of Subscribers..................... 5,659,550 5,927,939 268,389
</TABLE>
26
<PAGE> 27
Service, rent and maintenance revenues. Service, rent and maintenance
revenues increased approximately $132.3 million, or 31.8%, from $416.4 million
in 1998 to $548.7 million in 1999. The increase in revenues was due to the
268,389 increase in the number of subscribers receiving Metrocall's paging and
other wireless messaging services which was generated through internal growth
during 1999 and the 1.2 million subscribers acquired in the AMD acquisition in
October 1998. Metrocall's average service, rent and maintenance revenue per unit
(ARPU) for paging and messaging services increased $0.29 from $7.57 per unit in
1998 to $7.86 per unit. This increase was primarily the result of the high
premium, value-added service characteristics of the subscribers acquired in the
AMD acquisition, for which Metrocall provided services for an entire year in
1999. Service, rent and maintenance revenues also increased due to the continued
migration of subscribers to alphanumeric paging devices and selected rate
increases partially offset by a reduction in subscribers in direct distribution
channels and growth in the strategic alliances and reseller indirect
distribution channels, which are characterized by lower ARPU and lower operating
costs. Although Metrocall's revenue increased during 1999, the change in its
subscriber mix during the year benefited the indirect distribution channels,
which are characterized by lower ARPUs. Metrocall expects that revenues and ARPU
may be affected by a full year's impact of the factors described above as well
as continued competitive pressures within its industry. In 2000, Metrocall will
introduce two-way messaging services primarily within its direct distribution
channels. Metrocall expects that this product service may generate higher ARPU
than its current services. Metrocall does not expect a significant revenue
impact from the new two-way services in the first half of 2000 based on current
product availability estimates.
Product sales revenues. Product sales revenues increased approximately
$13.1 million from $48.4 million to $61.5 million in 1999 and decreased as a
percentage of net revenues from 11.1% in 1998 to 10.8% in 1999. The increase in
product sales was the result of the operations of AMD being included in
Metrocall's operations for a full fiscal year. Net book value of products sold
increased approximately $7.3 million from $31.8 million in 1998 to $39.1 million
in 1999 and decreased as a percentage of net revenues from 7.3% in 1998 to 6.8%
in 1999. On November 1, 1999 Metrocall completed the sale of its electronic
tracking business. Product sales revenues generated from this business were only
recognized through October 1999. Product sales attributable to the electronic
tracking business were approximately $6.0 million through October 31, 1999,
which represented a decrease of approximately $200,000 in 1999 from the twelve
months ended December 31, 1998.
The following tables set forth the amounts of operating expenses and
related percentages of net revenues represented by certain items in Metrocall's
Consolidated Statements of Operations and certain other information for fiscal
years 1998 and 1999.
<TABLE>
<CAPTION>
% OF % OF
OPERATING EXPENSES 1998 REVENUES 1999 REVENUES INCREASE
------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Service, rent and maintenance.............. $115,432 26.7 $146,961 25.7 $ 31,529
Selling and marketing...................... 73,546 17.0 97,051 17.0 23,505
General and administrative................. 121,644 28.1 170,591 29.9 48,947
Depreciation............................... 75,111 17.4 96,985 16.9 21,874
Amortization............................... 159,837 36.9 210,359 36.9 50,522
-------- ----- -------- ----- --------
$545,570 126.1 $721,947 126.4 $176,377
======== ===== ======== ===== ========
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES PER UNIT IN SERVICE 1998 1999 INCREASE OR (DECREASE)
-------------------------------------- ----- ----- ----------------------
<S> <C> <C> <C>
Monthly service, rent and maintenance....................... $2.12 $2.11 $(0.01)
Monthly selling and marketing............................... 1.35 1.39 0.04
Monthly general and administrative.......................... 2.24 2.45 0.21
----- ----- ------
Average monthly operating expense........................... $5.71 $5.95 $ 0.24
===== ===== ======
</TABLE>
27
<PAGE> 28
Overall, in 1999, Metrocall experienced an increase in its historical
average monthly operating expense per unit in service (operating expenses per
unit before depreciation and amortization) of $0.24 per unit. The increase in
the unit cost was primarily attributable to additional operating expenses
incurred by the operations of AMD, which was acquired on October 2, 1998. At the
time of the acquisition, AMD average monthly operating costs per unit had ranged
between $9.50 and $10.00 per unit over a base of approximately 1.2 million
subscribers. This average cost per unit was significantly above the $5.57
average cost per unit incurred by Metrocall on its 4.2 million unit subscriber
base for the nine-month period through September 30, 1998. Metrocall was able to
minimize the cost impact of AMD's operations on Metrocall's operating results
through its integration efforts. As Metrocall integrated AMD operations into its
own structure, Metrocall was able to achieve over $8.0 million of synergies in
its integration of AMD and reduce the amount of expenses incurred through AMD's
operations by converting a portion of AMD's customers onto Metrocall's network,
which reduced third-party paging service costs and increased network utilization
and from the elimination of duplicative AMD functions such as executive
staffing, finance and other positions. Metrocall has substantially completed its
integration efforts however continues to migrate existing AMD customers onto its
network.
Service, rent and maintenance expenses. Service, rent and maintenance
expenses increased approximately $31.5 million from $115.4 million in 1998 to
$147.0 million in 1999 and decreased as a percentage of revenues from 26.7% in
1998 to 25.7% in 1999. Approximately $31.7 million of this increase was the
result of expenses incurred by the operations of AMD, which was acquired in
October 1998 and therefore not included in Metrocall's operating results until
the fourth quarter of 1998. The expenses incurred were comprised primarily of
third-party dispatching, telecommunications expenses and tower site rents.
Monthly service, rent and maintenance expense per unit of $2.11 in 1999 has
decreased $0.01 per unit from $2.12 in 1998. Service, rent and maintenance
expenses have decreased as a percentage of revenues primarily due to a decrease
in telecommunication expenses as a result of renegotiated telecommunications
contracts, deconstruction of redundant tower sites and other cost reduction
initiatives. Metrocall expects that its service, rent and maintenance expenses
for its traditional paging services may be flat in 2000 and may increase due to
service costs related to providing two-way messaging services as Metrocall
expands its two-way message services and incurs additional costs associated with
operating leases for two-way messaging equipment.
Selling and marketing expenses. Selling and marketing expenses increased
approximately $23.5 million from $73.5 million in 1998 to $97.1 million in 1999
and remained flat as a percentage of net revenues at 17%. Approximately $17.6
million of the increase in selling and marketing expenses was attributable to
increased personnel costs related to the acquired AMD sales force. Exclusive of
the AMD acquisition, selling and marketing expenses have increased as a result
of an increase in the sales force in existing markets. Monthly selling and
marketing costs per unit increased was a result of the events described above.
Selling and marketing expenses may increase in future periods as a percentage of
net revenues as Metrocall continues to increase and intensify its competitive
presence in existing markets and launches its two way messaging services.
General and administrative expenses. General and administrative expenses
increased approximately $48.9 million from $121.6 million in 1998 to $170.6
million in 1999 and increased as a percentage of net revenue from 28.1% in 1998
to 29.9% in 1999. Approximately $24.3 million of the increase in general and
administrative expenses was attributable to the AMD acquisition primarily
representing expenses incurred for support staff, personnel costs and facilities
rents. Monthly general and administrative expenses per unit increased by $0.21
from $2.24 in 1998 to $2.45 in 1999 as a result of these events. Exclusive of
the AMD acquisition, general and administrative expenses increased $24.6
million, which was primarily the result of an increase in rent and facility
costs of approximately $3.0 million, technical consulting costs primarily
associated with year 2000 readiness efforts of $6.1 million, personnel costs of
$5.1 million and other expenses incurred of $10.4.
Depreciation expense. Depreciation expense increased approximately $21.9
million from $75.1 million in 1998 to $97.0 million in 1999. This increase was
primarily the result of depreciation expense recognized on subscriber paging
equipment and other plant and equipment acquired in the AMD acquisition and 1999
28
<PAGE> 29
depreciation expense on 1998 and 1999 additions to property, plant and equipment
and computer hardware and software.
Amortization expense. Amortization expense related to the amortization of
identified intangible assets of companies acquired by Metrocall increased
approximately $50.5 million from $159.8 million in 1998 to $210.4 million in
1999. This increase was primarily as a result of the amortization of intangibles
recorded in connection with the AMD acquisition. Amortization expense was
comprised of the following elements in 1998 and 1999:
<TABLE>
<CAPTION>
AMORTIZATION DECEMBER 31, DECEMBER 31,
AMORTIZATION EXPENSES PERIOD 1998 1999 INCREASE
--------------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Subscriber lists................................ 3 years $102,652 $144,349 $41,697
FCC licenses.................................... 10 years 33,189 36,023 2,834
Goodwill........................................ 10 years 21,354 22,869 1,515
Other........................................... Various 2,642 7,118 4,476
-------- -------- -------
$159,837 $210,359 $50,522
======== ======== =======
</TABLE>
Metrocall expects amortization expense to be significant in fiscal years
2000 and 2001 as it amortizes amounts allocated to subscriber lists of acquired
companies.
<TABLE>
<CAPTION>
INCREASE OR
OTHER 1998 1999 (DECREASE)
----- --------- --------- -----------
<S> <C> <C> <C>
Interest and other income net............................... $ 849 $ 407 $ (442)
Interest expense............................................ (64,448) (85,115) 20,667
Income tax benefit.......................................... 47,094 63,055 15,961
Net loss.................................................... (129,142) (172,484) 43,342
Preferred dividends......................................... (11,767) (16,462) 4,695
Gain on Series B repurchase................................. -- 2,208 2,208
EBITDA...................................................... 122,311 156,512 34,201
========= ========= ========
</TABLE>
Interest expense. The increase in interest expense in 1999 of approximately
$20.7 million was the result of higher average debt balances outstanding during
the fiscal year. Total debt increased $34.3 million from $743.3 million in 1998
to $777.6 million in 1999. Average debt balances were $151.8 million greater in
1999 than in 1998 as a result of debt incurred in connection with the AMD
acquisition in October 1998, the repurchase of the Series B preferred in January
1999 and working capital requirements.
Income tax benefit. The increase in the income tax benefit in 1999 of
approximately $16.0 million was the result of a full year's impact of the tax
benefit recorded on the amortization of non-goodwill related intangible assets
generated from the AMD acquisition.
Net loss. Metrocall's net loss increased approximately $43.3 million from
$129.1 million in 1998 to $172.4 million in 1999. The increase in net loss was
primarily the result of the increase in depreciation, amortization and interest
expenses in 1999 offset by the increase in EBITDA.
Preferred dividends. The increase in preferred dividends of $4.7 million
was the result of higher dividends paid to the holders of the Series A Preferred
due to the compounding nature of the preferred stock and a full year's dividend
distribution to the holder of the Series C Preferred. These dividend payments
were offset by the impact of the repurchase of the Series B Preferred, which
occurred in January 1999. Subsequent to December 31, 1999, AT&T Wireless agreed
to exchange the Series C Preferred for common stock. Assuming this transaction
is consummated, no dividends on the Series C Preferred will be incurred after
December 31, 1999. In addition, one holder of Series A Preferred has surrendered
shares of Series A Preferred in payment for the exercise of Warrants, which will
reduce the amount of dividends that will accrue on the Series A Preferred in
future periods.
Gain on Series B Repurchase. In January 1999, Metrocall repurchased and
retired all of the outstanding shares of its Series B Preferred for $16.2
million, representing a $2.2 million discount from its carrying value.
29
<PAGE> 30
The $2.2 million has been reflected as a gain for purposes of determining
Metrocall's loss attributable to common stockholders.
EBITDA. The increase in EBITDA in 1999 of approximately $34.2 million was
primarily the result of the increase in revenues in 1999 offset to a lesser
extent the increase in operating expenses. Metrocall's EBITDA margin decreased
from 28.3% in 1998 to 27.4% in 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH DECEMBER 31, 1997
The following table sets forth the amounts of revenues and the percentage
of net revenues represented by certain items in Metrocall's Consolidated
Statements of Operations and certain other information for fiscal years 1997 and
1998.
<TABLE>
<CAPTION>
% OF % OF INCREASE
REVENUES 1997 REVENUES 1998 REVENUES OR (DECREASE)
-------- ---------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Service, rent and maintenance........... $ 249,900 96.3 $ 416,352 96.2 $ 166,452
Product sales........................... 39,464 15.2 48,372 11.1 8,908
---------- ----- ---------- ----- ----------
Total revenues..................... 289,364 111.5 464,724 107.3 175,360
Net book value of products sold......... (29,948) (11.5) (31,791) (7.3) 1,843
---------- ----- ---------- ----- ----------
Net revenues....................... $ 259,416 100.0 $ 432,933 100.0 $ 173,517
========== ===== ========== ===== ==========
ARPU.................................... $ 8.25 $ 7.57 $ (0.68)
Number of subscribers................... 4,030,836 5,659,550 1,628,714
</TABLE>
Service, rent and maintenance revenues. Service, rent and maintenance
revenues increased approximately $166.5 million from $249.9 million in 1997 to
$416.4 million in 1998. The increase in revenues was primarily due to the 40.4%
growth in Metrocall's subscriber base. In 1998, Metrocall added approximately
414,000 subscribers or 10.3% through internal growth and added approximately 1.2
million subscribers or 30.1% through the AMD acquisition. Also in 1998,
Metrocall's service, rent and maintenance revenues included those revenues
generated from the 1.3 million subscriber base acquired in the December 30, 1997
ProNet merger for which no revenues were recognized during 1997 and the 1.2
million subscribers acquired from the AMD acquisition on October 2, 1998. The
decline in monthly ARPU of $0.68 per unit from 1997 to 1998 was attributable to
Metrocall's subscriber distribution mix and the related increase in the lower
ARPU indirect reseller distribution channel. The decline in ARPU was partially
offset by the increase in the rental base due to the AMD acquisition, which was
characterized with high revenue rental subscribers.
Product sales revenues. Product sales revenues increased approximately $8.9
million from $39.5 million in 1997 to $48.4 million in 1998 and decreased as a
percentage of net revenues from 15.2% in 1997 to 11.2% in 1998. Net book value
of products sold increased approximately $1.8 million from $29.9 million in 1997
to $31.8 million in 1998 and decreased as a percentage of net revenues from
11.5% in 1997 to 7.3% in 1998. The increase in product sales revenues was
directly attributable to higher unit sales and greater geographic penetration
related to the ProNet merger and the AMD acquisition.
The following tables set forth the amounts of operating expenses and
related percentages of net revenues represented by certain items in Metrocall's
Consolidated Statements of Operations and certain other information for fiscal
years 1997 and 1998.
<TABLE>
<CAPTION>
% OF % OF
OPERATING EXPENSES 1997 REVENUES 1998 REVENUES INCREASE
------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Service, rent and maintenance................ $ 69,254 26.7 $115,432 26.7 $ 46,178
Selling and marketing........................ 53,802 20.7 73,546 17.0 19,744
General and administrative................... 73,753 28.5 121,644 28.1 47,891
Depreciation and amortization................ 91,699 35.3 234,948 54.3 143,249
-------- ----- -------- ----- --------
$288,508 111.2 $545,570 126.1 $257,062
======== ===== ======== ===== ========
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
SEPARATING EXPENSES PER UNIT IN SERVICE 1997 1998 (DECREASE)
--------------------------------------- ----- ----- ----------
<S> <C> <C> <C>
Monthly service, rent and maintenance....................... $2.37 $2.12 $(0.25)
Monthly selling and marketing............................... 1.84 1.35 (0.49)
Monthly general and administrative.......................... 2.53 2.24 (0.29)
----- ----- ------
Average monthly operating costs............................. $6.74 $5.71 $(1.03)
===== ===== ======
</TABLE>
Overall in 1998, Metrocall experienced a reduction of $1.03 per unit in
average monthly operating expense per unit. As discussed below, Metrocall's
operating results in 1998 included the operating expenses of Page America and
ProNet for a full fiscal year. In addition, the 1998 operating results include
the operating expenses of AMD from the October 2, 1998 acquisition date. Each
operating expense is discussed separately below
Service, rent and maintenance expenses. Service, rent and maintenance
expenses increased approximately $46.2 million from $69.3 million in 1997 to
$115.4 million in 1998. Service, rent and maintenance expenses increased in 1998
because they included the service, rent and maintenance expenses of Page America
and ProNet for a complete fiscal year ($37.7 million) and the expenses of AMD
for the fourth quarter of 1998 ($15.2 million). Exclusive of the impact of the
ProNet merger and the Page America and AMD acquisitions, service, rent and
maintenance expenses in 1998 remained relatively flat compared to 1997 expenses
with increases in tower rents and network repairs and maintenance expenses being
partially offset by a decrease in expenses due to the divesture of Metrocall's
telemessaging operations in 1997 for which no expenses were recognized in 1998.
Average monthly service, rent and maintenance expense per unit slightly declined
in 1998 as a result of the higher average subscriber base throughout 1998.
Selling and marketing expenses. Selling and marketing expenses increased
approximately $19.7 million from $53.8 million in 1997 to $73.5 million in 1998
and decreased as a percentage of net revenues from 20.7% in 1997 to 17.0% in
1998. Selling and marketing expenses increased in 1998 because they included the
selling and marketing expenses of Page America and ProNet for a complete fiscal
year ($16.5 million) and the expenses of AMD for the fourth quarter of 1998
($5.3 million). The decrease in selling and marketing expenses as a percentage
of revenues in 1998 was primarily from the impact of recent merger and
acquisitions and the related higher revenues base. Average monthly selling and
marketing expense per unit declined in 1998 as a result of the higher average
subscriber base throughout 1998.
General and administrative expenses. General and administrative expenses
increased approximately $47.9 million from $73.8 million in 1997 to $121.6
million in 1998 and decreased as a percentage of net revenues from 28.5% in 1997
to 28.1% in 1998. General and administrative expenses increased in 1998 because
they included the general and administrative expenses of Page America and ProNet
for a complete fiscal year ($30.4 million) and the expenses of AMD for the
fourth quarter of 1998 ($10.6 million). Exclusive of the impact of the merger
and acquisitions, general and administrative expenses increased for a variety of
professional services ($3.9 million) and additional operating personnel ($3.0
million). The decrease in general and administrative expenses as a percentage of
net revenues in 1998 was primarily from the benefit of economies of scale
related to recent merger and acquisitions and the related increase in the
revenue base.
Depreciation and amortization expenses. Depreciation and amortization
expense increased approximately $143.2 million from $91.7 million in 1997 to
$234.9 million in 1998. The increase in total depreciation expense in 1998 was
approximately $20.0 million and resulted primarily from depreciation on
additional subscriber paging equipment and other plant and equipment acquired
mainly in the ProNet merger and Page America and AMD acquisitions. The increase
in total amortization expense in 1998 was approximately $123.0 million and
resulted primarily from amortization expenses on intangibles acquired in
Metrocall's recent merger and acquisitions and the reduction in estimated useful
lives of certain intangibles described below.
Effective January 1, 1998, Metrocall reduced the estimated useful lives of
certain intangibles, including goodwill, regulatory licenses issued by the 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 in 1998 by approximately $26.0 million.
31
<PAGE> 32
The following table indicates the recorded balances of certain intangible
assets, by acquisition, held by Metrocall at December 31, 1997, immediately
before the change in amortization period for these assets.
<TABLE>
<CAPTION>
FCC SUBSCRIBER
ACQUISITION ACQUISITION DATE GOODWILL LICENSES BASE
----------- ----------------- -------- -------- ----------
<S> <C> <C> <C> <C>
Parkway.................................... July 16, 1996 $ 12,966 $ 18,364 $ 1,957
Satellite.................................. August 30, 1996 2,334 19,412 2,141
A+ Network................................. November 15, 1996 117,905 110,697 19,876
Page America............................... July 1, 1997 -- 30,364 29,533
ProNet..................................... December 30, 1997 20,706 71,475 205,582
Other acquisitions......................... 39,942 62,561 5,400
-------- -------- --------
$193,853 $312,873 $264,489
======== ======== ========
</TABLE>
Metrocall reduced the period of amortization for amounts allocated to
goodwill from 15 to 25 years to 10 years for each of its acquisitions because of
the effects of technological and competitive pressures that had impacted the
industry and that were expected to continue. For instance, during late 1997 and
early 1998, technological developments occurred with respect to advanced
messaging devices and products, which would compete against the traditional
paging businesses that Metrocall had acquired in 1996 and 1997. Accordingly,
Metrocall believed that the estimated useful life of the underlying goodwill
recorded from its acquisitions was shortened due to these technological
developments an the risks of increased competition and marketing pressures on
its traditional paging business. Metrocall also reduced the number of years it
amortized the balances of its subscriber bases acquired with each acquisition
because of the continued and heightened competitive pressures that it had
experienced and that were evident in the one-way paging industry and the
technological developments in the industry that it believed would create new
products and services, which would compete with Metrocall's paging services.
Metrocall believes the revision in its estimated lives was necessary to ensure
that the recorded balances of these intangible assets and the change to a ten
year amortization period for goodwill and three year amortization period for its
subscriber bases appropriately match the value and future benefits of these
assets.
Metrocall also reduced the period that it amortized amounts paid for FCC
licenses from 25 years to 10 years as a result of the new FCC auction rules and
other regulatory changes that occurred during 1997 and early 1998. The revised
amortization period now matches the 10 years FCC holding period to the FCC
initial holding period for these licenses because of the effects of the
increased competition in the license auction process, the site build-out
requirements imposed on newly awarded licenses and the trade-in provisions for
wide-area licenses all of which could limit the period of time that Metrocall
holds a specific license.
<TABLE>
<CAPTION>
OTHER 1997 1998 INCREASE
----- -------- --------- --------
<S> <C> <C> <C>
Interest and other income, net.............................. $ 156 $ 849 $ 693
Interest expense............................................ (36,248) (64,448) 28,200
Income tax benefit.......................................... 4,861 47,094 42,233
Net loss.................................................... (60,323) (129,142) 68,819
Preferred dividends......................................... (7,750) (11,767) 4,017
EBITDA...................................................... 62,607 122,311 59,704
======== ========= =======
</TABLE>
Interest expense. The increase in interest expense in 1998 of approximately
$28.2 million was the result of higher average debt balances outstanding during
the fiscal year primarily associated with the additional debt assumed with the
ProNet merger and financing requirements of the AMD acquisition. During 1998,
total debt increased by $143.4 million to $743.3 million.
Income tax benefit. The increase in the income tax benefit in 1998 of
approximately $42.2 million was the result of the tax benefit recorded on the
amortization of non-goodwill related intangible assets primarily generated from
the ProNet merger which occurred on December 30, 1997 for which no tax benefits
were generated in 1997 and the AMD acquisition which occurred on October 2,
1998.
32
<PAGE> 33
Net loss. Metrocall's net loss increased approximately $68.8 million from
$60.3 million in 1997 to $129.1 million in 1998. The increase in net loss was
primarily the result of increased depreciation and amortization and other
operating expenses associated with the ProNet merger and the Page America and
AMD acquisitions offset by increases in net revenues related to an increase in
the subscriber base as a result of internal growth and recent merger and
acquisitions.
Preferred dividends. The increase in preferred dividends in 1998 of
approximately $4.0 million was the result of higher dividends paid to the
holders of the Series A Preferred and the Series B Preferred in 1998 and
dividends paid in the fourth quarter of 1998 to the holder of the Series C
Preferred. Dividends recognized on the Series A Preferred and the Series B
Preferred increased by $0.8 million and $1.3 million, respectively due to their
cumulative nature. On October 2, 1998, Metrocall issued 9,500 shares of the
Series C Preferred in connection with the AMD acquisition. Dividends recognized
on the Series C Preferred were approximately $1.9 million.
EBITDA. The increase in EBITDA in 1998 of approximately $59.7 million was
primarily the result of the increase in revenues in 1998 offset to a lesser
extent by the increase in operating expenses. EBITDA margin improved from 24.1%
in 1997 to 28.3% in 1998.
INFLATION
Inflation is presently not a material factor affecting Metrocall's
business. Traditional one-way paging system equipment and operating costs have
not increased and one-way pager costs have declined significantly in recent
years. This reduction in costs has been reflected in lower prices charged to our
subscribers. General operating expenses such as salaries, employee benefits and
occupancy costs are, however, subject to inflationary pressures.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
During the three years ended December 31, 1999, Metrocall's operations have
required significant funding, primarily to support mergers and acquisitions and
capital expenditures for paging and messaging infrastructure and equipment
requirements. Metrocall has met its funding requirements with cash generated
from operating activities, borrowings under its credit facilities and proceeds
from its senior subordinated notes offerings.
Cash Flows. Metrocall's net cash flows from operating activities increased
approximately $23.0 million or 56.1% from $41.2 million for the twelve months
ended December 31, 1998 to $64.5 million for the twelve months ended December
31, 1999. Approximately $13.5 million of the increase was attributable to the
increase in EBITDA offset by an increase in interest expense for the
twelve-month period ended December 31, 1999. The remaining $9.5 million increase
was primarily the result of improvements in Metrocall's working capital position
at December 31, 1999.
Net cash used in investing activities decreased approximately $103.5
million or 54.0% from $191.7 million for the twelve months ended December 31,
1998 to $88.2 million for the twelve months ended December 31, 1999. The net
decrease was primarily the result of a decrease in cash required for business
acquisitions in 1999, partially offset by increases in capital expenditures.
During 1998, Metrocall acquired AMD for a purchase price of $205.0 million
including cash of $110.0 million. There were no similar acquisition events in
1999. In addition, capital expenditures increased by $14.6 million in the twelve
months ended December 31, 1999, which was attributable to internal subscriber
growth, and capital requirements for AMD operations, which was acquired in
October 1998. Capital expenditures in 1999 included approximately $59.9 million
for subscriber equipment, representing increases of devices on hand and net
increases to the rental subscriber base. The balance of capital expenditures was
primarily for network and infrastructure development and information systems and
computer related equipment. Total capital expenditures for fiscal year 2000 are
expected to approximate $90.0 million. During 1999, Metrocall also sold the
assets of its electronic tracking business for approximately $12.7 million,
which included net cash proceeds of $8.5 million.
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<PAGE> 34
Net cash provided by financing activities decreased approximately $116.3
million from $134.1 million for the twelve months ended December 31, 1998 to
$18.0 million for the twelve months ended December 31, 1999. During fiscal year
1999, Metrocall borrowed an additional $35.0 million under its credit facility
primarily to fund the $16.2 million repurchase of the Series B Preferred and
other working capital and capital expenditure requirements. Metrocall also used
the cash proceeds received in the sale of its electronic tracking business to
reduce outstanding bank borrowings. During 1998, cash provided by financing
activities included net borrowings of approximately $143.8 million, which was
primarily used to fund the $110.0 million cash acquisition cost of AMD and
general working capital requirements.
Working Capital. Metrocall's working capital (defined as current assets
less current liabilities) deficit improved by $4.9 million from a deficit of
$41.8 million at December 31, 1998 to $36.9 million at December 31, 1999. The
improvement in working capital was the result of an increase in accounts
receivable, primarily the result of an increase in revenues, and decreases in
cash and accounts payable balances primarily related to the timing of payments
to Metrocall's vendors for its operating expenses.
Long-Term Debt. At December 31, 1999 and 1998, long-term debt consisted of:
<TABLE>
<CAPTION>
INCREASE
LONG-TERM DEBT 1998 1999 OR (DECREASE)
-------------- -------- -------- -------------
<S> <C> <C> <C>
Borrowings under the credit facility........................ $ 40,000 $ 75,000 $35,000
Senior subordinated notes................................... 698,544 698,608 64
Capital leases and other debt............................... 4,790 4,019 (771)
-------- -------- -------
Total long-term debt................................... $743,334 $777,627 $34,293
======== ======== =======
</TABLE>
Borrowings and repayments under the credit facility. During 1999, net
borrowings under the credit facility increased by $35.0 million, which
represented gross borrowings of $81.0 million, net of repayments of $46.0
million. Approximately $16.0 million of the net borrowings were used to
repurchase the Series B Preferred and the remainder was used for general
corporate purposes. Of the $46.0 million repaid, approximately $9.0 million was
from the proceeds received from the sale of the electronic tracking business and
$37.0 million was from cash generated from operating activities.
Subject to certain conditions set forth in its credit facility agreement,
as amended, Metrocall may borrow up to $200 million under two loan facilities
through December 31, 2004. The first facility (Facility A) is a $150 million
reducing revolving credit facility and the second (Facility B) is a $50 million
reducing term credit. The credit facility is secured by substantially all of
Metrocall's assets. Required quarterly principal repayments, as defined, begin
on March 31, 2001 and continue through December 31, 2004.
Under the credit facility, Metrocall is required to comply with financial
and operating covenants. It is required to maintain certain financial ratios,
including total debt to annualized operating cash flow, senior debt to
annualized operating cash flow, annualized operating cash flow to pro forma debt
service, total sources of cash to total uses of cash, and operating cash flow to
interest expense (in each case, as such terms are defined in the credit facility
agreement). The covenants also limit additional indebtedness and future mergers
and acquisitions without the approval of the lenders and restrict the payment of
cash dividends and other stockholder distributions by Metrocall. The credit
facility agreement also prohibits certain changes in ownership control of
Metrocall, as defined. At December 31, 1999, Metrocall was in compliance with
all of these covenants. At December 31, 1999 based on the terms of its financial
and operating covenants, Metrocall had $125.0 million available under its credit
facility, which represents the entire undrawn amount.
Under the credit facility, Metrocall will be required to apply 50% of the
net proceeds of the equity investments by PSINet, Aether and HMTF, or
approximately $25.0 million, to a permanent reduction of the Facility A and
Facility B commitments. Metrocall has requested its bank group to waive this
requirement and to make certain other amendments to the credit facility,
including extension of the maturity and amortization periods of the loans,
modification of leverage covenants, and approval of the establishment of
Inciscent. Metrocall expects to complete these amendments, subject to bank
approval, by March 31, 2000.
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<PAGE> 35
As described above, in February 2000, Metrocall entered into agreements to
issue new equity for approximately $51.0 million. In addition, Metrocall has
issued an option to HMTF to purchase additional shares that, if exercised, would
yield an additional $25.0 million. Metrocall expects to use the proceeds of
these equity issuances to reduce outstanding debt, either by repayments of
outstanding loans under the credit facility or repurchase of subordinated debt.
Metrocall may also seek to reduce leverage and interest expense by offering
to exchange common stock for its outstanding subordinated debt.
Access to Future Capital. Metrocall's ability 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 its
future performance and cash flows from operations. These dependencies will be
subject to financial, business and other factors, certain of which are beyond
Metrocall's control, such as prevailing economic conditions. Metrocall cannot
assure you that, in the event it were to require additional financing, such
additional financing would be available on terms permitted by agreements
relating to existing indebtedness or otherwise satisfactory to it. Metrocall
believes that funds generated by its operations, together with those available
under its credit facility, will be sufficient to finance estimated capital
expenditure requirements and to fund existing operations for the foreseeable
future.
RISK FACTORS
RISKS TO THE BUSINESS - METROCALL'S BUSINESS MIGHT BE ADVERSELY AFFECTED BY
FACTORS BEYOND ITS CONTROL.
Metrocall believes that its future operating results and funds generated
from operations and available under its credit facility will be sufficient to
meet general corporate requirements and planned capital expenditures for the
foreseeable future. Metrocall however cannot identify nor can it control all
circumstances that could occur in the future that may adversely affect its
business and results of operations. Some of the circumstances that may occur and
may impair Metrocall's business are described below. If any of the following
circumstances were to occur, Metrocall's business, financial conditions or
results of operations could be materially adversely affected.
OPERATING LOSSES -- METROCALL HAS A HISTORY OF OPERATING LOSSES AND EXPECTS TO
CONTINUE TO INCUR OPERATING LOSSES IN THE FUTURE. AS A RESULT, METROCALL MAY NOT
BE ABLE TO MEET ITS CASH NEEDS FROM OPERATIONS OR PAY DEBT OBLIGATIONS.
Metrocall historically has had operating losses and expects these losses to
continue. These losses make it more difficult for it to meet its cash and other
working capital needs, to support its business operations and to pay its debt
obligations as they become due because Metrocall must rely on its ability to
obtain financing or generate additional revenues. The losses have resulted
because Metrocall has focused mainly on its consolidation and growth strategies
and its capital expenditure requirements, instead of focusing mainly on current
earnings. Metrocall has sustained net losses of $60.3 million, $129.1 million
and $172.5 million for fiscal years 1997, 1998 and 1999. At December 31, 1999,
Metrocall's accumulated deficit was approximately $493.6 million and its working
capital deficit was $36.9 million. Metrocall expects to continue to incur losses
from operations in the future because it expenses significant amounts for
depreciation expenses from capital expenditures and amortization expenses
related to intangible assets recorded on acquisitions. In addition, Metrocall
has substantial levels of borrowing, which cause significant interest expense,
expected to be outstanding in the foreseeable future. Metrocall cannot assure
you that it can reverse operating losses and achieve profitability in the future
and that it will be able to meet all of its cash and other working capital needs
from operations in the future.
ABILITY TO COVER FIXED CHARGES - METROCALL'S EARNINGS HAVE HISTORICALLY BEEN
INSUFFICIENT TO COVER FIXED CHARGES AND AS A RESULT METROCALL MIGHT NEED TO
BORROW ADDITIONAL AMOUNTS IN THE FUTURE.
In previous fiscal years, Metrocall's earnings have been insufficient to
cover fixed charges. Fixed charges, as well as capital expenditure requirements
and other interest expense obligations, may cause Metrocall to borrow additional
amounts in the future.
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<PAGE> 36
Fixed charges primarily include interest expenses related to its long-term
debt. The insufficient amount of earnings is primarily attributable to
Metrocall's history of significant net losses. The chart below shows the extent
to which fixed charges exceed earnings.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C>
Amount of fixed charges................. $ 14,171 $ 23,206 $ 43,213 $ 76,454 $ 99,789
Deficiency of earnings to fixed
charges............................... $(18,002) $(47,605) $(65,184) $(176,236) $(235,539)
</TABLE>
In addition to the amount required to cover its fixed charges, Metrocall's
business requires substantial funds for capital expenditures for paging and
other wireless messaging equipment and for payment of significant interest
expenses associated with its substantial levels of borrowings. The substantial
amount of funds associated with Metrocall's business may require it to incur
additional borrowing from time to time.
SUBSTANTIAL AMOUNT OF INDEBTEDNESS - METROCALL'S SUBSTANTIAL AMOUNT OF
INDEBTEDNESS COULD ADVERSELY AFFECT ITS BUSINESS OPERATIONS, LIMIT ITS ABILITY
TO USE DEBT TO FUND FUTURE CAPITAL NEEDS AND PREVENT METROCALL FROM MEETING ITS
OBLIGATIONS UNDER ITS DEBT INSTRUMENTS.
Metrocall has a substantial amount of indebtedness. The following chart
forth sets forth important credit information:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Total indebtedness, less cash balances of $2,787......... $774,840
Fourth quarter ended annualized operating cash flow...... $165,940
Leverage ratio........................................... 4.67 to 1.00
Stockholders' equity (deficit)........................... $(152,134)
Debt to equity ratio..................................... (5.11) to 1.00
</TABLE>
Metrocall's substantial amount of indebtedness, along with the net
operating losses and working capital deficits it has sustained in recent
periods, could adversely affect its business. For example, it may:
- make it more difficult for Metrocall to satisfy its debt obligations;
- require Metrocall to dedicate a substantial portion of its operating cash
flows from operations to pay interest expense;
- limit its ability to react to changing market conditions, changes in its
industry and economic downturns;
- place Metrocall at a competitive disadvantage with respect to its ability
to finance future acquisitions or capital expenditures compared to its
competitors that have less debt;
- limit its ability to borrow additional funds; and
- cause Metrocall to be vulnerable to increases in interest rates because a
substantial amount of its indebtedness under the credit facility bears
interest at floating rates, only a portion of which is hedged.
Metrocall's credit facility agreement and other debt allows it to incur
more debt. As of December 31, 1999, Metrocall was permitted to borrow an
additional $125.0 million. Further borrowings could increase these risks.
METROCALL'S OPERATING AND FINANCIAL RESTRICTIONS - METROCALL'S DEBT AGREEMENTS
IMPOSE SIGNIFICANT OPERATING AND FINANCIAL RESTRICTIONS. IF METROCALL FAILS TO
COMPLY WITH THESE RESTRICTIONS, THE HOLDERS OF THE DEBT COULD DEMAND THAT
METROCALL PAY THEM IMMEDIATELY.
Metrocall's debt agreements impose significant operating and financial
restrictions. If Metrocall fails to comply with these restrictions, it would be
in default under the debt agreements and holders of the debt could demand
immediate payment. If the debt holders were to demand immediate payment,
Metrocall could not assure you that it would be able to pay or refinance the
debt on acceptable terms to Metrocall. In addition, if
36
<PAGE> 37
Metrocall fails to comply with a restriction in its credit facility, the lenders
under that credit facility could proceed against the assets of Metrocall, which
Metrocall pledged to the lenders as collateral for the payment of the debt.
The restrictions in the debt agreements significantly limit or prohibit,
among other things, Metrocall's ability to:
- incur additional debt and particular types of debt;
- pay cash dividends;
- repurchase or redeem its capital stock;
- make investments or other payments;
- create security interests;
- engage in transactions with stockholders or affiliates;
- sell assets;
- issue or sell stock of subsidiaries; and
- merge or consolidate with other companies.
In addition, Metrocall must comply with financial ratios in its credit
facility and the restrictions imposed by its preferred stock. Metrocall cannot
assure you that it will be able to meet these financial ratios and restrictions
in the future.
INTANGIBLE ASSETS - MOST OF METROCALL'S ASSETS ARE INTANGIBLE ASSETS WHOSE VALUE
MAY DECREASE FROM FACTORS BEYOND METROCALL'S CONTROL. IF THE VALUE OF THOSE
ASSETS WERE TO DECREASE AND METROCALL WERE REQUIRED TO SATISFY ITS DEBT
OBLIGATIONS BASED ON ITS ASSETS' VALUE. METROCALL MIGHT NOT BE ABLE TO SATISFY
THOSE DEBT OBLIGATIONS.
Most of Metrocall's assets are intangible assets, primarily FCC licenses
and certificates, goodwill, subscriber lists and deferred financing costs. At
December 31, 1999, Metrocall's total assets were approximately $1,025.5 million,
of which net intangible assets were approximately $682.0 million. If Metrocall
was required to satisfy its obligations under its credit facility because, for
example, it defaulted under its debt agreements, became insolvent or was
liquidated, and their lenders under the credit facility proceeded against
Metrocall's assets to satisfy those obligations, the value of its assets might
not be sufficient to satisfy those obligations. The reason the value of
Metrocall's assets might be insufficient is because the value of intangible
assets could be impaired by factors beyond Metrocall's control, such as changes
in technology, regulation, and available financing or competitive pressures.
Metrocall cannot assure you that the value of its assets is or will be
sufficient to repay its debt obligations under the credit facility.
ADDITIONAL COMPETITION DUE TO TECHNOLOGICAL DEVELOPMENTS - TECHNOLOGICAL
DEVELOPMENTS COULD LEAD TO INCREASED COMPETITION TO METROCALL.
Future technological developments in the wireless communications industry,
such as narrowband PCS and broadband PCS, could create new services or products
that compete with Metrocall's paging and wireless messaging services. That
increased competition might result in loss of existing or future subscribers,
loss of revenues and increase in expenses to stay competitive.
Developments in narrowband PCS, which provides advanced messaging
capabilities, could lead to increased competition. Some of Metrocall's largest
competitors in the traditional paging market have narrowband PCS licenses, which
permit them to provide advanced messaging services on a nationwide basis.
Metrocall expects other companies to offer advanced messaging services and, as a
result, Metrocall's growth in terms of subscriber base might be impaired.
Metrocall intends to offer two-way and continue providing other advanced
messaging services through its WebLink alliance in early 2000, but the success
of offering these services depends on several factors. Those factors include
market acceptance, cost of equipment and other
37
<PAGE> 38
capital requirements, technological changes in wireless messaging services,
competitors' marketing and sales strategies, regulatory developments and general
economic conditions. These factors are beyond Metrocall's control. Metrocall
cannot assure you that its offering of these services will be beneficial to its
business operations or financial condition.
Further developments of broadband PCS could also lead to increased
competition. Many companies now provide wireless telephone service using
broadband PCS technology and either have begun or will begin providing paging
service. As result, Metrocall might experience losses in subscribers and
recurring revenues and cost increases to stay competitive.
Other changes in technology could lower the cost of competing services and
products to a level at which Metrocall's services and products would become too
costly to offer or produce or would require it to reduce its prices. Metrocall
cannot assure you that it will be able to develop or introduce new services and
products on a timely basis and at competitive prices, if at all, nor can
Metrocall assure you that its profit margins, inventory costs and cash flows
will not be adversely affected by technological developments.
SATELLITE FAILURES - METROCALL'S ABILITY TO DELIVER PAGING AND MESSAGING
SERVICES COULD BE INTERRUPTED IF SATELLITE FAILURES OCCUR.
Metrocall transmits a majority of its paging and messaging traffic through
its "Global Messaging Gateway," which is a satellite uplink facility. Any
satellite interruption in transmissions might result in loss of subscribers,
loss of revenues and increased costs to find alternative ways to respond to the
interruptions. Disruptions may also impair its ability to gain more subscribers
and increase its revenues. Metrocall also uses land-based communications
facilities such as 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 these satellites and other facilities
also could disrupt Metrocall's paging and messaging services and impair its
results of operations.
SUBSCRIBER TURNOVER - WHEN SUBSCRIBERS CANCEL OR SWITCH THEIR SERVICE, THE COST
TO ATTRACT NEW SUBSCRIBERS IS HIGHER THAN THE COST TO PROVIDE SERVICES TO
EXISTING SUBSCRIBERS AND, AS A RESULT, ADVERSELY AFFECTS METROCALL'S RESULTS OF
OPERATIONS.
Subscriber turnover adversely affects Metrocall's results of operations
because it increases fixed costs. When subscribers cancel their paging or other
messaging services or switch their service to another carrier, Metrocall
attempts to attract new subscribers to replace the disconnected subscribers. The
sales and marketing costs associated with attracting new subscribers exceed the
costs to continue servicing existing subscribers and increase our high fixed
costs. For the twelve months ended December 31, 1997, 1998 and 1999, Metrocall's
subscriber turnover rates were 2.5%, 1.7% and 1.8%, respectively.
REGULATORY CHANGES AND COMPLIANCE - CHANGES IN THE REGULATIONS THAT GOVERN
METROCALL'S BUSINESS MIGHT MAKE IT MORE DIFFICULT OR COSTLY TO OPERATE ITS
BUSINESS OR COMPLY WITH ITS CHANGES.
The FCC and to a lesser extent state regulatory agencies regulate
Metrocall's paging and messaging operations. Those agencies might take actions,
such as changing licensing requirements or the allocation of radio spectrum that
would make it more difficult or costly for Metrocall to operate its business.
For example, the FCC has adopted rules under which it will issue licenses that
would permit companies to offer paging services on a wide-area basis through
competitive bidding. Metrocall believes these rules may simplify its regulatory
compliance burdens, particularly regarding adding or relocating transmitter
sites; however, those rules may also increase its costs of obtaining paging
licenses in the future. In addition, Metrocall cannot assure you that it will be
able to comply with all changes implemented by the agencies regulating its
business, such as changes in licensing or build-out requirements.
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<PAGE> 39
CHALLENGES OF ACQUISITIONS - METROCALL MIGHT NOT BE ABLE IDENTIFY OR FINANCE
BUSINESSES TO ACQUIRE. METROCALL MAY NOT BE ABLE TO INTEGRATE SUCCESSFULLY
BUSINESSES IT ACQUIRES OR MANAGE ITS EXISTING BUSINESS OPERATIONS AS IT ACQUIRES
AND INTEGRATES OTHER BUSINESSES.
Metrocall might not be able to execute its growth strategy in the future if
it is unable to identify attractive businesses to acquire, to negotiate
acceptable terms, to finance potential acquisitions and to integrate acquired
businesses. Even if Metrocall can pursue an acquisition, it would encounter many
obstacles before the acquisition could be successful and increase its revenues
or decrease its costs. The challenges of acquisitions include:
- potential strain on management;
- unanticipated liabilities or contingencies from the acquired company;
- reduced earnings due to increased intangible asset amortization,
increased interest costs, and costs related to integration;
- integrating the acquired business's financial, personnel, computer and
other systems into its own; and
- need to manage growth and implement controls and information systems
appropriate to a growing company.
If Metrocall is unsuccessful in meeting these challenges, its business
could suffer because of the diversion of management's attention away from
existing operations and the increase in costs.
INVESTMENT IN INCISCENT--INCISCENT IS SUBJECT TO ALL THE RISKS ASSOCIATED WITH A
START-UP HIGH TECHNOLOGY COMPANY. AS A RESULT, METROCALL'S INVESTMENT IN
INCISCENT IS SUBJECT TO THOSE RISKS AND METROCALL CANNOT ASSURE YOU THAT IT WILL
BENEFIT FINANCIALLY OR STRATEGICALLY FROM ITS INVESTMENT.
Inciscent is subject to all the risks associated with a start-up high
technology company in a market that is likely to have numerous competitors
offering wireless application services. Metrocall cannot guarantee that it will
realize the financial benefits or strategic objectives it expects from its
investment in Inciscent. The success of Metrocall's investment in Inciscent will
depend on Inciscent's ability to develop, market and sell its wireless
application services. Inciscent's ability to do those things, among others, is
subject to the following:
- Technology. The wireless application services that Inciscent intends to
offer require technology that is still being developed and has not been
fully proven. Even if the technology becomes sufficiently developed,
Inciscent may not have the financial, technical and other resources to
obtain and apply the technology it needs for its services. Metrocall
cannot guarantee that the technology required for the services of
Inciscent will be sufficiently developed or will be available to
Inciscent. In addition, the development of the technology may lag behind
the demands of customers. Metrocall cannot assure you that by the time
the technology is sufficiently developed, consumers will still demand the
wireless application services that Inciscent intends to offer.
- Market Acceptance. The market for wireless application services is
relatively new, and its commercial viability has not been demonstrated.
Metrocall cannot assure you that the wireless services offered by
Inciscent or by Inciscent's competitors will find market acceptance.
Inciscent's ability to generate recurring revenue will depend on its
ability to sign agreements with third parties. Inciscent may not be able
to find or attract a sufficient number of customers to generate any
revenue for the indefinite future.
- Competitors. The market for business-to-business wired-to-wireless
application services is attracting a number of companies, some of which
may have greater resources than Inciscent. As there are more entrants
into the market, Inciscent may lose existing or potential customers to
those entrants or may not be able to offer its services at a competitive
price.
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<PAGE> 40
ANTI-TAKEOVER DEFENSES -- METROCALL HAS ANTI-TAKEOVER DEFENSES THAT COULD DELAY
OR PREVENT AN ACQUISITION AND COULD ADVERSELY AFFECT THE PRICE OF ITS COMMON
STOCK.
Metrocall's certificate of incorporation, bylaws and debt instruments and
Delaware law could delay, defer or prevent an acquisition or change of control
of Metrocall or otherwise adversely affect the price of its common stock. These
provisions include:
- Metrocall has a classified board of directors, which means only a portion
of its board members' terms expire in any given year, thus preventing a
third party from replacing the entire board of directors at one time.
- Metrocall can issue shares of preferred stock without stockholder
approval, which means that the board could issue shares with special
voting rights or other provisions that could deter a takeover.
- Metrocall has a shareholder rights plan, which gives holders of common
stock the ability to purchase additional shares of common stock at a
bargain price if, among other things, a person acquires 20% of the
outstanding common stock.
- Acquisition of more than 50% of Metrocall's voting stock, or replacement
of a majority of the board in certain circumstances, could trigger a
default under Metrocall's credit facility. Also, the same events could
require Metrocall to repurchase its subordinated notes at 101% of
principals plus accrued interest.
- Section 203 of the Delaware law governing corporations will, with some
exceptions, prohibit Metrocall from engaging in any business combination
with an "interested stockholder" for a three-year period after that
stockholder meets the definition of an "interested stockholder."
In addition, each of AT&T Wireless and the three common stock investors has
agreed to restrictions on its ability to take actions to influence control of
Metrocall for a period of time. The presence of these restrictions and the
limitations on the actions of these investors could deter a potential
acquisition, given the total amount of issued and outstanding shares of common
stock in Metrocall that they will own in the aggregate.
DEPENDENCE ON KEY MANAGEMENT PERSONNEL -- IF METROCALL IS UNABLE TO RETAIN KEY
MANAGEMENT PERSONNEL, IT MIGHT NOT BE ABLE TO FIND SUITABLE REPLACEMENTS ON A
TIMELY BASIS AND ITS BUSINESS OPERATIONS MIGHT BE ADVERSELY AFFECTED.
Metrocall's existing operations and continued future developments are
dependent to a significant extent upon the efforts and abilities of certain key
individuals, including William L. Collins III, its Chief Executive Officer,
Steven D. Jacoby, its Chief Operating Officer, and Vincent D. Kelly, its Chief
Financial Officer. These individuals have substantial expertise and experience
in the paging and messaging industry, know the intricacies of Metrocall's
business operations and have insights into the future developments and goals of
the business. If Metrocall is unable to retain these individuals, it is unlikely
Metrocall could find individuals to replace them that would have the same degree
of expertise, experience, knowledge and insight into the industry and the
business operations. Even if Metrocall could find replacements, its business
would be impaired from the disruption associated with changes in management. For
example, Metrocall is largely dependent on these individuals in pursuing its
growth and consolidation strategies and in integrating successfully acquired
businesses. As a result, Metrocall's business operations could be adversely
affected. Metrocall has employment contracts with the named individuals but does
not have non-competition contracts with or "key man" life insurance for any of
them.
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<PAGE> 41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Metrocall is exposed to risks associated with interest rate changes.
Metrocall does not foresee any significant changes in its exposure to
fluctuations in interest rates in the near future. At December 31, 1999, total
outstanding debt consisted of five issues of fixed rate, senior subordinated
notes and the credit facility, which had a variable interest rate:
FIXED RATE DEBT:
<TABLE>
<CAPTION>
PRINCIPAL EFFECTIVE INTEREST PAYMENTS
BALANCE FAIR VALUE INTEREST RATE MATURITY DUE
--------- ---------------- ------------- -------- -----------------
<S> <C> <C> <C> <C>
$100.0 million $ 68.0 million 17.46% 2005 Semi-Annually
$ 0.2 million $ 0.2 million 11.88% 2005 Semi-Annually
$150.0 million $ 93.0 million 16.73% 2007 Semi-Annually
$200.0 million $118.0 million 16.53% 2007 Semi-Annually
$250.0 million $150.0 million 18.38% 2008 Semi-Annually
</TABLE>
No principal repayments are due under these notes until maturity. If at
maturity Metrocall refinanced these notes at interest rates that are 1/4
percentage point higher than their stated rates, its per annum interest costs
would increase by $1.8 million. Based on the outstanding balances at December
31, 1999 a hypothetical immediate 1/2 percentage point change in interest rates
would change the fair value of its fixed rate debt obligations by approximately
$13.5 million.
VARIABLE RATE DEBT:
<TABLE>
<CAPTION>
PRINCIPAL WEIGHTED AVERAGE INTEREST PAYMENTS
BALANCE FAIR VALUE INTEREST RATE MATURITY DUE
--------- ---------------- ---------------- -------- -----------------
<S> <C> <C> <C> <C>
$75.0 million $75.0 million 8.9% 2004 Quarterly
</TABLE>
Metrocall's credit facility bears interest at floating rates and matures in
2004. As of December 31, 1999, there was $75.0 million outstanding under the
credit facility and $125.0 million available for future borrowings. Based on
weighted average borrowings outstanding under the credit facility during fiscal
year 1999, a 1/4 percentage point change in our weighted average interest rate
would have caused interest expense to increase or decrease by approximately $0.2
million. Repayments under the credit facility may be made at anytime without
penalty.
Metrocall currently has an interest rate cap agreement in place that caps
its interest rates, excluding margin fees, on its floating rate debt at 8 1/2%
on up to $50.0 million of outstanding borrowings. This agreement expires on
April 3, 2000.
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<PAGE> 42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
DESCRIPTION PAGE
----------- ----
<S> <C>
FINANCIAL STATEMENTS:
Report of Arthur Andersen LLP, Independent Public
Accountants........................................... F-2
Consolidated Balance Sheets, as of December 31, 1998
and 1999.............................................. F-3
Consolidated Statements of Operations for the three
years ended December 31, 1997, 1998 and 1999.......... F-4
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1997, 1998 and 1999.... F-5
Consolidated Statements of Cash Flows for the three
years ended December 31, 1997, 1998 and 1999.......... F-6
Notes to Consolidated Financial Statements............. F-7
FINANCIAL STATEMENT SCHEDULE:
Report of Arthur Andersen LLP, Independent Public
Accountants........................................... F-26
Schedule II Valuation and Qualifying Accounts............... F-27
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning our directors and executive officers is incorporated
by reference from our Proxy Statement for the Annual Meeting of Stockholders to
be held on May 3, 2000 (the "2000 Proxy Statement") under the caption "Election
of Directors -- Information as to Nominees and Continuing Directors."
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by reference
from the 2000 Proxy Statement under the caption "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the stock ownership of each person known to Metrocall
to be the beneficial owner of more than 5% of the common stock of each director
and executive officer of Metrocall and all directors and executive officers as a
group is incorporated by reference from the 2000 Proxy Statement under the
caption "Beneficial Ownership of Common Stock."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated by reference from the 2000 Proxy Statement under the caption
"Certain Relationships and Related Transactions."
43
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The following financial statements are included in Part II Item 8
<TABLE>
<CAPTION>
DESCRIPTION PAGE
----------- ----
<S> <C>
FINANCIAL STATEMENTS:
Report of Arthur Andersen LLP, Independent Public
Accountants........................................... F-2
Consolidated Balance Sheets, as of December 31, 1998
and 1999.............................................. F-3
Consolidated Statements of Operations for the three
years ended December 31, 1997, 1998 and 1999.......... F-4
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1997, 1998 and 1999.... F-5
Consolidated Statements of Cash Flows for the three
years ended December 31, 1997, 1998 and 1999.......... F-6
Notes to Consolidated Financial Statements............. F-7
FINANCIAL STATEMENT SCHEDULE:
Report of Arthur Andersen LLP, Independent Public
Accountants........................................... F-26
Schedule II Valuation and Qualifying Accounts.......... F-27
</TABLE>
All other schedules are omitted because they are not required,
inapplicable, or the information is otherwise shown in the financial statements
or notes thereto.
(B) REPORTS ON FORM 8-K
None
(C) EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
3.1 Restated Certificate of Incorporation of Metrocall, Inc.
(Metrocall), as amended.+
3.2 Eighth Amended and Restated Bylaws of Metrocall.(a)
4.1 Rights Agreement, dated as of February 25, 2000, between
Metrocall and First Chicago Trust Company of New York, as
Rights Agent.(b)
4.2 Indenture for Metrocall 11% Senior Subordinated Notes due
2008, dated as of December 22, 1998.(c)
4.3 Indenture for 9 3/4% Senior Subordinated Notes due 2007
dated October 21, 1997.(d)
4.4 Indenture for Metrocall 10 3/8% Senior Subordinated Notes
due 2007 dated September 27, 1995.(e)
4.5 Indenture for ProNet Inc. (ProNet) 11 7/8% Senior
Subordinated Notes due 2005 ("ProNet Notes") dated June 15,
1995.(f)
4.6 Supplemental Indenture dated May 28, 1996 for ProNet
Notes.(a)
4.7 Second Supplemental Indenture dated December 30, 1997 for
ProNet Notes.(g)
4.8 Indenture for A+ Network, Inc. 11 7/8% Senior Subordinated
Notes due 2005 ("A+ Notes") dated October 24, 1995.(h)
4.9 First Supplemental Indenture dated November 14, 1996 for A+
Notes.(i)
4.10 Second Supplemental Indenture dated November 15, 1996 for A+
Notes.(i)
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
4.11 Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series
A Convertible Preferred Stock of Metrocall.(j)
4.12 Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series
C Convertible Preferred Stock of Metrocall.(k)
4.13 Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series
E Junior Participating Preferred Stock as filed with the
Secretary of State of the State of Delaware on February 25,
2000.(b)
4.14 Warrant Agreement between Metrocall and the First National
Bank of Boston as Warrant Agent dated as of November 15,
1996.(l)
10.1 Fourth Amended and Restated Loan Agreement by and among
Metrocall, certain lenders and Toronto Dominion (Texas),
Inc. as administrative agent, dated as of December 22,
1998.(c)
10.2 Securities Exchange Agreement by and between AT&T Wireless
Services, Inc. and Metrocall dated February 2, 2000.+
10.3 Common Stock Purchase Agreement by and between HMTF Bridge
MC I, LLC and Metrocall dated February 2, 2000.+
10.4 Common Stock Purchase Agreement by and between Aether
Systems, Inc. and Metrocall dated February 2, 2000.+
10.5 Common Stock Purchase Agreement by and between PSINet Inc.
and Metrocall dated February 2, 2000.+
10.6 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.(m)
10.7 Registration Rights Agreement between Metrocall and McCaw
Communications Companies, Inc. dated October 1, 1998.(k)
10.8 Unit Purchase Agreement among Metrocall and the entities
listed thereto dated November 15, 1996.(l)
10.9 Registration Rights Agreement among Metrocall and the
entities listed thereto dated November 15, 1996.(l)
10.10 Employment Agreement between Metrocall and William L.
Collins III.(n)
10.11 Amendment to Employment Agreement between Metrocall and
Williams L. Collins III.(o)
10.12 Second Amendment to Employment Agreement between Metrocall
and Williams L. Collins III.(p)
10.13 Third Amendment to Employment Agreement between Metrocall
and Williams L. Collins III.(q)
10.14 Employment Agreement between Metrocall and Steven D.
Jacoby.(n)
10.15 Amendment to Employment Agreement between Metrocall and
Steven D. Jacoby.(o)
10.16 Second Amendment to Employment Agreement between Metrocall
and Steven D. Jacoby.(p)
10.17 Third Amendment to Employment Agreement between Metrocall
and Steven D. Jacoby.(q)
10.18 Employment Agreement between Metrocall and Vincent D.
Kelly.(n)
10.19 Amendment to Employment Agreement between Metrocall and
Vincent D. Kelly.(o)
10.20 Second Amendment to Employment Agreement between Metrocall
and Vincent D. Kelly.(p)
10.21 Third Amendment to Employment Agreement between Metrocall
and Vincent D. Kelly.(q)
10.22 Change of Control Agreement between Metrocall and William L.
Collins III.(n)
10.23 Change of Control Agreement between Metrocall and Steven D.
Jacoby.(n)
10.24 Change of Control Agreement between Metrocall and Vincent D.
Kelly.(n)
10.25 Noncompetition Agreement between Metrocall and Jackie R.
Kimzey dated August 8, 1997.(r)
10.26 Noncompetition Agreement between Metrocall and David J.
Vucina dated August 8, 1997.(r)
10.27 Metrocall 1996 Stock Option Plan, as amended.(s)
10.28 Metrocall Amended Employee Stock Purchase Plan.(t)
10.29 Directors' Stock Option Plan, as amended.(u)
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.30 Deed of Lease between Douglas and Joyce Jemal, as landlord,
and Metrocall, as tenant, dated April 14, 1994.(v)
10.31 Lease Agreement dated December 20, 1983 between Beacon
Communications Associates, Ltd. and a predecessor of
Metrocall.(w)
10.32 Consulting, No Conflict and Nondisclosure Agreement dated
May 16, 1996 between Metrocall and Elliott H. Singer.+
10.33 Amendment to Consulting, No Conflict and Nondisclosure
Agreement dated October 1, 1999 between Metrocall and
Elliott H. Singer.+
10.34 Placement Agreement dated December 17,1998 between Metrocall
and Morgan Stanley & Co. Incorporated, NationsBanc
Montgomery Securities LLC, TD Securities (USA) Inc., First
Union Capital Markets and BancBoston Roberston Stephens
Inc.(a)
11.1 Statement re computation of per share earnings.+
21.1 Subsidiaries of Metrocall, Inc.+
23.2 Consent of Arthur Andersen LLP, as independent public
accountants for Metrocall.+
27.1 Financial Data Schedule.+
</TABLE>
- ---------------
+ Filed herewith.
(a) Incorporated by reference to Metrocall's Annual Report on Form 10-K for the
year ended December 31, 1998 filed with the Commission on March 31, 1999.
(b) Incorporated by reference to Metrocall's Registration Statement on Form 8-A
filed with the Commission on February 25, 2000.
(c) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on January 4, 1999.
(d) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on October 23, 1997.
(e) 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.
(f) Incorporated by reference to ProNet's Current Report on Form 8-K filed with
the Commission on July 5, 1995.
(g) 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.
(h) 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.
(i) 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.
(j) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
(k) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on October 16, 1998.
(l) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
(m) Incorporated by reference to Metrocall's Proxy Statement filed with the
Commission on August 31, 1998.
(n) 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.
(o) 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.
46
<PAGE> 47
(p) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 filed with the Commission on August 14,
1998.
(q) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 filed with the Commission on August 13,
1999.
(r) 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.
(s) Incorporated by reference to Metrocall's Proxy Statement filed with the
Commission on April 5, 1999.
(t) 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.
(u) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A, as
amended, for the year ended December 31, 1993 filed with the Commission on
July 21, 1994.
(v) 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.
(w) 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.
47
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 10th day of
March, 2000.
METROCALL, INC.
By: /s/ RICHARD M. JOHNSTON
------------------------------------
Richard M. Johnston
Chairman of the Board
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD M. JOHNSTON Chairman of the Board March 10, 2000
- -------------------------------------
Richard M. Johnston
/s/ WILLIAM L. COLLINS, III Vice Chairman of the Board, March 7, 2000
- ------------------------------------- President, Chief Executive Officer
William L. Collins, III and Director
Chief Financial Officer, Executive March 10, 2000
/s/ VINCENT D. KELLY Vice President, and Treasurer
- ------------------------------------- (Principal Financial and Accounting
Vincent D. Kelly Officer)
/s/ HARRY L. BROCK, JR. Director March 3, 2000
- -------------------------------------
Harry L. Brock, Jr.
/s/ FRANCIS A. MARTIN, III Director March 8, 2000
- -------------------------------------
Francis A. Martin, III
/s/ RONALD V. APRAHAMIAN Director March 4, 2000
- -------------------------------------
Ronald V. Aprahamian
/s/ MICHAEL GREENE Director March 10, 2000
- -------------------------------------
Michael Greene
/s/ ROYCE R. YUDKOFF Director March 10, 2000
- -------------------------------------
Royce R. Yudkoff
/s/ JACKIE R. KIMZEY Director March 7, 2000
- -------------------------------------
Jackie R. Kimzey
/s/ EDWARD E. JUNGERMAN Director March 4, 2000
- -------------------------------------
Edward E. Jungerman
/s/ MAX D. HOPPER Director March 10, 2000
- -------------------------------------
Max D. Hopper
</TABLE>
48
<PAGE> 49
METROCALL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
---------
<S> <C>
Report of Arthur Andersen LLP, Independent Public
Accountants............................................... F-2
Consolidated Balance Sheets, as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the three years
ended December 31, 1997,
1998 and 1999............................................. F-4
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1997, 1998 and 1999........ F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1997,
1998 and 1999............................................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Metrocall, Inc.:
We have audited the accompanying consolidated balance sheets of Metrocall,
Inc. and subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
an audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Metrocall, Inc., and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
ARTHUR ANDERSEN LLP
Vienna, Virginia
February 4, 2000
F-2
<PAGE> 51
METROCALL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 8,436 $ 2,787
Accounts receivable, less allowance for doubtful accounts
of $6,196 and $7,103 as of December 31, 1998 and 1999,
respectively............................................ 44,694 52,015
Prepaid expenses and other current assets................. 8,843 3,333
---------- ----------
Total current assets............................... 61,973 58,135
---------- ----------
PROPERTY AND EQUIPMENT:
Land, buildings and leasehold improvements................ 15,079 15,685
Furniture, office equipment and vehicles.................. 64,438 76,962
Paging and plant equipment................................ 380,313 377,047
Less -- Accumulated depreciation and amortization......... (168,067) (192,329)
---------- ----------
291,763 277,365
---------- ----------
INTANGIBLE ASSETS, net of accumulated amortization of
approximately $219,960 and $433,088 at December 31, 1998
and 1999, respectively.................................... 894,707 682,026
OTHER ASSETS................................................ 2,595 8,021
---------- ----------
TOTAL ASSETS....................................... $1,251,038 $1,025,547
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 771 $ 643
Accounts payable.......................................... 37,533 28,144
Accrued expenses and other current liabilities............ 37,728 42,022
Deferred revenues and subscriber deposits................. 27,769 24,235
---------- ----------
Total current liabilities.......................... 103,801 95,044
---------- ----------
CAPITAL LEASE OBLIGATIONS, less current maturities (Note
5)........................................................ 3,575 3,001
CREDIT FACILITY AND OTHER LONG-TERM DEBT, less current
maturities (Note 5)....................................... 40,444 75,375
SENIOR SUBORDINATED NOTES (Note 5).......................... 698,544 698,608
DEFERRED INCOME TAX LIABILITY............................... 209,642 146,387
MINORITY INTEREST IN PARTNERSHIP............................ 510 510
---------- ----------
Total liabilities.................................. 1,056,516 1,018,925
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
SERIES A CONVERTIBLE PREFERRED STOCK, 14% cumulative; par
value $.01 per share; 810,000 shares authorized; 209,203
shares and 239,517 shares issued and outstanding as of
December 31, 1998 and 1999, respectively and a liquidation
preference of $53,216 and $60,927 at December 31, 1998 and
1999, respectively (Note 6)............................... 45,441 53,939
SERIES B JUNIOR CONVERTIBLE PREFERRED STOCK, 14% cumulative;
par value $.01 per share; 9,000 shares authorized; 1,808
shares and 0 shares issued and outstanding as of December
31, 1998 and 1999, respectively and a liquidation
preference of $18,391 and $0 at December 31, 1998 and
1999, respectively (Note 6)............................... 18,391 --
SERIES C CONVERTIBLE PREFERRED STOCK, 8% cumulative; par
value $.01 per share; 25,000 shares authorized; 9,595
shares and 10,378 shares issued and outstanding as of
December 31, 1998 and 1999, respectively and a liquidation
preference of $96,910 and $104,817 at December 31, 1998
and 1999 respectively (Note 6)............................ 96,910 104,817
STOCKHOLDERS' EQUITY (Note 6)
Common stock, par value $.01 per share; 100,000,000 shares
authorized; 41,583,403 shares and 41,901,908 shares
issued and outstanding at December 31, 1998 and 1999,
respectively............................................ 416 419
Additional paid-in capital................................ 340,249 341,070
Accumulated deficit....................................... (306,885) (493,623)
---------- ----------
33,780 (152,134)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $1,251,038 $1,025,547
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 52
METROCALL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Service, rent and maintenance............................. $ 249,900 $ 416,352 $ 548,700
Product sales............................................. 39,464 48,372 61,487
----------- ----------- -----------
Total revenues.................................... 289,364 464,724 610,187
Net book value of products sold............................. (29,948) (31,791) (39,071)
----------- ----------- -----------
259,416 432,933 571,116
OPERATING EXPENSES:
Service, rent and maintenance............................. 69,254 115,432 146,961
Selling and marketing..................................... 53,802 73,546 97,051
General and administrative................................ 73,753 121,644 170,591
Depreciation and amortization............................. 91,699 234,948 307,344
----------- ----------- -----------
288,508 545,570 721,947
----------- ----------- -----------
Loss from operations.............................. (29,092) (112,637) (150,831)
INTEREST AND OTHER INCOME, NET.............................. 156 849 407
INTEREST EXPENSE............................................ (36,248) (64,448) (85,115)
----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT.............................. (65,184) (176,236) (235,539)
INCOME TAX BENEFIT.......................................... 4,861 47,094 63,055
----------- ----------- -----------
Net loss.......................................... (60,323) (129,142) (172,484)
PREFERRED DIVIDENDS (Note 6)................................ (7,750) (11,767) (16,462)
GAIN ON REPURCHASE OF PREFERRED STOCK....................... -- -- 2,208
----------- ----------- -----------
Loss attributable to common stockholders.......... $ (68,073) $ (140,909) $ (186,738)
=========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE ATTRIBUTABLE TO COMMON
STOCKHOLDERS:
Basic and diluted loss per share attributable to common
stockholders........................................... $ (2.51) $ (3.43) $ (4.47)
=========== =========== ===========
Weighted-average common shares outstanding................ 27,086,654 41,029,601 41,773,789
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 53
METROCALL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL
SHARES PAID-IN ACCUMULATED
OUTSTANDING PAR VALUE CAPITAL DEFICIT TOTAL
----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996...................... 24,521,135 $245 $262,827 $ (97,903) $ 165,169
Issuance of shares in employee stock purchase
plan....................................... 109,747 1 429 -- 430
Adjustment to shares issued in Satellite
Acquisition................................ 74,085 1 (213) -- (212)
Shares issued in acquisition of Radio and
Communications Consultants, Inc. and
Advanced Cellular Telephone, Inc. ......... 494,279 5 2,899 -- 2,904
Issuance of shares in Page America
acquisition................................ 3,911,856 39 18,787 -- 18,826
Exercise of stock options (Note 7)............ 1,896 -- 2 -- 2
Shares issued in ProNet Merger................ 11,435,416 114 51,345 -- 51,459
Preferred dividends (Note 6).................. -- -- -- (7,750) (7,750)
Net loss...................................... -- -- -- (60,323) (60,323)
---------- ---- -------- --------- ---------
BALANCE, December 31, 1997...................... 40,548,414 405 336,076 (165,976) 170,505
Issuance of shares in employee stock purchase
plan and other (Note 7).................... 134,989 2 573 -- 575
Shares issued in settlement of litigation
related to the ProNet Merger............... 900,000 9 3,600 -- 3,609
Preferred dividends (Note 6).................. -- -- -- (11,767) (11,767)
Net loss...................................... -- -- -- (129,142) (129,142)
---------- ---- -------- --------- ---------
BALANCE, December 31, 1998...................... 41,583,403 416 340,249 (306,885) 33,780
Issuance of shares in employee stock purchase
plan and other (Note 7).................... 318,505 3 821 -- 824
Preferred dividends (Note 6).................. -- -- -- (16,462) (16,462)
Gain on repurchase of Series B Preferred (Note
6)......................................... -- -- -- 2,208 2,208
Net loss...................................... -- -- -- (172,484) (172,484)
---------- ---- -------- --------- ---------
BALANCE, December 31, 1999...................... 41,901,908 $419 $341,070 $(493,623) $(152,134)
========== ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 54
METROCALL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (60,323) $(129,142) $(172,484)
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation and amortization.......................... 91,699 234,948 307,344
Amortization of debt financing costs................... 1,152 1,771 3,130
Decrease in deferred income taxes...................... (5,400) (47,391) (63,255)
Other.................................................. 240 (130) --
Changes in current assets and liabilities, net of effects
from acquisitions:
Accounts receivable.................................... (1,408) (2,387) (9,275)
Prepaid expenses and other current assets.............. 2,531 (1,693) 1,157
Accounts payable....................................... 372 2,175 (9,237)
Deferred revenues and subscriber deposits.............. (2,481) (12,263) 1,865
Accrued expenses and other current liabilities......... 784 (4,734) 5,289
--------- --------- ---------
Net cash provided by operating activities......... 27,166 41,154 64,534
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired.......... (113,466) (110,000) --
Capital expenditures, net................................. (69,935) (78,658) (93,327)
Proceeds from sale of businesses (Note 3)................. 11,000 -- 8,572
Additions to intangibles.................................. (5,070) (1,885) (819)
Other..................................................... 1,042 (1,204) (2,654)
--------- --------- ---------
Net cash used in investing activities............. (176,429) (191,747) (88,228)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt (Note 5)..................... 364,261 248,260 81,000
Repayment of long-term debt (Note 5)...................... -- -- (46,000)
Principal payments on long-term debt...................... (194,222) (104,362) (882)
Repurchase of Series B Preferred.......................... -- -- (16,240)
Net proceeds from issuance of common stock................ 432 577 767
Deferred debt financing costs and other................... (7,229) (10,342) (600)
--------- --------- ---------
Net cash provided by financing activities......... 163,242 134,133 18,045
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 13,979 (16,460) (5,649)
CASH AND CASH EQUIVALENTS, beginning of period.............. 10,917 24,896 8,436
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 24,896 $ 8,436 $ 2,787
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 55
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND RISK FACTORS
Metrocall, Inc. and subsidiaries, is a leading provider of local, regional
and national paging and other wireless messaging services in the United States.
Through its nationwide wireless network, Metrocall provides messaging services
to over 1,000 U.S. cities, including the top 100 Standard Metropolitan
Statistical Areas.
Risks and Other Important Factors
Metrocall sustained net losses of $60.3 million, $129.1 million and $172.5
million for the years ended December 31, 1997, 1998 and 1999, respectively.
Metrocall's loss from operations for the year ended December 31, 1999 was $150.8
million. In addition, at December 31, 1999, Metrocall had an accumulated deficit
of approximately $493.6 million and a deficit in working capital of $36.9
million. Metrocall's losses from operations and net losses are expected to
continue for additional periods in the future. There can be no assurance that
its operations will become profitable.
Metrocall's operations require the availability of substantial funds to
finance the maintenance and growth of its existing paging operations and
subscriber base, development and construction of future wireless communications
networks, expansion into new markets, and the acquisition of other wireless
communications companies. At December 31, 1999, Metrocall had approximately
$777.6 million outstanding under its credit facility, senior subordinated notes,
capital leases and other long-term debt. Amounts available under its credit
facility are subject to certain financial covenants and other restrictions. At
December 31, 1999, Metrocall was in compliance with each of the covenants under
its $200.0 million credit facility. Metrocall's ability to borrow additional
amounts in the future, including amounts currently available under the credit
facility is dependent on Metrocall's ability to comply with the provisions of
its credit facility as well as the availability of financing in the capital
markets. At December 31, 1999, Metrocall had $125.0 million of additional
borrowings available under its credit facility based on its total leverage
covenant under which total debt cannot exceed six-times annualized operating
cash flow.
Metrocall is also subject to additional risks and uncertainties including,
but not limited to, changes in technology, business integration, competition,
government regulation and subscriber turnover.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
In addition to Metrocall, the accompanying consolidated financial
statements include the accounts of Metrocall's 61% interest in Beacon Peak
Associates Ltd. ("Beacon Peak") and Metrocall of Virginia, Inc. and Metrocall,
USA, Inc., nonoperating wholly owned subsidiaries that hold certain regulatory
licenses issued by the Federal Communications Commission (the "FCC"). Beacon
Peak owns land adjacent to Metrocall's headquarters building. The minority
interest in Beacon Peak was $510,000 as of December 31, 1998 and 1999.
All significant intercompany transactions have been eliminated in
consolidation.
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
Metrocall recognizes revenue under service, rental and maintenance
agreements with customers as the related services are performed. Metrocall
leases (as lessor) pagers and messaging devices under operating leases.
Substantially all the leases are on a month-to-month basis. Advance billings for
services are deferred and recognized as revenue when earned. Sales of equipment
are recognized upon delivery.
F-7
<PAGE> 56
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cash and Cash Equivalents
Cash equivalents consist primarily of repurchase agreements, all having
maturities of ninety days or less when purchased. The carrying amount reported
in the accompanying balance sheets for cash equivalents approximates fair value
due to the short-term maturity of these instruments.
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
Transmission and plant equipment............................ 5-12
</TABLE>
New pagers and advanced messaging devices are depreciated using the
half-year convention upon acquisition. Betterments to acquired pagers and the
net book value of lost pagers are charged to depreciation expense. Subscriber
equipment sold is recorded in the consolidated statement of operations at their
net book value at the date of sale. Betterments to acquired subscriber equipment
and the net book value of lost subscriber equipment is charged to depreciation
expense. Devices leased to customers under operating leases continue to be
depreciated over their remaining useful lives. As of December 31, 1998 and 1999,
the balance of subscriber equipment was $101.8 million and $183.3 million,
respectively, net of accumulated depreciation of $87.8 million and $79.1
million, respectfully.
Purchases of property and equipment in the accompanying consolidated
statements of cash flows are reflected net of the net book value of products
sold to approximate the net addition to subscriber equipment.
Metrocall currently purchases a significant amount of its subscriber paging
equipment from one supplier. Although there are other manufacturers of similar
subscriber paging equipment, the inability of this supplier to provide equipment
required by Metrocall could result in a decrease of pager placements and decline
in sales, which could adversely affect operating results.
Intangible Assets
Intangible assets, net of accumulated amortization, consist of the
following at December 31, 1998 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, AMORTIZATION
------------------- PERIOD IN
1998 1999 YEARS
-------- -------- ------------
<S> <C> <C> <C>
State certificates and FCC licenses......................... $325,116 $289,155 10
Goodwill.................................................... 198,692 175,404 10
Customer lists.............................................. 328,651 184,617 3
Debt financing costs........................................ 23,540 21,184 8-12
Non-compete covenants....................................... 17,125 10,406 3
Other....................................................... 1,583 1,260 3-7
-------- --------
$894,707 $682,026
======== ========
</TABLE>
Debt financing costs represent fees and other costs incurred in connection
with the issuance of long-term debt. These costs are amortized as interest
expense over the term of the related debt using the effective interest rate
method.
F-8
<PAGE> 57
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Lived Assets
Long-lived assets and identifiable intangibles, including goodwill
allocated thereto, to be held and used are reviewed for impairment on a periodic
basis and whenever events or changes in circumstances indicate that the carrying
amount should be reviewed. Impairment is measured by comparing the book value to
the estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. Metrocall has determined that there has
been no impairment in the carrying value of long-lived assets reflected in the
accompanying balance sheets.
Metrocall currently evaluates enterprise level goodwill for impairment by
comparing estimated future undiscounted cash flows over the remaining life of
the goodwill to the carrying value of goodwill. If an impairment exists, entity
level goodwill is written down to its fair value based on estimated future cash
flows of Metrocall discounted at risk adjusted interest rates.
Effective January 1, 1998, Metrocall reduced the estimated useful lives of
certain intangibles recorded in connection 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 year ended December 31, 1998, by
approximately $26.0 million.
Loss Per Common Share Attributable to Common Stockholders
Basic earnings per share is computed by dividing loss attributable to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted earnings per share is similar to basic earnings per
share, except the weighted-average number of common shares outstanding is
increased to include dilutive stock options and warrants. Stock options and
warrants were not included in the computation of loss per share in any period
presented as the effect would be antidilutive. As a result, the basic and
diluted earnings per share amounts are identical.
Income Taxes
As prescribed by Statement of Financial Accounting Standards ("SFAS") No.
109 "Accounting for Income Taxes," Metrocall utilizes the asset and liability
method of accounting for income taxes. Under this method, deferred income taxes
are recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities, less valuation allowances, if required.
Reclassifications
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the current year's presentation.
3. ACQUISITION AND DISPOSITION
AT&T Wireless Messaging Division ("AMD")
On October 2, 1998, Metrocall closed on a stock purchase agreement with
AT&T Wireless Services, Inc. ("AT&T Wireless"), McCaw Communications Companies,
Inc. and AT&T Two Way Messaging Communications, Inc. to acquire the stock of
certain subsidiaries of AT&T Wireless that operated the paging and messaging
services business of AT&T Corporation and a nationwide 50KHz/50KHz narrowband
personal communication services license. The purchase price for the business and
license acquired was $110.0 million in cash and 9,500 shares of Series C
Preferred Stock (see Note 6) having a value upon liquidation equal to its stated
value. The total purchase price was $205.0 million. The cash portion of the
purchase price, including fees and expenses, was funded through borrowings under
Metrocall's credit facility. The acquisition was accounted for as a purchase for
financial reporting purposes.
F-9
<PAGE> 58
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price was allocated as follows (in thousands):
<TABLE>
<S> <C>
Plant and equipment......................................... $ 64,215
Accounts receivable and other assets........................ 18,773
Non compete agreements...................................... 17,833
Customer lists.............................................. 162,428
FCC licenses and state certificates......................... 45,385
Liabilities assumed......................................... (30,531)
Deferred income tax liability............................... (73,103)
--------
Total purchase price allocation................... $205,000
========
Cash paid................................................... 110,000
Series C Preferred issued................................... $ 95,000
--------
Total consideration............................... $205,000
========
</TABLE>
The unaudited pro forma information presented below reflects the
acquisition as if it had occurred on January 1, 1998. The results are not
necessarily indicative of future operating results or of what would have
occurred had the acquisition actually been consummated on that date (in
thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Revenues.................................................... $ 613,211
Loss attributable to common stockholders.................... $(165,680)
Loss per share attributable to common stockholders.......... $ (4.04)
</TABLE>
Sale of Electronic Tracking Systems Business
Effective November 1, 1999, Metrocall sold to a third party the assets of
its Electronic Tracking Systems business that Metrocall had acquired in its
December 1997 merger with ProNet. Total proceeds were approximately $12.7
million including cash proceeds of approximately $8.6 million and a note
receivable of approximately $4.1 million. Metrocall recorded the note receivable
at its fair value on the accompanying balance sheet. No gain or loss was
recognized on the transaction for financial reporting purposes.
F-10
<PAGE> 59
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. SUPPLEMENTARY BALANCE SHEET INFORMATION
Prepaid expenses and other current assets and accrued expenses and other
current liabilities consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS)
------------------
1998 1999
------- -------
<S> <C> <C>
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Inventory of electronic tracking systems business......... $ 2,406 $ --
Tax refunds............................................... 2,000 --
Deposits.................................................. 1,258 --
Prepaid advertising....................................... 1,101 1,282
Prepaid insurance......................................... 887 556
Other..................................................... 1,191 1,495
------- -------
TOTAL............................................. $ 8,843 $ 3,333
======= =======
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued interest payable.................................. $14,216 $21,829
Accrued severance, payroll and payroll taxes.............. 11,542 7,813
Accrued state and local taxes............................. 4,981 5,817
Accrued insurance claims.................................. 1,047 1,771
Accrued acquisition liabilities........................... 3,321 2,217
Other..................................................... 2,621 2,575
------- -------
TOTAL............................................. $37,728 $42,022
======= =======
</TABLE>
5. LONG-TERM DEBT AND LEASE OBLIGATIONS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Credit Facility, interest at a floating rate, defined below,
with principal payments beginning March 2001.............. $ 40,000 $ 75,000
10 3/8% Senior subordinated notes due in 2007 (the "1995
Notes")................................................... 150,000 150,000
9 3/4% Senior subordinated notes due in 2007 (the "1997
Notes")................................................... 200,000 200,000
11 7/8% Senior subordinated notes due in 2005 (the "ProNet
Notes")................................................... 100,000 100,000
11% Senior subordinated notes due in 2008 (the "1998 Notes")
(net of unamortized discount of $1,740 and $1,566 in 1998
and 1999)................................................. 248,260 248,434
11 7/8% Senior subordinated notes due in 2005 (the "A+
Notes")................................................... 284 174
Capital lease obligations at a weighted average interest
rate of 9.7%.............................................. 4,282 3,575
Other....................................................... 508 444
-------- --------
743,334 777,627
Less -- Current portion..................................... 771 643
-------- --------
Long-term portion........................................... $742,563 $776,984
======== ========
</TABLE>
Annual maturities of long-term debt after December 31, 1999 are as follows
(in thousands): $643 in 2000; $735 in 2001; $836 in 2002; $25,948 in 2003;
$50,813 in 2004 and $698,652 thereafter.
F-11
<PAGE> 60
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair value of the long-term debt excluding capital lease
obligations is listed below. The fair value of the senior subordinated notes is
based on market quotes as of the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Credit Facility.................................. $ 40,000 $ 40,000 $ 75,000 $ 75,000
Senior subordinated notes........................ 698,544 695,045 698,608 429,174
Other............................................ 508 503 444 444
-------- -------- -------- --------
Total debt, excluding capital leases... $739,052 $735,548 $774,052 $504,618
======== ======== ======== ========
</TABLE>
Credit Facility
In October 1997, Metrocall and its bank lenders executed an amended and
restated credit agreement (the "1997 Credit Agreement"). Under the 1997 Credit
Agreement, subject to certain conditions, Metrocall was able to borrow up to
$300 million under two reducing loan facilities. On October 2, 1998, Metrocall
and its bank lenders amended and restated the 1997 Credit Agreement to increase
the amount of borrowings available under the 1997 Credit Agreement, as amended,
to $400 million. The additional $100 million term loan facility was used to fund
the cash portion of the AMD acquisition.
On December 22, 1998, Metrocall revised the $400 million credit facility
and entered into a fourth amended and restated loan agreement with its bank
lenders (the "1998 Credit Agreement"). Subject to certain conditions set forth
in the 1998 Credit Agreement, Metrocall may borrow up to $200 million under two
loan facilities through December 31, 2004. The first facility ("Facility A") is
a $150 million reducing revolving credit facility and the second ("Facility B")
is a $50 million reducing term credit facility (together Facility A and Facility
B are referred to as the "Credit Facility"). The Credit Facility is secured by
substantially all of Metrocall's assets. Required quarterly principal
repayments, as defined, begin on March 31, 2001 and continue through December
31, 2004. As of December 31, 1999, approximately $125.0 million of additional
borrowings were available under the Credit Facility.
The 1998 Credit Agreement requires compliance with certain financial and
operating covenants. Metrocall is required to maintain certain financial ratios,
including total debt to annualized operating cash flow, senior debt to
annualized operating cash flow, annualized operating cash flow to pro forma debt
service, total sources of cash to total uses of cash, and operating cash flow to
interest expense (in each case, as such terms are defined in the 1998 Credit
Agreement). The covenants, among other restrictions, also limit additional
indebtedness and future mergers and acquisitions without the approval of the
lenders and restrict the payment of cash dividends and other stockholder
distributions by Metrocall. The 1998 Credit Agreement also prohibits certain
changes in ownership control of Metrocall, as defined. At December 31, 1999,
Metrocall was in compliance with all of these covenants. The Credit Agreement
also includes a material adverse effect clause under which the Credit Facility
could be in default if there is any material adverse effect upon Metrocall's
assets, liabilities, financial condition, results of operations, properties or
business. Metrocall believes that the declaration of a material adverse effect
default by its bank lenders is remote.
Under the Credit Facility, Metrocall may designate all or any portion of
the borrowings outstanding as either a floating base rate advance or a
Eurodollar rate advance with an applicable margin that ranges from 0.625% to
1.875% for base rate advances and 1.750% to 3.000% for Eurodollar rate advances.
The predefined margins are based upon the level of indebtedness outstanding
relative to annualized cash flow, as defined in the 1998 Credit Agreement.
Commitment fees of 0.375% to 0.750% per year (depending on the level of
Metrocall's indebtedness outstanding to annualized cash flow)
F-12
<PAGE> 61
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are charged on the average undrawn balance of the Facility A commitment and are
charged to interest expense as incurred.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
OTHER CREDIT FACILITY DATA 1997 1998 1999
-------------------------- -------- -------- -------
<S> <C> <C> <C>
Weighted average balances outstanding....................... $170,000 $178,600 $79,536
Interest expense............................................ $ 15,500 $ 13,100 $ 7,067
Weighted average interest rate.............................. 9.2% 7.3% 8.9%
Effective interest rate..................................... 8.2% 7.8% 8.9%
</TABLE>
Senior Subordinated Notes
10 3/8% SENIOR SUBORDINATED NOTES
In October 1995, Metrocall issued $150.0 million aggregate principal amount
of 10 3/8% senior subordinated notes due 2007 (the "1995 Notes"). Interest on
the 1995 Notes is payable semi-annually on April 1 and October 1. The 1995 Notes
are general unsecured obligations subordinated in right to the Metrocall's
existing long-term debt and other senior obligations, as defined. The 1995 Notes
contain various covenants that, among other restrictions, limit the Metrocall's
ability to incur additional indebtedness, pay dividends, engage in certain
transactions with affiliates, sell assets and engage in mergers and
consolidations except under certain circumstances.
The 1995 Notes may be redeemed at Metrocall's option after October 1, 2000
at the following redemption prices plus accrued and unpaid interest during the
12-month period beginning on October 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000........................................................ 105.188%
2001........................................................ 103.458
2002........................................................ 101.729
2003 and thereafter......................................... 100.000
</TABLE>
In the event of a change in control of Metrocall, as defined, each holder
of the 1995 Notes will have the right, at such holder's option, to require
Metrocall to purchase that holder's 1995 Notes at a purchase price equal to 101%
of the principal amount thereof, plus any accrued and unpaid interest to the
date of repurchase.
9 3/4% SENIOR SUBORDINATED NOTES
In October 1997, Metrocall issued $200.0 million aggregate principal amount
of 9 3/4% senior subordinated notes due 2007 (the "1997 Notes). The 1997 Notes
bear interest, payable semi-annually on January 15 and July 15. The 1997 Notes
are callable beginning November 1, 2002. The 1997 Notes are unsecured
obligations of Metrocall, subordinated to all its present and future senior
indebtedness. The 1997 Notes contain various covenants that, among other
restrictions, limit Metrocall's ability to incur additional indebtedness, pay
dividends, engage in certain transactions with affiliates, sell assets and
engage in mergers and consolidations except under certain circumstances.
The 1997 Notes may be redeemed at Metrocall's option on or after November
1, 2002 at the following redemption prices plus accrued and unpaid interest
during the 12-month period beginning on November 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 104.8750%
2003........................................................ 102.4375
2004 and thereafter......................................... 100.0000
</TABLE>
F-13
<PAGE> 62
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the event of a change of control of Metrocall, as defined, each holder
of the 1997 Notes will have the right, at such holder's option, to require
Metrocall to repurchase that holder's 1997 Notes at a purchase price equal to
101% of the principal amount thereof, plus any accrued and unpaid interest to
the date of repurchase.
11 7/8% Senior Subordinated Notes (the "A+ Notes")
During 1998 and 1999, Metrocall redeemed approximately $2.3 million and
$110,000 of aggregate principal of 11 7/8% senior subordinated notes due 2005.
At December 31, 1998 and 1999, $284,000 and $174,000 of the A+ Notes were
outstanding. The A+ Notes bear interest, payable semi-annually on May 1 and
November 1.
11 7/8% Senior Subordinated Notes (the "ProNet Notes")
In connection with the ProNet merger, Metrocall assumed $100.0 million
aggregate principal amount of ProNet's 11 7/8% senior subordinated notes due
2005. The ProNet Notes bear interest, payable semi-annually on June 15 and
December 15. The ProNet Notes are general unsecured obligations subordinated in
right to Metrocall's existing long-term debt and other senior obligations, as
defined. The ProNet Notes contain various covenants that, among other
restrictions, limit Metrocall's ability to incur additional indebtedness, pay
dividends, engage in certain other transactions with affiliates, sell assets and
engage in mergers and consolidations except under certain conditions.
The ProNet Notes may be redeemed at Metrocall's option on or after June 15,
2000 at the following redemption prices plus accrued and unpaid interest during
the 12-month period beginning on June 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2000........................................................ 105.938%
2001........................................................ 103.958
2002........................................................ 101.979
2003 and thereafter......................................... 100.000
</TABLE>
In the event of a change of control of Metrocall, as defined, each holder
of the ProNet Notes will have the right to require that Metrocall repurchase
such holder's ProNet Notes at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase.
11% Senior Subordinated Notes (the "1998 Notes")
In December 1998, Metrocall completed a private placement of $250.0 million
aggregate principal amount of 11% senior subordinated notes due 2008 (the "1998
Notes"). The 1998 Notes bear interest, payable semi-annually on March 15 and
September 15. The Notes are callable beginning September 15, 2003. The 1998
Notes are unsecured obligations of Metrocall, subordinated to all its present
and future senior indebtedness. During 1999, Metrocall registered the 1998 Notes
under the Securities Act of 1933. The 1998 Notes contain various covenants that,
among other restrictions, limit Metrocall's ability to incur additional
indebtedness, pay dividends, engage in certain other transactions with
affiliates, sell assets and engage in mergers and consolidations except under
certain conditions.
The 1998 Notes may be redeemed at the Metrocall's option on or after
September 15, 2003 at the following redemption prices plus accrued and unpaid
interest during the 12-month period beginning on September 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 105.500%
2004........................................................ 103.667
2005........................................................ 101.833
2006 and thereafter......................................... 100.000
</TABLE>
F-14
<PAGE> 63
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the event of a change of control of Metrocall, as defined, each holder
of the 1998 Notes will have the right to require that Metrocall repurchase such
holder's 1998 Notes at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the date of repurchase.
Lease Obligations
Metrocall is party to one capital lease agreement for office space. The
future minimum rental commitment under this lease is as follows (in thousands):
$896 in 2000, $923 in 2001, $951 in 2002, $980 in 2003 and $752 in 2004. At
December 31, 1999, the aggregate future minimum capital lease payment was $4,502
including interest of $927.
Metrocall has various operating lease arrangements (as lessee) for office
space and communications equipment sites. Rental expenses related to operating
leases were approximately (in thousands) $21,675, $37,362 and $48,311 for the
years ended December 31, 1997, 1998 and 1999, respectively.
Minimum rental payments as of December 31, 1999, required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year are as follows (in thousands): $27,091 in 2000, $17,550 in 2001, $10,079 in
2002, $4,622 in 2003, $1,917 in 2004 and $422 thereafter.
Rent expense for lease agreements with related parties for office space,
tower sites and transmission systems, excluding consolidated entities, was
approximately (in thousands) $761, $1,033, and $997 for the years ended December
31, 1997, 1998 and 1999, respectively. Metrocall leases office and warehouse
space from a company owned by a director. The annual rental commitment under
these leases, is approximately $570,000. Metrocall believes the terms of these
leases are at least as favorable as those that could be obtained from a
non-affiliated party.
6. CAPITAL STOCK
At December 31, 1999, Metrocall's authorized capital stock consisted of
100,000,000 shares of common stock and 1,000,000 shares of preferred stock, par
value $0.01 per share ("Preferred Stock"), of which 810,000 shares have been
designated as the Series A Convertible Preferred Stock (the "Series A
Preferred") and 25,000 shares have been designated as the Series C Convertible
Preferred Stock (the "Series C Preferred"). Metrocall repurchased and retired
its Series B Junior Convertible Preferred Stock (the "Series B Preferred") in
January 1999. In January 2000, Metrocall's stockholders approved the increase of
the number of shares of common stock authorized to 200,000,0000 shares.
Common Stock
Because the FCC places limitations on foreign ownership of its licenses, no
more than 20 percent of Metrocall's common stock may, in the aggregate, be owned
directly, or voted by a foreign government, a foreign corporation, or resident
of a foreign country. Metrocall's amended and restated certificate of
incorporation permits the redemption of the common stock from stockholders,
where necessary, to protect its regulatory licenses. Such stock may be redeemed
at fair market value or, if the stock was purchased within one year of such
redemption, at the lower of fair market value or such holder's purchase price.
Series A Preferred
At December 31, 1999, there were 239,517 shares of the Series A Preferred
outstanding, including 30,314 Series A Preferred shares issued during 1999 as
dividends and accrued but unpaid dividends were approximately $1.0 million. Each
share of the Series A Preferred has a stated value of $250 per share and has a
liquidation preference over shares of Metrocall's common stock equal to the
stated value. The Series A Preferred carries a dividend of 14% of the stated
value per year, payable semi-annually in cash or in additional shares of the
Series A Preferred, at Metrocall's option. Upon the occurrence of a triggering
event, as defined in the certificate of designation for the Series A Preferred,
and so long as the triggering event continues, the dividend rate increases to
16% per year. Triggering events include, among other events, (i) Metrocall
issues or incurs indebtedness or equity securities senior with respect to
payment of dividends or distributions
F-15
<PAGE> 64
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on liquidation or redemption to the Series A Preferred in violation of
limitations set forth in the certificate of designation, and (ii) default on the
payment of indebtedness in an amount of $5,000,000 or more.
Holders of the Series A Preferred have the right, beginning five years from
the date of issuance, to convert their Series A Preferred (including shares
issued as dividends) into shares of common stock based on the market price of
the common stock at the time of conversion. The Series A Preferred may, at the
holders' option, be converted sooner upon a change of control of Metrocall, as
defined in the certificate of designation. The Series A Preferred must be
redeemed on November 15, 2008, for an amount equal to the stated value plus
accrued and unpaid dividends.
Beginning November 15, 1999, Metrocall had the ability to redeem the Series
A Preferred in whole or in part (subject to certain minimums). The redemption
price prior to November 15, 2001, is equal to the stated value of the shares of
the Series A Preferred, plus accrued and unpaid dividends, and a redemption
premium, as defined. After November 15, 2001, the Series A Preferred Stock may
be redeemed for the stated value of $250 per share, without a premium.
Holders of Series A Preferred have the right to elect two members to
Metrocall's Board of Directors. If a triggering event has occurred and is
continuing, the holders of the Series A Preferred have the right to elect
additional directors so that directors elected by such holders shall constitute
no less than 40% of the members of the Board of Directors. Metrocall is required
to obtain the approval of the holders of not less than 75% of the Series A
Preferred before undertaking (i) any changes in Metrocall's certificate of
incorporation and bylaws that adversely affect the rights of holders of the
Series A Preferred, (ii) a liquidation, winding up or dissolution of Metrocall
or the purchase of shares of capital stock of Metrocall from holders of over 5%
of the issued and outstanding voting securities, (iii) any payment of dividends
on or redemption of common stock; or (iv) issuance of any additional shares of
the Series A Preferred (except in payment of dividends) or any shares of capital
stock having preferences on liquidation or dividends ranking equally to the
Series A Preferred. Metrocall is also required to obtain approval of holders of
not less than a majority of the issued and outstanding Series A Preferred before
undertaking (i) any acquisition involving consideration having a value equal to
or greater than 50% of the market capitalization of the Company or (ii) any sale
of Metrocall unless it redeems the Series A Preferred.
Series B Preferred
Through January 1999, the Board of Directors had designated 9,000 shares of
Preferred Stock as Series B Junior Convertible Preferred Stock (the "Series B
Preferred"). In January 1999, Metrocall repurchased and retired all 1,808 issued
and outstanding shares of the Series B Preferred for approximately $16.2
million, representing a discount of $2.2 million from its carrying value. The
gain on the repurchase was treated as an adjustment to the loss attributable to
common stockholders and has been included in Metrocall's earnings per share
calculations.
Series C Preferred
At December 31, 1999, there were 10,378 shares of the Series C Preferred
outstanding, including 783 shares of Series C Preferred issued during 1999 as
dividends. Accrued but unpaid dividends were approximately $1.0 million. Each
share of Series C Preferred had a stated value of $10,000 per share and a
liquidation preference, which is junior to the Series A Preferred but senior to
the shares of Metrocall common stock, equal to its stated value. The Series C
Preferred carried a dividend of 8% of the stated value per year, payable
semi-annually in cash or in additional shares of the Series C Preferred, at
Metrocall's option.
On February 2, 2000, Metrocall and the sole holder agreed to exchange
Metrocall common stock for the Series C Preferred. Please refer to Note 11,
"Subsequent Events."
Warrants
In connection with the issuance of the Series A Preferred discussed above,
Metrocall issued warrants to purchase common stock. Each warrant represented the
right of the holder to purchase 18.266 shares of common stock or an
F-16
<PAGE> 65
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
aggregate of 2,915,254 shares of common stock. The exercise price per share is
$7.40. The warrants expire November 15, 2001. The total value allocated to the
warrants for financial reporting purposes, $7.9 million or $2.70 per share, is
being accreted over the term of the Series A Preferred as preferred dividends.
On February 2, 2000, in connection with the common stock investments the
exercise price of the Warrants and the number of shares of common stock that may
be purchased upon exercise of the Warrants have been adjusted. Please refer to
Note 11, "Subsequent Events."
7. EMPLOYEE STOCK OPTION AND OTHER BENEFIT PLANS
STOCK OPTION PLANS
1993 Stock Option Plan
Under the 1993 Metrocall Stock Option Plan, as amended, (the "1993 Plan"),
options to purchase up to an aggregate of 975,000 shares of common stock were
reserved for grants to key employees. The 1993 Plan limits the maximum number of
shares that may be granted to any person eligible under the 1993 Plan to
325,000. All options have been issued with exercise prices equal to the fair
market value of the common stock at the date of grant. All options granted under
the 1993 Plan become fully vested and exercisable on the second anniversary of
the date of grant. Each option granted under the 1993 Plan will terminate no
later than ten years after the date the option was granted.
Under the 1993 Metrocall Directors Stock Option Plan (the "Directors
Plan"), options to purchase up to an aggregate of 25,000 shares of common stock
are available for grants to members of the Board of Directors who are neither
officers nor employees of Metrocall ("Eligible Director"). Options issued under
the Directors Plan vest fully on the six-month anniversary of the date of grant.
Each Eligible Director was also granted an option to purchase 1,000 shares of
common stock on the first and second anniversaries of the grant date of the
initial option if the director continues to be an Eligible Director on each of
such anniversary dates.
1996 Stock Option Plan
Under the Metrocall 1996 Stock Option Plan (as amended, the "1996 Plan"),
options to purchase up to an aggregate of 8 million shares of common stock have
been reserved for grant to key employees, officers and nonemployee directors
("Qualified Directors"). The 1996 Plan limits the maximum number of shares that
may be granted to any person eligible under the 1996 Plan to 1 million in any
calendar year. If any option granted under the 1996 Plan expires or terminates
prior to exercise in full, the shares subject to that option shall be available
for future grants under the 1996 Plan. Substantially all employees and Qualified
Directors of Metrocall are eligible to participate in the 1996 Plan. All options
granted under the 1996 Plan become fully vested and exercisable on the second
anniversary of the date of grant. Each option granted under the 1996 Plan will
terminate no later than ten years from the date the option was granted.
Under the 1996 Plan, both incentive stock options and nonstatutory stock
options are available for grant to employees. For incentive stock options, the
option price shall not be less than the fair market value of a share of common
stock on the date the option is granted. For nonstatutory options, the option
price shall not be less than the par value of common stock. All options granted
to Qualified Directors shall be nonstatutory options. Upon approval of the 1996
Plan, each Qualified Director was granted an initial option to purchase 10,000
shares of common stock. Thereafter, every Qualified Director will be granted an
initial option to purchase 10,000 shares of common stock at the time the
Qualified Director commences service on the Board of Directors. Subsequently,
each Qualified Director who received an initial grant of an option shall receive
an additional option to purchase 1,000 shares of common stock on each
anniversary of the initial option, provided that the director continues to be a
Qualified Director on each anniversary date. Options granted to Qualified
Directors shall become fully vested six months after the date of grant. The
exercise price for options granted to Qualified Directors shall be the fair
market value of common stock on the date the option is granted.
In connection with the 1997 ProNet merger, Metrocall exchanged options to
purchase 1,212,539 shares of its common stock with former option holders of the
acquired company, in exchange for their options held. The options issued by
Metrocall were fully vested and exercisable upon issuance.
F-17
<PAGE> 66
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In February 1997, the Compensation Committee of the Board of Directors
approved a change in the exercise price for substantially all outstanding
options for then current employees, officers and directors. The new exercise
price was $6.00 per share, the fair market value on the date of the change. The
repricing established a new measurement date for the options.
Employee Stock Purchase Plan
Under the Metrocall, Inc. 1996 Employee Stock Purchase Plan (the "Stock
Purchase Plan"), up to 1 million shares of common stock may be purchased by
eligible employees through payroll deductions of up to 15% of their eligible
compensation. Substantially all full-time employees are eligible to participate
in the Stock Purchase Plan. Participants may elect to purchase shares of common
stock at the lesser of 85% of the fair market value on either the first or last
trading day of each deduction period. No employee may purchase in one calendar
year shares of common stock having an aggregate fair market value in excess of
$25,000. Employees were issued 109,747 shares, 138,413 shares and 276,967 shares
of common stock in 1997, 1998, and 1999, respectively, under the Stock Purchase
Plan. At December 31, 1999, 201,109 shares of common stock were due to Stock
Purchase Plan participants, which were subsequently issued in January 2000.
Accounting for Stock-Based Compensation
Metrocall accounts for its stock option plans under Accounting Principles
Board (APB) Opinion No. 25 "Accounting for Stock Issued to Employees." In
accordance with the recognition requirements set forth under this pronouncement,
no compensation expense was recognized for the three years ended December 31,
1999 because Metrocall had granted options to acquire common stock at exercise
prices equal to the fair value of the common stock on the dates of grant.
Metrocall adopted SFAS No. 123 "Accounting for Stock Based Compensation" for
disclosure purposes only.
For disclosure purposes, the fair value of each stock purchase and option
grant was estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions in 1997, 1998, and 1999,
respectively: expected volatility of 64.4%, and 69.7%, and 79.77% risk free
interest rate of 5.7%, 4.7% and 6.4%, and expected life of ten years for all
option grants. The weighted-average fair value of stock options granted in 1997,
1998 and 1999 was $4.35 per share, $4.15 per share, and $2.88 per share
respectively. The weighted-average fair value of stock purchase rights in 1997,
1998 and 1999 was $4.67 per share, $5.23 per share, and $2.21 per share
respectively.
Under the above model, the total value of stock options granted in 1997,
1998 and 1999 was approximately $3.0 million, $7.0 million and $5.0 million,
respectively, which would be recognized ratably on a pro forma basis over the
two year vesting period, and the total value of the stock purchase rights
granted in 1997, 1998 and 1999 was $583,000, $913,000, and $865,000,
respectively. Had compensation cost for Metrocall compensation and purchase
plans been determined in accordance with SFAS No. 123, Metrocall loss and loss
per share information would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Pro forma loss attributable to common stockholders......... $(72,664) $(146,673) $(190,077)
Pro forma loss per share attributable to common
stockholders............................................. (2.68) (3.57) (4.55)
</TABLE>
The resulting pro forma compensation cost may not be representative of that
to be expected in future years.
F-18
<PAGE> 67
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE WEIGHTED-AVERAGE
SHARES PRICE RANGE EXERCISE PRICE
--------- -------------- ----------------
<S> <C> <C> <C>
Options outstanding, December 31, 1996...................... 1,747,002 $1.035-$22.125 $8.18
Options granted........................................... 685,000 6.00 6.00
Options issued in ProNet merger........................... 1,212,539 6.42 6.42
Options exercised......................................... (1,896) 1.04 1.04
Options canceled.......................................... (171,990) 6.00-20.25 14.16
--------- -------------- -----
Options outstanding, December 31, 1997...................... 3,470,655 $1.035-$22.125 $6.84
Options granted........................................... 1,681,700 5.125-6.75 5.13
Options exercised......................................... -- -- --
Options canceled.......................................... (144,802) 5.125-6.67 5.90
--------- -------------- -----
Options outstanding, December 31, 1998...................... 5,007,553 $1.035-$22.125 $5.84
Options granted........................................... 1,748,500 2.75-5.6250 3.38
Options exercised......................................... -- -- --
Options canceled.......................................... (287,395) 3.2190-19.50 6.07
--------- -------------- -----
Options outstanding, December 31, 1999...................... 6,468,658 $1.035-$22.125 $5.16
========= ============== =====
Options exercisable, December 31, 1997...................... 2,362,655 $1.035-$22.125 $6.28
Options exercisable, December 31, 1998...................... 2,972,353 $1.035-$22.125 $6.17
Options exercisable, December 31, 1999...................... 3,465,658 $1.035-$22.125 $6.06
</TABLE>
The following table summarizes information about the options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
------------------------------- ---------------------------------------------------
WEIGHTED-AVERAGE
RANGE OF NUMBER WEIGHTED-AVERAGE NUMBER REMAINING LIFE WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISE PRICE OUTSTANDING (YEARS) EXERCISE PRICE
- --------------- ----------- ---------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
$1.035-$2.21................. 21,323 $1.035 21,323 4.0 $1.035
$2.21-$4.425................. 76,510 3.69 1,646,010 9.2 3.25
$4.43-$6.63.................. 2,458,670 5.91 3,892,170 6.9 5.62
$6.64-$8.85.................. 900,155 6.67 900,155 2.7 6.67
$8.86-$22.13................. 9,000 17.87 9,000 4.9 17.87
--------- ------ --------- --- ------
3,465,658 $ 6.06 6,468,658 6.9 $ 5.16
========= ====== ========= === ======
</TABLE>
Profit Sharing Plan and Retirement Benefits
The Metrocall, Inc. Savings and Retirement Plan (the "Plan"), a combination
employee savings plan and discretionary profit-sharing plan, covers
substantially all full-time employees. The Plan qualifies under section 401(k)
of the Internal Revenue Code (the "IRC"). Under the Plan, participating
employees may elect to voluntarily contribute on a pretax basis between 1% and
15% of their salary up to the annual maximum established by the IRC. Metrocall
has agreed to match 50% of the employee's contribution, up to 4% of each
participant's gross salary. Contributions made by Metrocall vest 20% per year
beginning on the second anniversary of the participant's employment. Other than
Metrocall's matching obligations, discussed above, profit sharing contributions
are discretionary. Metrocall's expenses for contributions under the Plan
recorded were $372,000, $150,000 and $1,426,000 for the years ended December 31,
1997, 1998 and 1999, respectively.
F-19
<PAGE> 68
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. CONTINGENCIES
Legal and Regulatory Matters
Metrocall 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 the operations of Metrocall.
9. INCOME TAXES
As of December 31, 1999, Metrocall had net operating loss and investment
tax credit carryforwards of approximately $252 million and $1.2 million,
respectively, which expire in the years 2000 through 2019. The benefits of these
carryforwards may be limited in the future as a result of historical changes in
the ownership of Metrocall. Net operating loss carryforwards may be used to
offset up to 90 percent of Metrocall's alternative minimum taxable income. The
provision for alternative minimum tax will be allowed as a credit carryover
against regular tax in the future in the event regular tax exceeds alternative
minimum tax expense. To the extent that acquired net operating losses are
utilized in future periods, the benefit will first be recognized to reduce
acquired intangible assets before reducing the provision for income taxes.
The tax effect of the net operating loss and investment tax credit
carryforwards, together with net temporary differences, represents a net
deferred tax asset for which management has reserved 100% due to the uncertainty
of future taxable income. These carryforwards will provide a benefit for
financial reporting purposes when utilized to offset future taxable income.
The components of net deferred tax assets (liabilities) were as follows as
of December 31, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................... $ 2,611 $ 2,729
Management reorganization................................. 610 732
Contributions............................................. 169 241
New pagers on hand........................................ 1,468 735
Intangibles............................................... 13,668 14,126
Other..................................................... 7,688 6,388
Investment tax credit carryforward........................ 1,204 1,204
Net operating loss carryforwards.......................... 100,283 100,565
--------- ---------
Total deferred tax assets......................... 127,701 126,720
========= =========
Deferred tax liabilities:
Basis differences attributable to purchase accounting..... (209,642) (146,387)
Depreciation and amortization expense..................... (11,677) (10,096)
Other..................................................... (10,517) (14,900)
--------- ---------
Total deferred tax liabilities.................... (231,836) (171,383)
========= =========
Net deferred tax liability.................................. (104,135) (44,663)
Less: Valuation allowance................................... (105,507) (101,724)
--------- ---------
$(209,642) $(146,387)
========= =========
</TABLE>
F-20
<PAGE> 69
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The income tax benefit for the years ended December 31, 1997, 1998 and
1999, is primarily the result of the amortization of the basis differences
attributable to purchase accounting and is composed of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998 1999
------ ------- -------
<S> <C> <C> <C>
Income tax (provision) benefit
Current --
Federal................................................ $ -- $ -- $ --
State.................................................. (539) (310) --
Deferred --
Federal................................................ 4,698 41,755 55,174
State.................................................. 702 5,649 7,881
------ ------- -------
$4,861 $47,094 $63,055
====== ======= =======
</TABLE>
The benefit for income taxes for the years ended December 31, 1997, 1998
and 1999, results in effective rates that differ from the Federal statutory rate
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1998 1999
----- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate........................... 35.0% 35.0% 35.0%
Effect of graduated rates................................... (1.0) (1.0) (1.0)
State income taxes, net of Federal tax benefit.............. 5.3 4.6 4.6
Net operating losses for which no tax benefit is currently
available................................................. (9.1) (5.8) (8.6)
Permanent differences....................................... (22.7) (6.1) (4.8)
----- ---- ----
7.5% 26.7% 25.2%
===== ==== ====
</TABLE>
10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Metrocall made cash payments for interest of $30.2 million, $58.0 million
and $74.1 million for the years ended December 31, 1997, 1998, and 1999
respectively. Given Metrocall's recurring net losses, nominal income tax
payments were made for each of the three years ended December 31, 1999.
During 1997 and 1998, Metrocall issued capital stock to effect certain
acquisitions as reflected in the consolidated statements of stockholders' equity
and as described in Notes 3 and 6. In 1999, Metrocall received a note receivable
with a face amount of $4,068,000 as part of the sales consideration of its
electronic trading systems business, which was recorded at its fair value in
other assets on the accompanying balance sheet.
11. SUBSEQUENT EVENTS
Exchange of Series C Preferred
On February 2, 2000, Metrocall and AT&T Wireless entered into a Securities
Exchange Agreement under which AT&T Wireless agreed to exchange its shares of
Series C Preferred for 13,250,000 shares of Metrocall common stock and, if
applicable, non-voting common stock equivalents in the form of a new series of
Metrocall preferred stock. AT&T Wireless' voting interest in Metrocall will be
limited to 19.9% of the total issued and outstanding shares of Metrocall common
stock. To the extent 13,250,000 shares of Metrocall common stock exceeds 19.9%
of the total issued and outstanding Metrocall common stock, AT&T Wireless will
receive shares of Series D Non-Voting Participating Convertible Preferred Stock
(the "Series D Preferred"). The Series D Preferred will have rights
substantially equivalent to those of the common stock, except that it will have
limited voting rights. AT&T Wireless may convert the Series D Preferred shares
at any time. Metrocall has the right to convert the Series D Preferred into
common stock so long as the
F-21
<PAGE> 70
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
number of converted shares of common stock does not equal or exceed 20% of the
issued and outstanding common stock at the time of the conversion.
The consummation of the exchange is subject to the expiration of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the receipt of any required consent of
the FCC and other customary closing conditions. Metrocall expects that these
conditions will be met by March 31, 2000.
AT&T Wireless has agreed to deliver to Metrocall an irrevocable proxy
granting a person designated by Metrocall full power and authority, for one year
commencing on the consummation of the exchange, to vote all shares of Metrocall
common stock that AT&T Wireless receives from the exchange in accordance with
the recommendation of the Board of Directors for Metrocall. This proxy will not
apply to any matter to which a holder of the Series D Preferred has the right to
vote under the Certificate of Designation for that series or applicable law.
AT&T Wireless has limited rights to sell all or a portion of the shares it
receives from the exchange at any time more than six months after consummation
of the exchange in privately negotiated sales to any person or group that
Metrocall and AT&T Wireless has not designated as restricted and subject to
Metrocall's right of negotiation and the transferee's consent to be bound by the
Securities Exchange Agreement. In addition, AT&T Wireless may sell all or any
portion of the shares of Metrocall common stock it receives from the exchange at
any time more than twelve months after consummation of the exchange in one or
more sales in any available over-the-counter market for the common stock and/or
through any exchange on which the common stock is then traded, subject to the
following permitted period sales: 2,650,000 shares of common stock beginning 12
months after consummation of the exchange; an additional 2,650,000 shares of
common stock beginning 18 months after consummation of the exchange; an
additional 2,650,000 shares beginning 24 months after consummation of the
exchange; and the remaining 5,300,000 shares of common stock beginning 30 months
after consummation of the exchange.
Metrocall has agreed to register for resale the shares of Metrocall common
stock AT&T Wireless receives or can receive upon conversion of the Series D
Preferred from the exchange within 180 days after consummation of the exchange.
If the three common investments described below close substantially
simultaneously with the closing of the exchange of the Series C Preferred,
Metrocall will not issue any shares of the Series D Preferred.
Common Stock Investments
On February 2, 2000, Metrocall entered into common stock purchase
agreements with each of three equity investors: PSINet Inc. (PSINet), Aether
Systems, Inc. (Aether) and HMTF Bridge MC I, LLC, an affiliate of Hicks, Muse,
Tate & Furst Incorporated (HMTF). Each of the three companies will acquire
approximately 7.8 million shares of common stock. Each investor will pay $2.19
per share or a total of approximately $17.0 million. Each of the three entities
will have the right to nominate a representative to Metrocall's Board of
Directors. Metrocall will use the proceeds from the sale of its common stock to
reduce outstanding debt.
Each transaction is subject to the completion of Series C Preferred
exchange, the expiration of the applicable HSR Act waiting period, the receipt
of any required consent of the FCC, the completion of the other common stock
equity investments and other customary closing conditions. Metrocall expects
that these conditions will be satisfied and that the transactions will be
consummated by March 31, 2000.
Metrocall also granted HMTF two options to purchase additional shares of
Metrocall common stock. Metrocall granted an option to purchase 8,333,333 shares
of common stock (Option I), at an exercise price of $3.00 per share, subject to
adjustment under certain events. Option I may be exercised by HMTF in whole but
not in part, at any time on or before the first anniversary of the closing.
Metrocall also granted HMTF (i) an option to purchase 12,500,000 shares of
common stock at an exercise price of $4.00 per share plus, (ii) if HMTF has not
exercised Option I, 8,333,333 shares of common stock at an exercise price per
share of $3.00, in each case subject to adjustment under certain events
(collectively, Option II). Option II may be exercised in whole or in part but
only in connection with the issuance of new equity for cash to finance a
business combination or acquisition (by means of merger, consolidation,
exchange, or
F-22
<PAGE> 71
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition of assets, or otherwise) involving Metrocall or any of its
subsidiaries and an aggregate transactional consideration to the other entity or
its equity and debt holders or to Metrocall and its equity and debt holders
having a fair value (as determined in good faith by Metrocall's Board of
Directors) of at least $50,000,000 (a Qualified Transaction). Option II will
terminate on the second anniversary of the closing, except that it can be
extended if there are pending active discussions with respect to a potential
Qualified Transaction or material changes in the terms of a Qualified
Transaction. The Option I and Option II transactions are subject to the
expiration of the applicable HSR Act waiting period, the receipt of any required
consent of the FCC, and other customary closing conditions.
PSINet and Aether will each deliver to Metrocall irrevocable proxies
pursuant to which their respective shares will be voted for as nominees for the
election to Metrocall's Board of Directors for the twelve month period following
the closing. PSINet and Aether will not, directly or indirectly, sell, transfer
or otherwise dispose of their shares for a period of twelve months after the
closing, with certain exceptions, unless the investor has first delivered to
Metrocall an offer for Metrocall to repurchase such shares.
Each of the three equity investors also agreed to certain limitations, for
a period of twenty-four months after the closing. These limitations include the
following: each investor will not, directly or indirectly, (i) increase its
beneficial ownership of any securities or rights or options to acquire
beneficial ownership of any securities of Metrocall, except by way of stock
dividends, stock splits or distributions made by Metrocall to holders of common
stock (Aether may acquire up to 15% of the issued and outstanding common stock,
and HMTF may acquire up to 15% of the issued and outstanding common stock, of
which 15% ownership limit does not include the shares issuable under or
purchased pursuant to the Option Agreement); (ii) make any public announcement
with respect to or submit to Metrocall any proposal for the acquisition of
securities of Metrocall or for any merger, consolidation, or business
combination involving Metrocall or its affiliates or for any purchase of a
substantial portion of the assets of Metrocall or its affiliates; (iii) make, or
in any way participate in, any "solicitation" of "proxies" to vote any voting
securities of Metrocall or become a participant in any "election contest" (as
those terms are defined in Regulation 14A under the Securities Exchange Act of
1934, as amended (the Exchange Act)); (iv) form, join, or in any way participate
in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of Metrocall; or (v) seek to influence or
influence the management or policies of Metrocall, with the exception of the
investor's designee on the Board of Directors may act to take action in his
capacity as a director of Metrocall.
As a result of the above investments, the exercise price of the Warrants
and the number of shares of common stock that may be purchased upon exercise of
the Warrants have been adjusted. The exercise price of the Warrants was reduced
to $2.74 per share. Under the anti-dilution provisions of the Warrants, the
number of shares of common stock that may be purchased upon exercise of each
Warrant increased to 18.531 shares of common stock, or an aggregate of 2,957,529
F-23
<PAGE> 72
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares. The exercise price of the Warrants and number of shares of common stock
that may be purchased upon exercise of the Warrants may be further adjusted in
the future as a result of anti-dilution and other provisions of the Warrants.
PREFERRED STOCK RIGHTS PLAN
In February 2000, the Board of Directors adopted a stockholders' rights
plan and declared a dividend distribution of one preferred share purchase right
("Right") for each outstanding share of the common stock. The distribution is
payable to stockholders of record at the close of business on March 6, 2000.
Each Right, when exercisable, entitles the registered holder to purchase from
Metrocall 1/1000th of a share of Series E Junior Participating Preferred Stock,
par value $.01 per share (the "Series E Preferred") at a price of $50 per
1/1000th share, subject to adjustment (the "Purchase Price"). For purposes of
the Rights Plan, the Board of Directors has designated 100,000 shares of Series
E Preferred, which may be increased or decreased by the Board of Directors.
The Rights will be attached to all certificates representing shares of
common stock outstanding as of March 6, 2000. The Rights will separate from the
common stock and a distribution of Right Certificates (as defined below) will
occur upon the earlier of the following dates (the earlier of such dates, the
"Distribution Date"): (1) twenty (20) business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of common stock (the "Share
Acquisition Date"), or (2) twenty (20) business days (or such later date as the
Board of Directors may determine) following the commencement of, or announcement
of an intention to make, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person (other than the
Excluded Persons as defined below) of 20% or more of the outstanding shares of
common stock, in either (1) or (2) other than pursuant to a Qualified Offer (as
defined below).
The Rights Agreement contains exceptions from the definition of Acquiring
Person for the following persons (the "Excluded Persons"): (1) Metrocall, (2)
any wholly owned subsidiary of the Metrocall, (3) any employee benefit plan of
Metrocall or any subsidiary of Metrocall or any person holding shares of common
stock for or pursuant to the terms of any such employee benefit plan, (4) AT&T
Wireless Services, its affiliates and associates, with respect to the exchange
of Series C Preferred Stock for shares of common stock and common stock
equivalents, as described above, and (5) HMTF, its affiliates and associates,
with respect to acquisitions of common stock permitted under the Common Stock
Purchase Agreement described above.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 25, 2010, unless earlier redeemed or
exchanged by Metrocall as provided in the Rights Agreement.
In the event that a person (other than the Excluded Persons) becomes the
beneficial owner of 20% or more of the then outstanding shares of common stock
(except pursuant to an offer for all outstanding shares of common stock and on
terms that at least a majority of independent directors determine to be fair to
and otherwise in the best interests of Metrocall and its stockholders (a
"Qualified Offer")) (a "Flip-in Event"), each holder of a Right will, after the
end of the Redemption Period (defined below), have the right to exercise the
Right by purchasing, for an amount equal to the Purchase Price, shares of common
stock (or, in certain circumstances, cash, property or other securities of
Metrocall) having a value (determined pursuant to a formula set forth in the
Rights Agreement) equal to two times such amount. Notwithstanding any of the
foregoing, following the occurrence of a Flip-in Event, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void. However,
Rights are not exercisable following the occurrence of a Flip-in Event until
such time as the Rights are no longer redeemable by Metrocall as set forth
below.
In the event that, at any time following the Share Acquisition Date, (1)
Metrocall is acquired in a merger or other consolidation transaction in which
Metrocall is not the surviving corporation (other than a merger or consolidation
transaction that follows a Qualified Offer), (2) Metrocall engages in a merger
or consolidation transaction (other than a merger or consolidation transaction
that follows a Qualified Offer) in which Metrocall is the surviving corporation
and its common stock is changed into or exchanged for other securities or
assets, or (3) 50% or more of Metrocall's assets or
F-24
<PAGE> 73
METROCALL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
earning power is sold or transferred (other than to Metrocall or a wholly owned
subsidiary of Metrocall), each holder of a Right (except Rights that previously
have been voided as set forth above) shall, after the expiration of the
Redemption Period (defined below), have the right to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
Purchase Price of the Right.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person, the Board of Directors may exchange the Rights
(other than Rights owned by such person or group, which have become void), in
whole or in part, at an exchange ratio of one share of common stock, per Right
(subject to adjustment).
The Purchase Price payable, and the number of 1/1000ths of a Preferred
Share or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution to holders of the
Rights in certain circumstances.
In general, the Board of Directors may cause Metrocall to redeem the Rights
in whole, but not in part, at any time during the period commencing on March 6,
2000, and ending on the earlier of the close of business on (1) the 20th day
following the Share Acquisition Date or (2) February 25, 2010 (the "Redemption
Period") at a price of $.0001 per Right (payable in cash, common stock or other
consideration deemed appropriate by the Board of Directors). Until a Right is
exercised, the holder thereof, as such, will have no rights as a stockholder of
Metrocall, including, without limitation, the right to vote or to receive
dividends.
12. UNAUDITED QUARTERLY FINANCIAL DATA
The following table of quarterly financial data has been prepared from the
financial records of Metrocall, without audit, and reflects all adjustments that
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the interim periods presented:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------------- ------------------- ------------------- -------------------
1998 1999 1998 1999 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $103,331 $155,030 $103,254 $155,630 $105,890 $151,753 $152,249 $147,774
Loss from operations................. (26,262) (36,879) (23,654) (39,776) (25,865) (37,968) (36,856) (36,208)
Loss attributable to common
stockholders....................... (32,672) (43,808) (31,157) (48,759) (33,771) (47,979) (43,309) (46,192)
Loss per share attributable to common
stockholders....................... (0.80) (1.05) (0.76) (1.17) (0.83) (1.15) (1.04) (1.10)
</TABLE>
The sum of the per share amounts may not equal the annual amounts because
of the changes in the weighted-average number of shares outstanding during the
year.
F-25
<PAGE> 74
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Metrocall, Inc.:
We have audited, in accordance with auditing standards generally accepted
in the United States, the consolidated financial statements of Metrocall, Inc.
and subsidiaries, and have issued our report thereon dated February 4, 2000. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule included on page F-27 is the responsibility of
Metrocall's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Vienna, Virginia
February 4, 2000
F-26
<PAGE> 75
SCHEDULE II
METROCALL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGE TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES ACQUIRED(1) DEDUCTIONS(2) OF YEAR
----------- ---------- --------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts................. $2,961 $ 9,963 $4,609 $10,690 $6,843
====== ======= ====== ======= ======
Year ended December 31, 1998
Allowance for doubtful accounts................. $6,843 $13,418 $1,377 $15,442 $6,196
====== ======= ====== ======= ======
Year ended December 31, 1999
Allowance for doubtful accounts................. $6,196 $15,306 -- $14,399 $7,103
====== ======= ====== ======= ======
</TABLE>
- ---------------
(1) Allowance for doubtful accounts acquired in 1997 for Page America, Inc. and
ProNet, Inc. and 1998 for AT&T Wireless Messaging Division. (See Note
3 -- Notes to Consolidated Financial Statements).
(2) Deductions represent write-offs of accounts receivable.
F-27
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
3.1 Restated Certificate of Incorporation of Metrocall, Inc.
(Metrocall), as amended.+
3.2 Eighth Amended and Restated Bylaws of Metrocall.(a)
4.1 Rights Agreement, dated as of February 25, 2000, between
Metrocall and First Chicago Trust Company of New York, as
Rights Agent.(b)
4.2 Indenture for Metrocall 11% Senior Subordinated Notes due
2008, dated as of December 22, 1998.(c)
4.3 Indenture for 9 3/4% Senior Subordinated Notes due 2007
dated October 21, 1997.(d)
4.4 Indenture for Metrocall 10 3/8% Senior Subordinated Notes
due 2007 dated September 27, 1995.(e)
4.5 Indenture for ProNet Inc. (ProNet) 11 7/8% Senior
Subordinated Notes due 2005 ("ProNet Notes") dated June 15,
1995.(f)
4.6 Supplemental Indenture dated May 28, 1996 for ProNet
Notes.(a)
4.7 Second Supplemental Indenture dated December 30, 1997 for
ProNet Notes.(g)
4.8 Indenture for A+ Network, Inc. 11 7/8% Senior Subordinated
Notes due 2005 ("A+ Notes") dated October 24, 1995.(h)
4.9 First Supplemental Indenture dated November 14, 1996 for A+
Notes.(i)
4.10 Second Supplemental Indenture dated November 15, 1996 for A+
Notes.(i)
4.11 Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series
A Convertible Preferred Stock of Metrocall.(j)
4.12 Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series
C Convertible Preferred Stock of Metrocall.(k)
4.13 Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series
E Junior Participating Preferred Stock as filed with the
Secretary of State of the State of Delaware on February 25,
2000.(b)
4.14 Warrant Agreement between Metrocall and the First National
Bank of Boston as Warrant Agent dated as of November 15,
1996.(l)
10.1 Fourth Amended and Restated Loan Agreement by and among
Metrocall, certain lenders and Toronto Dominion (Texas),
Inc. as administrative agent, dated as of December 22,
1998.(c)
10.2 Securities Exchange Agreement by and between AT&T Wireless
Services, Inc. and Metrocall dated February 2, 2000.+
10.3 Common Stock Purchase Agreement by and between HMTF Bridge
MC I, LLC and Metrocall dated February 2, 2000.+
10.4 Common Stock Purchase Agreement by and between Aether
Systems, Inc. and Metrocall dated February 2, 2000.+
10.5 Common Stock Purchase Agreement by and between PSINet Inc.
and Metrocall dated February 2, 2000.+
10.6 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.(m)
10.7 Registration Rights Agreement between Metrocall and McCaw
Communications Companies, Inc. dated October 1, 1998.(k)
10.8 Unit Purchase Agreement among Metrocall and the entities
listed thereto dated November 15, 1996.(l)
10.9 Registration Rights Agreement among Metrocall and the
entities listed thereto dated November 15, 1996.(l)
10.10 Employment Agreement between Metrocall and William L.
Collins III.(n)
10.11 Amendment to Employment Agreement between Metrocall and
Williams L. Collins III.(o)
10.12 Second Amendment to Employment Agreement between Metrocall
and Williams L. Collins III.(p)
10.13 Third Amendment to Employment Agreement between Metrocall
and Williams L. Collins III.(q)
10.14 Employment Agreement between Metrocall and Steven D.
Jacoby.(n)
10.15 Amendment to Employment Agreement between Metrocall and
Steven D. Jacoby.(o)
10.16 Second Amendment to Employment Agreement between Metrocall
and Steven D. Jacoby.(p)
10.17 Third Amendment to Employment Agreement between Metrocall
and Steven D. Jacoby.(q)
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
10.18 Employment Agreement between Metrocall and Vincent D.
Kelly.(n)
10.19 Amendment to Employment Agreement between Metrocall and
Vincent D. Kelly.(o)
10.20 Second Amendment to Employment Agreement between Metrocall
and Vincent D. Kelly.(p)
10.21 Third Amendment to Employment Agreement between Metrocall
and Vincent D. Kelly.(q)
10.22 Change of Control Agreement between Metrocall and William L.
Collins III.(n)
10.23 Change of Control Agreement between Metrocall and Steven D.
Jacoby.(n)
10.24 Change of Control Agreement between Metrocall and Vincent D.
Kelly.(n)
10.25 Noncompetition Agreement between Metrocall and Jackie R.
Kimzey dated August 8, 1997.(r)
10.26 Noncompetition Agreement between Metrocall and David J.
Vucina dated August 8, 1997.(r)
10.27 Metrocall 1996 Stock Option Plan, as amended.(s)
10.28 Metrocall Amended Employee Stock Purchase Plan.(t)
10.29 Directors' Stock Option Plan, as amended.(u)
10.30 Deed of Lease between Douglas and Joyce Jemal, as landlord,
and Metrocall, as tenant, dated April 14, 1994.(v)
10.31 Lease Agreement dated December 20, 1983 between Beacon
Communications Associates, Ltd. and a predecessor of
Metrocall.(w)
10.32 Consulting, No Conflict and Nondisclosure Agreement dated
May 16, 1996 between Metrocall and Elliott H. Singer.+
10.33 Amendment to Consulting, No Conflict and Nondisclosure
Agreement dated October 1, 1999 between Metrocall and
Elliott H. Singer.+
10.34 Placement Agreement dated December 17,1998 between Metrocall
and Morgan Stanley & Co. Incorporated, NationsBanc
Montgomery Securities LLC, TD Securities (USA) Inc., First
Union Capital Markets and BancBoston Roberston Stephens
Inc.(a)
11.1 Statement re computation of per share earnings.+
21.1 Subsidiaries of Metrocall, Inc.+
23.2 Consent of Arthur Andersen LLP, as independent public
accountants for Metrocall.+
27.1 Financial Data Schedule.+
</TABLE>
- ---------------
+ Filed herewith.
(a) Incorporated by reference to Metrocall's Annual Report on Form 10-K for the
year ended December 31, 1998 filed with the Commission on March 31, 1999.
(b) Incorporated by reference to Metrocall's Registration Statement on Form 8-A
filed with the Commission on February 25, 2000.
(c) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on January 4, 1999.
(d) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on October 23, 1997.
(e) 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.
(f) Incorporated by reference to ProNet's Current Report on Form 8-K filed with
the Commission on July 5, 1995.
(g) 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.
(h) 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.
(i) 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.
(j) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
<PAGE> 78
(k) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on October 16, 1998.
(l) Incorporated by reference to Metrocall's Current Report on Form 8-K filed
with the Commission on November 21, 1996.
(m) Incorporated by reference to Metrocall's Proxy Statement filed with the
Commission on August 31, 1998.
(n) 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.
(o) 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.
(p) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 filed with the Commission on August 14,
1998.
(q) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 filed with the Commission on August 13,
1999.
(r) 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.
(s) Incorporated by reference to Metrocall's Proxy Statement filed with the
Commission on April 5, 1999.
(t) 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.
(u) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A, as
amended, for the year ended December 31, 1993 filed with the Commission on
July 21, 1994.
(v) 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.
(w) 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.
<PAGE> 1
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
METROCALL, INC.
(AS AMENDED)
Metrocall, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follow:
FIRST: The name of the Corporation is Metrocall, Inc. The
Corporation was originally incorporated under the name Metrocall of Delaware,
Inc., and the original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 26,
1982.
SECOND: This Restated Certificate of Incorporation was duly adopted
in accordance with Sections 242 & 245 of the General Corporation Law of the
State of Delaware (the "Delaware General Corporation Law"), and restates and
integrates (including the provisions provided under the Certificate of
Designation, Number, Powers, Preferences and Relative, Participating, Optional
and Other Rights of Series A Convertible Preferred Stock of the Corporation as
filed with the Secretary of State of the State of Delaware on November 15, 1996;
and the Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Rights of Series C Convertible Preferred Stock
of the Corporation, Inc. as filed with the Secretary of State of the State of
Delaware on October 1, 1998) and does not further amend the provisions of the
Certificate of Incorporation of the Corporation, as theretofore amended,
restated or supplemented, and there is no discrepancy between those provisions
and the provisions of this Restated Certificate of Incorporation.
THIRD: The text of the Certificate of Incorporation of the
Corporation as heretofore amended or supplemented, shall read in its entirety
as follows:
1. NAME.
The name of this corporation is Metrocall, Inc.
2. REGISTERED OFFICE AND AGENT.
The registered office of the Corporation shall be located at 1013
Centre Road, Wilmington, DE 19805, in New Castle County. The registered agent of
the Corporation at such address shall be United States Corporation Company.
<PAGE> 2
3. PURPOSE AND POWERS.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law. The Corporation shall have all power necessary or helpful to
engage in such acts and activities.
4. CAPITAL STOCK.
4.1. Authorized Shares.
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 201,000,000 shares, of which
1,000,000 shares shall be Preferred Stock, having a par value of $0.01 per share
(" the Preferred Stock") and 200,000,000 shall be classified as shares of Common
Stock, par value $0.01 per share ("Common Stock"). The Board of Directors is
expressly authorized to provide for the classification and reclassification of
any unissued shares of Preferred Stock or Common Stock and the issuance thereof
in one or more classes or series without the approval of the stockholders of the
Corporation.
4.2. Common Stock.
(a) Relative Rights.
The Common Stock shall be subject to all of the rights, privileges,
preferences and priorities of the Preferred Stock as set forth in the
certificate of designations filed to establish the respective series of
Preferred Stock. Each share of Common Stock shall have the same relative rights
as and be identical in all respects to all the other shares of Common Stock.
(b) Voting Rights.
Each holder of shares of Common Stock shall be entitled to attend
all special and annual meetings of the stockholders of the Corporation and,
share for share and without regard to class, together with the holders of all
other classes of stock entitled to attend such meetings and to vote (except any
class or series of stock having special voting rights), to cast one vote for
each outstanding share of Common Stock so held upon any matter or thing
(including, without limitation, the election of one or more directors) properly
considered and acted upon by the stockholders, except as otherwise provided in
this Restated Certificate of Incorporation or by applicable law.
(c) Dividends.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of shares of any class of stock having preference over
the Common Stock as to the payment of dividends, the full amount of dividends
and of sinking fund or retirement payments, if any, to
2
<PAGE> 3
which such holders are respectively entitled in preference to the Common Stock,
then the holders of record of the Common Stock and any class or series of stock
entitled to participate therewith as to dividends, shall be entitled to receive
dividends, when, as, and if declared by the Board of Directors, out of any
assets legally available for the payment of dividends thereon.
(d) Dissolution, Liquidation, Winding Up.
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of record of the
Common Stock then outstanding, and all holders of any class or series of stock
entitled to participate therewith in whole or in part, as to distribution of
assets, shall become entitled to participate in the distribution of any assets
of the Corporation remaining after the Corporation shall have paid, or set aside
for payment, to the holders of any class of stock having preference over the
Common Stock in the event of dissolution, liquidation or winding up, the full
preferential amounts (if any) to which they are entitled, and shall have paid or
provided for payment of all debts and liabilities of the Corporation.
4.3. Preferred Stock.
(a) Issuance, Designations, Powers, Etc.
The Board of Directors expressly is authorized, subject to
limitations prescribed by the Delaware General Corporation Law and the
provisions of this Restated Certificate of Incorporation, to provide, by
resolution and by filing a certificate of designations pursuant to the Delaware
General Corporation Law, for the issuance from time to time of the shares of
Preferred Stock in one or more series, to establish from time to time the number
of shares to be included in each such series, and to fix the designation,
powers, preferences and other rights of the shares of each such series and to
fix the qualifications, limitations and restrictions thereon, including, but
without limiting the generality of the foregoing, the following:
(i) the number of shares constituting that series and the
distinctive designation of that series;
(ii) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(iii) whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms of such
voting rights;
(iv) whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
3
<PAGE> 4
(v) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(viii) any other relative powers, preferences, and rights of
that series, and qualifications, limitations or restrictions on that series.
(b) Dissolutions, Liquidation, Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Preferred Stock of
each series shall be entitled to receive only such amount or amounts as shall
have been fixed by the certificate of designations or by the resolution or
resolutions of the Board of Directors providing for the issuance of such series.
(c) Pursuant to the foregoing authority, there has been
authorized the following Preferred Stock:
(i) the Series A Convertible Preferred Stock shall have the
powers, preferences and relative, participating, optional or other rights, or
the qualifications, limitations or restrictions as set forth on Exhibit
4.3(c)(i) hereto;
(ii) the Series C Convertible Preferred Stock shall have the
powers, preferences and relative, participating, optional or other rights, or
the qualifications, limitations or restrictions as set forth on Exhibit
4.3(c)(ii) hereto; and
(iii) the Series E Junior Participating Preferred Stock shall
have the powers, preferences and relative, participating, optional or other
rights, or the qualifications, limitations or restrictions as set forth on
Exhibit 4.3(c)(iii) hereto.
4.4. Adjustments of Authorized Stock.
Except as provided to the contrary in the provisions establishing a
class or series of stock, the amount of the authorized stock of the Corporation
of any class or classes may be increased or decreased (but not below the number
then outstanding) by the affirmative vote of a majority of the directors then in
office, whether or not a quorum.
4
<PAGE> 5
4.5. Restrictions on Foreign Ownership of Shares.
(a) No shares of stock of any class or series outstanding at any
time shall be owned of record or beneficially by a person (as defined in Section
4.5(c) hereof) whose ownership thereof would constitute a violation of Section
310(a) or 310(b) of the Communications Act of 1934, as amended, or any similar
or successor federal statutes.
(b) The Corporation may, in its sole discretion, redeem any
outstanding shares of stock of any class or series which are owned in violation
of Section 4.5(a) hereof. Shares redeemed by the Corporation under this Section
4.5(b) may be redeemed for cash, property or rights, at the lesser of (i) the
fair market value at the time of the redemption or (ii) the holder's purchase
price, provided the holder purchased such shares within a year prior to the
redemption. The Board of Directors shall have sole discretion to determine
whether shares are owned in violation of Section 4.5(a) hereof, the fair market
value of any shares to be redeemed, and the value of any non-cash consideration
to be provided for such shares in any such redemption.
(c) For purposes of this Section 4.5, "person" shall mean an
individual, a partnership, a corporation, a trust, a joint venture, an
unincorporated organization, a government or any department or agency thereof or
any other legal entity.
5. BOARD OF DIRECTORS.
5.1. Classification.
Except as otherwise provided in this Restated Certificate of
Incorporation or a certificate of designations relating to the rights of the
holders of any class or series of Preferred Stock, voting separately by class or
series, to elect additional directors under specified circumstances, the number
of directors of the Corporation shall be as fixed from time to time by or
pursuant to the Bylaws of the Corporation. The directors, other than those who
may be elected by the holders of any class or series of Preferred Stock voting
separately by class or series, shall be classified, with respect to the time for
which they severally hold office, into three classes, Class I, Class II and
Class III, which shall be as nearly equal in number as possible, and shall be
adjusted from time to time in the manner specified in the Bylaws of the
Corporation to maintain such proportionality. Each initial director in Class I
shall hold office for a term expiring at the 1996 annual meeting of
stockholders, each initial director in Class II shall hold office initially for
a term expiring at the 1995 annual meeting of stockholders, and each initial
director in Class III shall hold office for a term expiring at the 1994 annual
meeting of stockholders. Notwithstanding the foregoing provisions of this
Section 5.1, each director shall serve until such director's successor is duly
elected and qualified or until such director's earlier death, resignation or
removal. At each annual meeting of stockholders, the successors to the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election and until their successors have been duly
elected and qualified or until any such director's earlier death, resignation or
removal.
5
<PAGE> 6
5.2. Removal.
(a) Except as otherwise provided pursuant to the provisions of this
Restated Certificate of Incorporation or a certificate of designations relating
to the rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, but only for
cause (as defined in Section 5.2(b) hereof) and only by the affirmative vote, at
a special meeting of the stockholders called for such a purpose, of not less
than 66-2/3% of the 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, but only if notice of such
proposal was contained in the notice of such meeting. At least 30 days prior to
such special meeting of stockholders, written notice shall be sent to the
director or directors whose removal will be considered at such meeting. Any
vacancy in the Board of Directors resulting from any such removal or otherwise
shall be filled only by vote of a majority of the directors then in office,
although less than a quorum, and any directors so chosen shall hold office until
the next election of the class for which such directors shall have been chosen
and until their successors shall be elected and qualified or until any such
director's earlier death, resignation or removal.
(b) For purposes of this Section 5.2, "cause" shall mean (i) conduct
as a director of the Corporation or any subsidiary involving dishonesty of a
material nature or (ii) criminal conduct (other than minor infractions and
traffic violations) that relates to the performance of the director's duties as
a director of the Corporation or any subsidiary.
5.3. Change of Authorized Number.
In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
5.4. Directors Elected by Holders of Preferred Stock.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation or a certificate of
designations applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 5 unless expressly provided by the
certificate of designations.
5.5. Limitation of Liability.
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No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) for
the types of liability set forth in Section 174 of the Delaware General
Corporation Law; or (d) for any transaction from which the director received any
improper personal benefit. Any repeal or modification of this Section 5.5 by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
6. INDEMNIFICATION.
To the extent permitted by law, the Corporation shall fully
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 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,
To the extent permitted by law, the Corporation may fully 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.
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 an
employee or agent in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
7. ACTIONS BY STOCKHOLDERS.
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
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by any consent in writing by such stockholders, unless such consent is
unanimous.
8. SPECIAL MEETINGS.
Special meetings of the stockholders may be called at any time but
only by (a) the chairman of the board of the Corporation, (b) a majority of the
directors in office, although less than a quorum, or (c) the holders of not less
than 35% of the 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.
9. CRITERIA FOR EVALUATING CERTAIN OFFERS.
The Board of Directors, when evaluating any offer of another party
to (a) make a tender or exchange offer for any equity security of the
Corporation, (b) merge or consolidate the Corporation with another institution,
or (c) purchase or otherwise acquire all or substantially all of the properties
and assets of the Corporation, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the Corporation and its
stockholders, be authorized, to give due consideration to any such factors as
the Board of Directors determines to be relevant, including, without limitation:
(i) the interests of the stockholders of the Corporation;
(ii) whether the proposed transaction might violate
federal or state laws;
(iii) the consideration being offered in the proposed
transaction, in relation to the then current market price for the outstanding
capital stock of the Corporation, the market price for the capital stock of the
Corporation over a period of years, the estimated price that might be achieved
in a negotiated sale of the Corporation as a whole or in part or through orderly
liquidation, the premiums over market price for the securities of other
corporations in similar transactions, current political, economic and other
factors bearing on securities prices and the Corporation's financial condition
and estimated future value as an independent entity; and
(iv) the social, legal and economic effects upon employees,
suppliers, subscribers and others having similar relationships with the
Corporation, and the communities in which the Corporation conducts it business.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
10. ANTI-GREENMAIL.
Any direct or indirect purchase or other acquisition by the
Corporation of any capital stock of the Corporation from any Significant
Stockholder (as hereinafter defined) who has
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<PAGE> 9
been the beneficial owner (as hereinafter defined) of such capital stock for
less than two years prior to the date of such purchase or other acquisition
shall, except as hereinafter expressly provided, require the affirmative vote of
the holders of at least a majority of the total number of outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, excluding in calculating such
affirmative vote and the total number of outstanding shares all capital stock
beneficially owned by such Significant Stockholder. Such affirmative vote shall
be required notwithstanding the fact that no vote may be required or that a
lesser percentage may be specified, by law, but no such affirmative vote shall
be required with respect to (a) any purchase or other acquisition of capital
stock of the Corporation made as part of a tender or exchange offer by the
Corporation to purchase capital stock of the Corporation on the same terms from
all holders of the same class of capital stock and complying with the applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, (b) any purchase of capital stock of the Corporation
which the Board of Directors shall determine to be necessary pursuant to Section
4.5 of this Restated Certificate of Incorporation, (c) any purchase or other
acquisition of capital stock of the Corporation on the same terms from all
holders of such class of capital stock in accordance with the terms and
conditions of any stock option or employee benefit plan of the Corporation, or
(d) any purchase of capital stock of the Corporation, where the Board of
Directors has determined that the purchase price per share of the capital stock
does not exceed the fair market value of the capital stock. Such fair market
value shall be equal to the average closing price or the mean of the bid and
asked prices of a share of capital stock for the 20 trading days immediately
preceding the execution of a definitive agreement to purchase the capital stock
from a Significant Stockholder.
For purposes of this Section 10, "Significant Stockholder" shall
mean any person (other than the Corporation or any corporation of which a
majority of any class of capital stock of the Corporation is owned, directly or
indirectly, by the Corporation) that is the beneficial owner, directly or
indirectly, of five percent or more of the voting power of the outstanding
capital stock of the Corporation.
For purposes of this Section 10, "Beneficial Owner," when used with
respect to any capital stock of the Corporation, means any person that:
(i) individually or with any of its Affiliates (as
hereinafter defined), beneficially owns capital stock directly or indirectly;
(ii) individually or with any of its Affiliates, has (a) the
right to acquire capital stock (whether such right is exercisable immediately or
only after passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; (b) the right to vote or direct the voting of
capital stock pursuant to any agreement, arrangement or understanding; or (c)
the right to dispose of or to direct the disposition of capital stock pursuant
to any agreement, arrangement or understanding; or
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<PAGE> 10
(iii) individually or with any of its Affiliates, has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of capital stock with any other person that beneficially
owns, or whose Affiliates beneficially own, directly or indirectly, such shares
of capital stock.
For purposes of this Section 10, "Affiliate" shall mean a person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a specified person.
11. COMPROMISE OR ARRANGEMENT CLAUSE.
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of the Delaware General Corporation Law or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under Section 279 of the Delaware General Corporation Law order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
12. AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION.
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Restated Certificate of
Incorporation or the Bylaws of the Corporation), the affirmative vote of 66 2/3%
of the total number of votes of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with the purpose or intent of Sections 5, 7, 8, 9,
and 10 hereof, and this Section 12. Notice of any such proposed amendment,
repeal or adoption shall be contained in the notice of the meeting at which it
is to be considered. Subject to the provisions set forth herein, the Corporation
reserves the right to amend, alter, repeal or rescind any provision contained in
this Restated Certificate of Incorporation in the manner now or hereafter
prescribed by law.
13. AMENDMENT OF BYLAWS.
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In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors is expressly authorized
and empowered to adopt, amend and repeal the Bylaws of the Corporation, subject
to the right of the stockholders entitled to vote with respect thereto to amend
or repeal Bylaws adopted by the Board of Directors as provided for in this
Restated Certificate of Incorporation or in the Bylaws of the Corporation.
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IN WITNESS WHEREOF, Metrocall, Inc. has caused this Restated
Certificate of Incorporation to be executed on its behalf on February 16,
1999.
METROCALL, INC.
By: /s/William L. Collins, III
---------------------------
William L. Collins, III
President
Attest:
/s/Shirley B. White
- ----------------------
Shirley B. White
Assistant Secretary
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Exhibit 4.3(c)(i) to Restated Certificate of Incorporation
<PAGE> 14
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
METROCALL, INC.
Metrocall, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors, at a meeting
duly held on November 13, 1996, adopted the following resolution:
WHEREAS, the Board of Directors of the Corporation is
authorized by the Amended and Restated Certificate of Incorporation to issue up
to 1,000,000 shares of preferred stock in one or more classes or series and, in
connection with the creation of any class or series, to fix by the resolutions
providing for the issuance of shares the powers, designations, preferences and
relative, participating, optional or other rights of the class or series and the
qualifications, limitations or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to such authority, to authorize and fix the terms and
provisions of a series of preferred stock and the number of shares constituting
the series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized a series of preferred stock on the terms and with the provisions
herein set forth on Annex A attached to this resolution.
/s/ Shirley B. White
-----------------------
Shirley B. White
Assistant Secretary
ATTEST:
/s/ Vincent D. Kelly
- --------------------
Vincent D. Kelly
Chief Financial Officer
<PAGE> 15
ANNEX A
SERIES A CONVERTIBLE PREFERRED STOCK
The powers, designations, preferences and relative,
participating, optional or other rights of the Series A Convertible Preferred
Stock of Metrocall, Inc. (the "Corporation") are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series
A Convertible Preferred Stock," and shall have $0.01 par value per share. The
number of authorized shares constituting this series shall be 810,000 shares.
Shares of the Series A Convertible Preferred Stock shall have a stated value of
$250 per share (the "Stated Value").
2. DIVIDENDS.
(a) Right to Receive Dividends. Holders of the Series A
Convertible Preferred Stock shall be entitled to receive, when and as declared
by the Board of Directors of the Corporation (the "Board of Directors"), to the
extent permitted by the General Corporation Law of the State of Delaware,
cumulative dividends at the rate, in the form, at the times and in the manner
set forth in this Section 2. Such dividends shall accrue on any given share from
the day of issuance of such share and shall accrue from day to day whether or
not earned or declared.
(b) Form of Dividend. Except as provided in Section 9(b),
any dividend payment made with respect to the Series A Convertible Preferred
Stock may be made, at the sole discretion of the Board of Directors, in cash out
of funds legally available for such purpose or by issuing the number of shares
of Series A Convertible Preferred Stock equal to the amount of the dividend
divided by the Stated Value. Any such dividend payment may be made, in the sole
discretion of the Board of Directors, partially in cash and partially in shares
of Series A Convertible Preferred Stock determined in accordance with the
preceding formula; provided, that, in the event that any such dividend payment
is made partially in cash and partially in shares of Series A Convertible
Preferred Stock, each holder of Series A Convertible Preferred Stock shall
receive a ratable amount of cash and Series A Convertible Preferred Stock that
is proportionate to the amount of Series A Convertible Preferred Stock held by
such holder on which such dividend is paid. All shares of Series A Convertible
Preferred Stock issued as a dividend shall be fully paid and nonassessable.
(c) Dividend Rate. The dividend rate on the Series A
Convertible Preferred Stock shall be 14% of the Stated Value per share per
annum; provided, that, upon the occurrence and during the continuance of any
Triggering Event (as defined in Section 8 hereof), the dividend rate
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on the Series A Convertible Preferred Stock shall be 16% of the Stated Value per
share per annum (such rate, as applicable, the "Dividend Rate").
(d) Payment of Dividends. Dividends shall be payable in
arrears, when and as declared by the Board of Directors, on May 15 and November
15 of each year, commencing May 15, 1997 (each such semiannual payment date a
"Dividend Payment Date"), except that if any such date is a Saturday, Sunday or
legal holiday then such dividend shall be payable on the first immediately
succeeding calendar day which is not a Saturday, Sunday or legal holiday.
Dividends shall accrue on each share of Series A Convertible Preferred Stock
from the date of issuance of such share which, in the case of the initial
issuance of Series A Preferred Stock, shall be from November 15, 1996 (the
"Issuance Date"), and, after payment of a dividend as required hereunder, from
and after each Dividend Payment Date based on the number of days elapsed and a
365-day year. The dividend payable on the first Dividend Payment Date with
respect to any share of Series A Convertible Preferred Stock shall be the pro
rata portion of the Dividend Rate based upon the number of days from and
including the Issuance Date, up to and including such first Dividend Payment
Date and a 365-day year. Each dividend shall be paid to the holders of record of
shares of the Series A Convertible Preferred Stock as they appear on the books
of the Corporation on such record date, not more than 45 days nor fewer than 10
days preceding the respective Dividend Payment Date, as shall be fixed by the
Board of Directors.
(e) Dividend Preference. Dividends on the Series A
Convertible Preferred Stock shall be payable before any dividends or
distributions or other payments shall be paid or set aside for payment upon the
common stock, par value $0.01 per share, of the Corporation (the "Common
Stock"), the variable common rights ("VCRs") issued pursuant to the Variable
Common Rights Agreement dated November 15, 1996 between the Corporation and
First Union National Bank of Virginia as Rights Agent, or any other stock
ranking on liquidation or as to dividends or distributions junior to the Series
A Convertible Preferred Stock (any such stock or VCRs, together with the Common
Stock, being referred to hereinafter as "Junior Stock"), other than a dividend,
distribution or payment paid solely in shares of Common Stock or other Junior
Stock that is not Redeemable Stock. If at any time dividends on the outstanding
Series A Convertible Preferred Stock at the rate set forth herein shall not have
been paid or declared and set apart for payment with respect to all preceding
and current periods, the amount of the deficiency shall be fully paid or
declared and set apart for payment, before any dividend, distribution or payment
shall be declared or paid upon or set apart for the shares of any other class or
series of stock of the Corporation, other than a dividend, distribution or
payment paid solely in shares of Common Stock or other Junior Stock that is not
Redeemable Stock. The term "Redeemable Stock" shall mean any equity security
that by its terms or otherwise is required to be redeemed for cash on or prior
to the Final Redemption Date (as defined in Section 7) or is redeemable for cash
at the option of the holder thereof at any time prior to the Final Redemption
Date.
If there shall be outstanding shares of any Parity Securities,
no full dividends shall be declared or paid or set apart for payment on any such
Parity Securities for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum
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or additional shares of Series A Convertible Preferred Stock as permitted
hereunder sufficient for the payment thereof set apart for such payment on the
Series A Convertible Preferred Stock for all dividend periods terminating on or
prior to the date of payment of such dividends; provided that in no event shall
any dividends be declared or paid in cash on Parity Securities unless dividends
in cash of not less than a ratable amount are declared and paid on Series A
Convertible Preferred Stock. The term "Parity Securities" shall mean any class
or series of capital stock which is entitled to share ratably with the Series A
Convertible Preferred Stock in the payment of dividends, including
accumulations, if any, and, in the event that the amounts payable thereon on
liquidation are not paid in full, are entitled to share ratably with the Series
A Convertible Preferred Stock in any distribution of assets; provided that
Parity Securities shall not include any shares of Series A Convertible Preferred
Stock issued as dividends pursuant to this Section 2.
If dividends on the Series A Convertible Preferred Stock and
on any other series of Parity Securities are in arrears, in making any dividend
payment on account of such arrears, the Corporation shall make payments ratably
(and ratably as to cash, in-kind or other payments) upon all outstanding shares
of the Series A Convertible Preferred Stock and shares of such other Parity
Securities in proportion to the respective amounts of dividends in arrears on
the Series A Convertible Preferred Stock and on such other series of Parity
Securities to the date of such dividend payment.
3. LIQUIDATION PREFERENCE.
In the event of any bankruptcy, liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, each holder of
Series A Convertible Preferred Stock at the time thereof shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
funds of the Corporation to the holders of the Common Stock or other Junior
Stock by reason of their ownership of such stock, an amount per share of Series
A Convertible Preferred Stock equal to the Stated Value plus any accrued and
unpaid dividends to the date of liquidation. If the assets and funds legally
available for distribution among the holders of Series A Convertible Preferred
Stock shall be insufficient to permit the payment to the holders of the full
aforesaid preferential amount, then the assets and funds shall be distributed
ratably among holders of Series A Convertible Preferred Stock in proportion to
the number of shares of Series A Convertible Preferred Stock owned by each
holder. If the assets and funds of the Corporation available for distribution to
stockholders upon any bankruptcy, liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, shall be
insufficient to permit the payment to holders of the full aforesaid preferential
amount and there shall be any outstanding shares of Parity Securities, the
holders of Series A Convertible Preferred Stock and the holders of such other
Parity Securities shall share ratably (and ratably as to cash or other
distributions) in any distribution of assets of the Corporation in proportion to
the full respective preferential amounts to which they are entitled.
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<PAGE> 18
4. VOTING RIGHTS.
In addition to any voting rights provided elsewhere herein or
in the Corporation's Amended and Restated Certificate of Incorporation, as it
may be amended or restated from time to time (the "Certificate of
Incorporation"), and any voting rights provided by law, the holders of shares of
Series A Convertible Preferred Stock shall have the following voting rights:
(a) Election of Directors
(i) Subject to the terms hereof, the holders of
the Series A Convertible Preferred Stock shall have the right to elect two
directors (in addition to the directors elected by holders of Common Stock or
any other capital stock of the Corporation). Such directors shall be elected as
follows:
(A) The holder or holders of a majority of
shares of the sub-series consisting of the Accreted Number of Shares
held by the purchaser of the largest number shares as designated on
Exhibit A of the Unit Purchase Agreement dated as of November 15, 1996,
among the Corporation and the other parties thereto (the "Unit Purchase
Agreement") and the direct or indirect transferees of such purchaser
(collectively, the "Largest Initial Holder") shall, so long as such
shares are outstanding, have the right to vote as a single class based
on the number of shares of Series A Convertible Preferred Stock held by
each holder, to elect one director. The term "Accreted Number of
Shares" shall mean the number of shares of Series A Convertible
Preferred Stock issued to a holder on the Issuance Date plus the number
of shares of Series A Convertible Preferred Stock paid as dividends in
respect of such shares (including dividends on dividend shares).
(B) The holder or holders of a majority of
shares of the sub-series consisting of the Accreted Number of Shares
issued to the other two purchasers as designated on Exhibit A of the
Unit Purchase Agreement, and the direct or indirect transferees of such
purchasers (collectively, the "Designated Holders") shall, so long as
such shares are outstanding, have the right to vote as a single class
based on the shares of Series A Convertible Preferred Stock held by
each Designated Holder, to elect one director.
(ii) Any director elected by the holders of shares
of Series A Convertible Preferred Stock, including any director elected pursuant
to Section 4(a)(iii) hereof, shall be referred to herein as a "Series A
Preferred Director." The initial terms of the two directors to be appointed
pursuant to Section 4(a)(i) will commence upon their election by the Series A
Convertible Preferred Stock and shall expire at the 1999 annual meeting of
stockholders of the Corporation. Upon expiration of the initial terms of such
Series A Preferred Directors, so long as the Series A Convertible Preferred
Stock is outstanding, the holders of the Series A Convertible Preferred Stock
shall have the right to elect two Series A Preferred Directors to replace such
directors in the same manner described above in Section 4(a)(i). A Series A
Preferred Director so elected shall hold office for a term expiring at the
annual meeting of stockholders in the third year following the election of
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such director; provided that upon any termination of the right of the applicable
holders of Series A Convertible Preferred Stock to designate or vote for a
Series A Preferred Director, the term of office of such director shall
terminate. Notwithstanding the foregoing, a Series A Preferred Director elected
under Section 4(a)(i) shall serve until such Series A Preferred Director's
successor is duly elected and qualified or until such director's earlier removal
as provided in Section 4(a)(iv) or death or resignation and, in the event a
vacancy occurs, a replacement Series A Preferred Director shall be selected as
provided in Section 4(a)(i).
(iii) So long as the Series A Convertible Preferred
Stock is outstanding, if a Triggering Event (as defined in Section 8 hereof) has
occurred and is continuing, the holders of shares of Series A Convertible
Preferred Stock (who will have one vote for each share held) shall have the
right, voting as a single class, to elect an additional number of Series A
Preferred Directors equal to such number of additional directors as will make
the ratio of the number of directors elected by the holders of the Series A
Convertible Preferred Stock to the number of all directors of the Corporation
equal or exceed 4:10. Each Series A Preferred Director selected pursuant to this
Section 4 (a)(iii) shall serve indefinitely until such director's removal as
provided in Section 4(a)(iv) or death or resignation and, in the event a vacancy
occurs, a replacement Series A Preferred Director shall be selected as provided
in this Section 4(a)(iii). At such time as the Triggering Event that enabled the
holders of Series A Convertible Preferred Stock to elect additional Series A
Preferred Directors no longer exists, and no other Triggering Event has occurred
and is continuing, the Series A Preferred Directors appointed pursuant to this
Section 4(a)(iii) shall resign and the right of the holders of Series A
Convertible Preferred Stock under this Section 4(a)(iii) to appoint Series A
Preferred Directors shall lapse unless and until another Triggering Event
occurs.
(iv) Except as provided in Section 4(a)(vi), a
Series A Preferred Director may be removed by, and shall not be removed except
by, the vote of the holders of record of a majority of the outstanding shares of
Series A Convertible Preferred Stock, voting together as a single class, except
that any Series A Preferred Director referred to in Section 4(a)(i) shall be
removed only by the holder or holders of Series A Convertible Preferred Stock
entitled to designate such director as provided therein.
(v) The Corporation shall at all times reserve and
keep available a sufficient number of vacant seats on the Board of Directors
solely for the purpose of enabling the holders of the Series A Convertible
Preferred Stock to designate Series A Preferred Directors as provided in this
Section 4(a) and, if at any time the number of vacant seats shall not be
sufficient, the Corporation will take such corporate action as shall be
necessary to increase the authorized number of board seats for this purpose.
(vi) Notwithstanding anything herein to the
contrary, a majority of the Board of Directors of the Corporation (excluding all
Series A Preferred Directors) may remove any Series A Preferred Director that is
an officer, director, or employee or holder of 10% or more of the voting
securities of any entity engaged directly or indirectly in the paging business
and, upon delivery of written notice by the Corporation to such Series A
Preferred Director, such Series A
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<PAGE> 20
Preferred Director shall resign and the holders of Series A Convertible
Preferred Stock entitled to designate or vote for such Series A Preferred
Director shall be entitled to designate or vote for a replacement Series A
Preferred Director; provided, however, that in no event shall this Section
4(a)(vi) apply to any Series A Preferred Director that is an officer, director,
or employee of any of the initial purchasers of the Series A Convertible
Preferred Shares pursuant to the Unit Purchase Agreement;
(b) Certain Corporate Actions.
(i) So long as the Series A Convertible Preferred
Stock is outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of the holders of not less
than 75% of the then outstanding shares of Series A Convertible Preferred
Stock, voting as a single class:
(A) amend, repeal, modify or supplement
any provision of the Certificate of Incorporation, the Fourth Amended
and Restated Bylaws of the Corporation, as in effect on November 15,
1996, or any successor bylaws or this Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and
Other Rights of Series A Convertible Preferred Stock ("Certificate of
Designation"), if such amendment, repeal, modification or supplement in
any way adversely affects the powers, designations, preferences or
other rights of the Series A Convertible Preferred Stock;
(B) authorize or effect, in a single
transaction or through a series of related transactions, (1) a
liquidation, winding up or dissolution of the Corporation or adoption
of any plan for the same; or (2) any direct or indirect purchase or
other acquisition by the Corporation of any capital stock (other than
the Series A Convertible Preferred Stock) of the Corporation held by
any person or entity or group (as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended) of persons or
entities (in each case, a "Beneficial Owner"), which Beneficial Owner
is the beneficial owner (by voting power or otherwise) of five percent
(5%) or more of the securities of the Corporation ordinarily having the
right to vote in the election of directors;
(C) declare or pay or set aside for
payment any dividend or distribution or other payment (other than a
dividend or distribution paid solely in shares of Common Stock or other
Junior Stock that is not Redeemable Stock) upon the Common Stock, upon
the VCRs or upon any other Junior Stock, nor redeem, purchase or
otherwise acquire any Common Stock, VCRs or other Junior Stock for any
consideration (or pay or make available any moneys, whether by means of
a sinking fund or otherwise, for the redemption of or other
distribution or payment with respect to any shares of any Common Stock,
VCRs or other Junior Stock), except by conversion or exchange of Common
Stock, VCRs, or other Junior Stock for such stock that is not
Redeemable Stock.
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<PAGE> 21
(D) authorize or permit the Corporation
or any subsidiary of the Corporation, (i) to issue any shares of
Series A Convertible Preferred Stock except on the Issuance Date or in
payment of dividends as provided in Section 2 above; or (ii) to issue
any Parity Securities.
(ii) So long as the Series A Convertible
Preferred Stock is outstanding, the Corporation shall not, without
first obtaining the affirmative vote or written consent of the holders
of a majority of the then outstanding shares of Series A Convertible
Preferred Stock, voting as a single class:
(A) authorize or effect in a single
transaction or through a series of related transactions (whether by
purchase, lease, exchange, issuance of stock or other equity or debt
security, merger, reorganization or any other method, other than
transactions that would constitute a Sale of the Company (as defined
below)), any acquisition by, merger or other transaction between, the
Corporation or any of its Subsidiaries and any other Person, which
Person shall then become consolidated or otherwise combined with the
Corporation or any such Subsidiary in accordance with generally
accepted accounting principles ("GAAP"), including but not limited to,
any acquisition by the Corporation or any of its Subsidiaries of all or
any substantial part of the assets of any other Person, if the
aggregate consideration (including cash, the fair market value of any
securities or other property, and all Debt assumed by the Corporation
or any of its subsidiaries after giving effect to such transaction)
paid or otherwise assumed or incurred in such transaction exceeds 50%
of the Corporation's total market capitalization (comprised of
outstanding debt, and the value of all outstanding equity securities)
immediately prior to such transaction. The foregoing provisions shall
not apply to the merger of A+ Network, Inc. with and into the
Corporation; a merger of a wholly-owned subsidiary of the Corporation
with and into the Corporation in which the Corporation is the surviving
entity so long as the subsidiary was a subsidiary of the Corporation on
November 15, 1996, has not merged or consolidated with another entity
after November 15, 1996 and the Corporation is the surviving
corporation; the merger of A+ Network of Shreveport, Inc. with and into
the Corporation; or a merger between one subsidiary of the Corporation
with and into another subsidiary of the Corporation; or
(B) authorize or effect any Sale of the
Company in a single transaction or through a series of related
transactions, unless the Corporation shall, concurrently with the
consummation of any Sale of the Company, redeem all outstanding shares
of the Series A Convertible Preferred Stock pursuant to Section 6(a),
except for shares held by holders that have elected to exercise the
conversion rights provided for under Section 5(h). For purposes hereof,
"Sale of the Company" means (A) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of
all, or substantially all, the assets of the Corporation (other than to
one or more wholly owned subsidiaries of the Corporation); (B) the
merger or consolidation of the Corporation with or into another
corporation where such other corporation is the surviving corporation
or (C) the merger or consolidation of another corporation with and into
the Corporation, with the Corporation as the surviving corporation,
with the effect that immediately after such
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<PAGE> 22
transaction any Beneficial Owner shall have become the beneficial owner
of securities of the surviving corporation of such merger or
consolidation representing a majority of the combined voting power of
the outstanding securities of the surviving corporation ordinarily
having the right to vote in the election of directors.
(c) Means of Voting. The rights of the holders of
Series A Convertible Preferred Stock under this Section 4 may be exercised (i)
with respect to the election of the Series A Preferred Directors pursuant to
Section 4(a), at a meeting of the holders of the Series A Convertible Preferred
Stock or by written consents executed by the holders entitled to vote therefor
and delivered to the Secretary or Assistant Secretary of the Corporation; (ii)
at any meeting of stockholders of the Corporation for the election of directors;
(iii) at a meeting of the holders of shares of such Series A Convertible
Preferred Stock, called for the purpose by the Corporation or by the holders of
record of 25% or more of the outstanding shares of the Series A Convertible
Preferred Stock, pursuant to requests delivered in writing to the Secretary or
Assistant Secretary of the Corporation; or (iv) by written consent signed by the
holders of the requisite percentage of the then outstanding shares of the Series
A Convertible Preferred Stock, delivered to the Secretary or Assistant Secretary
of the Corporation, it being understood that a Series A Preferred Director
selected pursuant to Section 4(a)(i) may be designated by a written consent
executed by holders of a majority of the applicable sub-series of Series A
Convertible Preferred Stock referred to in Section 4(a)(i)(A) or Section
4(a)(i)(B), as the case may be. Except to the extent otherwise provided herein
or to the extent that holders of 75% of the Series A Convertible Preferred Stock
decide otherwise, any meeting of the holders of Series A Convertible Preferred
Stock shall be conducted in accordance with the provisions of the By-Laws of the
Corporation applicable to meetings of stockholders. In the event of a conflict
or inconsistency between the By-Laws of the Corporation and any term of this
Certificate of Designation, including, but not limited to this Section 4, the
terms of this Certificate of Designation shall prevail.
5. CONVERSION
Shares of Series A Convertible Preferred Stock may be
converted into shares of Common Stock, on the terms and conditions set forth in
this Section 5.
(a) Optional Conversion. Commencing on November 15, 2001
(except as to any shares which shall have been called for redemption), and if
the Conversion Price determined in accordance with Section 5(c) below is equal
to or greater than the book value per share (the "Book Value") of the Common
Stock determined in accordance with GAAP as of the end of the most recent fiscal
quarter for which the Corporation has filed reports with the Securities and
Exchange Commission ("SEC") (the "Book Value Requirement"), each holder (or
group of affiliated holders under common control) of shares of Series A
Convertible Preferred Stock may, upon 30 days' notice to the Corporation,
convert all, but not less than all, such shares held by such holder and its
affiliated holders under common control into the number of shares of Common
Stock determined by dividing (x) the Stated Value multiplied by the number of
shares surrendered for conversion plus any accrued
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<PAGE> 23
but unpaid dividends on such shares, by (y) the Conversion Price on the date of
conversion determined in accordance with Section 5(c) below. Notwithstanding the
foregoing, shares of the Series A Convertible Preferred Stock may be converted
into Common Stock at the Conversion Price even if such Conversion Price is less
than Book Value if such conversion would not violate National Association of
Securities Dealers ("NASD") Rule 4460(i)(1)(D)(ii) or any successor provision
and the holders of the Series A Convertible Preferred Stock will have the right
on a pro rata basis to convert less than all of their shares (ratably or as
otherwise agreed by such holders) at a Conversion Price less than Book Value,
provided, in either case, that the Corporation has received an opinion of
counsel reasonably satisfactory in form and substance to the Corporation or
assurances from Nasdaq to the effect that such conversion is permitted by NASD
rules;
(b) Change of Control. (i) If a Change of Control occurs,
then on any date following such Change of Control that the Book Value
Requirement is satisfied, each holder of shares of Series A Convertible
Preferred Stock may convert all, but not less than all, such shares held by such
holder into the number of fully paid and nonassessable shares of Common Stock
determined by dividing (x) the Stated Value multiplied by the number of shares
surrendered plus any accrued but unpaid dividends on such shares by (y) the
Conversion Price on the date of conversion determined in accordance with Section
5(c) below. Notwithstanding the foregoing, shares of the Series A Convertible
Preferred Stock may be converted into Common Stock even if the Conversion Price
is less than Book Value if such conversion would not violate NASD Rule
4460(i)(1)(D)(ii) or any successor provision, and the holders of the Series A
Convertible Preferred Stock will have the right on a pro rata basis to convert
less than all of their shares (ratably or as otherwise agreed by such holders)
at a Conversion Price less than Book Value, provided, in either case, that the
Corporation has received an opinion of counsel reasonably satisfactory in form
and substance to the Corporation or assurances from Nasdaq to the effect that
such conversion is permitted by NASD rules.
(ii) For the purposes of this Section 5(b) "Change
of Control" means the occurrence of one or more of the following events:
(A) a Beneficial Owner shall have become
the beneficial owner of a majority (by voting power or otherwise) of
the securities of the Corporation ordinarily having the right to vote
in the election of directors;
(B) during any consecutive three-year
period commencing on or after September 27, 1995, individuals who at
the beginning of such period constituted the Board of Directors
(together with any directors who are members of such Board of Directors
on September 27, 1995, any Series A Preferred Director and any new
directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Corporation was approved by a
vote of 66-% of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in
office;
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<PAGE> 24
(C) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of
all, or substantially all, the assets of the Corporation to any
Beneficial Owner (other than any wholly owned subsidiary of the
Corporation);
(D) the merger or consolidation of the
Corporation with or into another corporation or the merger of another
corporation into the Corporation with the effect that immediately after
such transaction any Beneficial Owner shall have become the beneficial
owner of securities of the surviving corporation of such merger or
consolidation representing a majority of the combined voting power of
the outstanding securities of the surviving corporation ordinarily
having the right to vote in the election of directors; or
(E) the adoption of a plan leading to the
liquidation or dissolution of the Corporation;
provided, however, that none of the
following, in itself, constitutes or will constitute a Change
of Control within the meaning of this Paragraph: (1) prior to or under
the merger of A+ Network, Inc. with and into the Corporation (the "A+
Merger"), the existence or termination of the Voting Agreement dated
as of August 31, 1996 (the "Voting Agreement"), among the Corporation
and the other parties thereto, (2) the beneficial ownership by the
Stockholders (as such term is defined in the Voting Agreement),
collectively, of a majority of the outstanding shares of Common Stock,
(3) the sale or disposition of any securities of the Corporation by,
or other decrease in the percentage ownership in any class of such
securities of, any Stockholder or Stockholders, or (4) the purchase or
acquisition of any securities of the Corporation by, or other increase
in the percentage ownership in any class of such securities of, any
Stockholder or Stockholders; provided further, however, that,
notwithstanding the foregoing, (a) the beneficial ownership by any
individual Stockholder, by the Metrocall Group, by the FirstPAGE Group
(as such terms are defined in the Voting Agreement), or by any other
group (as defined above) of which any Stockholder is a part, of a
majority (by voting power or otherwise) of securities of the
Corporation ordinarily having the right to vote in the election of
directors, or (b) any transaction or event that constitutes a "Rule
13e-3 transaction" within the meaning of Rule 13e-3 (a) (3) of the SEC
(or that would constitute such a Rule 13e-3 transaction if the person
effecting such transaction was an affiliate of the Corporation within
the meaning of such rule), shall nevertheless constitute a Change of
Control for purposes hereof.
(iii) References in this Section 5 to "Common Stock"
shall include all stock or other securities or property (including cash) into
which Common Stock is converted following any merger, reorganization or
reclassification of the capital stock of the Company.
(c) Conversion Price. The Conversion Price per share, for
any date, shall be the average of the Closing Prices of the Common Stock of the
Corporation for the 10 Trading Days prior to such date. For purposes of this
Agreement:
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<PAGE> 25
(i) the term "Closing Price," on any Trading Day,
shall mean the last reported sale price, or in case no such sale takes
place on such day, the average of the closing bid and asked prices, for
the Common Stock.
(ii) the term "Trading Day" shall mean (A) a day on
which the Common Stock is traded on the principal stock exchange on
which the Common Stock has been listed, or (B) if the Common Stock is
not listed on any stock exchange, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the Nasdaq
National Market System, or (C) if the Common Stock is not listed on any
stock exchange or traded on the Nasdaq National Market System, a day on
which the Common Stock is traded in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting
prices).
(d) Common Stock. The Common Stock to be issued upon
conversion hereunder shall be fully paid and nonassessable.
(e) Procedures for Conversion. (i) In order to convert
shares of Series A Convertible Preferred Stock into shares of Common Stock, the
holder shall surrender the certificate or certificates therefore, duly endorsed
for transfer, at any time during normal business hours, to the Corporation at
its principal or at such other office or agency then maintained by it for such
purpose (the "Payment Office"), accompanied (or preceded as required by Section
5(a)) by written notice to the Corporation of such holder's election to convert
and (if so required by the Corporation or any conversion agent) by an instrument
of transfer, in form reasonably satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or by his duly
authorized attorney, and required pursuant to Section 5(e)(iii). As promptly as
practicable after the surrender for conversion of any share of the Series A
Convertible Preferred Stock in the manner provided in the preceding sentence,
and the payment in cash of any amount required by the provisions of Section
5(e)(iii), but in any event within three Trading Days of such surrender for
payment, the Corporation will deliver or cause to be delivered at the Payment
Office to or upon the written order of the holder of such shares, certificates
representing the number of full shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares in proper order for
conversion, and all rights of the holder of such share as a holder of such
shares shall cease at such time and the person or persons in whose name or names
the certificates for such shares of Common Stock are to be issued shall be
treated for all purposes as having become the record holder or holders thereof
at such time; provided, however, that any such surrender and payment on any date
when the stock transfer books of the Corporation shall be closed shall
constitute the person or persons in whose name or names the certificates for
such shares of Common Stock are to be issued as the record holder or holders
thereof for all purposes immediately prior to the close of business on the next
succeeding day on which such stock transfer books are opened and such conversion
shall be at the conversion price in effect at such time on such succeeding day.
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<PAGE> 26
(ii) The Corporation shall not be required to
issue fractional shares of Common Stock upon conversion of shares of
Series A Convertible Preferred Stock. At the Corporation's discretion, in the
event the Corporation determines not to issue fractional shares, in lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the Conversion
Price.
(iii) The issuance of certificates for shares of
Common Stock upon conversion shall be made without charge for any issue, stamp
or other similar tax in respect of such issuance. However, if any such
certificate is to be issued in a name other than that of the holder of record of
the shares converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid or is not payable.
(f) Reservation of Stock Issuable Upon Conversion. Subject
to the limitation set forth in the last sentence of this Section 5(f), the
Corporation shall reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Convertible Preferred Stock, 15,000,000 shares of
Common Stock. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Convertible Preferred Stock without regard to
the Book Value Requirement or whether the holders of Series A Convertible
Preferred Stock are then entitled to convert, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including, without limitation, taking
appropriate board action, recommending such an increase to the holders of Common
Stock, holding shareholders meetings, soliciting votes and proxies in favor of
such increase to obtain the requisite stockholder approval and upon such
approval, the Corporation shall reserve and keep available such additional
shares solely for the purpose of effecting the conversion of the shares of the
Series A Convertible Preferred Stock. Prior to the earlier of (i) June 1, 1997
or (ii) the approval by the stockholders of the Corporation of an increase in
the number of authorized shares of Common Stock as contemplated in the Unit
Purchase Agreement, the Corporation shall be in compliance with this Section
5(f) to the extent that it reserves and keeps available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Convertible Preferred Stock, 500,000
shares of Common Stock.
(g) Notices. Any notice required by the provisions of this
Section to be given to the holders of shares of Series A Convertible Preferred
Stock shall be deemed given five days after such notice is deposited in the
United States mail, postage prepaid, and addressed to each holder of record at
its address appearing on the books of the Corporation.
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<PAGE> 27
(h) Reorganization, Merger or Sale of the Company.
(i) Notwithstanding any other provision hereof, in
case of (A) any reorganization or any reclassification of the capital
stock of the Corporation or (B) any Sale of the Company prior to
November 15, 1999, if such transaction does not constitute a
liquidation, dissolution or winding up as provided in Section 3, then,
at the election of each holder of Series A Convertible Preferred Stock,
concurrently with the consummation of such reorganization,
reclassification or Sale of the Company, provision shall be made so
that each share of Series A Convertible Preferred Stock shall
thereafter be convertible into the number of shares of stock or other
securities or property (including cash) to which a holder of the number
of shares of Common Stock deliverable upon conversion of such share of
Series A Convertible Preferred Stock would have been entitled assuming
conversion on the Trading Day immediately prior to the initial
announcement of the transaction or a proposed transaction that
ultimately resulted in the transaction. For purposes of the preceding
sentence only, the Conversion Price shall be the average of the Closing
Prices of the Common Stock for the 15 Trading Days prior to the date of
such announcement. In any case, appropriate adjustment (as determined
by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests
thereafter of the holders of the Series A Convertible Preferred Stock,
to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to
any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of Series A
Convertible Preferred Stock.
(ii) After the Company has determined to enter
into a transaction described in Section 5(h)(i)(B), and
publicly announces that the Company will enter into such transaction,
the Company will provide written notice to each holder setting forth
the material terms of the transaction, together with all relevant
information regarding such transaction (such transaction a "5(h)(i)(B)
Transaction"). If the Company requests in writing that each holder
elect whether or not to convert its Series A Convertible Preferred
Stock as described above, then, such holder shall have 14 days from
the later of the receipt of such information or such written request
within which to notify the Company in writing of its election to
convert its Series A Convertible Preferred Stock as described above,
and the failure to provide such notice shall be deemed to constitute
such holder's election not to so convert in connection with such
5(h)(i)(B) Transaction. Assuming that the 5(h)(i)(B) Transaction is
consummated on the terms set forth in such information provided by the
Company, such election shall be binding on such holder.
(iii) In case of any merger, consolidation,
reclassification or other similar reorganization, to the extent the
Corporation is not the surviving entity, and the Corporation or the
holders do not otherwise redeem or convert all outstanding shares of
Series A Convertible Stock, the Series A Convertible Preferred Stock
shall be converted into or exchanged for and shall become shares of the
surviving corporation having, in respect of the
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<PAGE> 28
surviving corporation, substantially the same powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the Series A
Convertible Preferred Stock had immediately prior to such transaction.
6. OPTIONAL REDEMPTION
(a) Redemption Price. The Corporation, at its sole option,
may redeem shares of the Series A Convertible Preferred Stock on or after
November 15, 1999, in whole or (except for redemptions pursuant to Section
6(a)(iv)) in part (subject to Section 6(b)), for cash, at any time or from time
to time, for a redemption price per share equal to the sum of the Stated Value,
any accrued and unpaid dividends on such shares, and the Make Whole Payment, if
any; provided, that the Corporation may redeem all the shares of the Series A
Convertible Preferred Stock prior to November 15, 1999 on the date on which the
Corporation consummates a Sale of the Company to the extent permitted under
Section 6(a)(iv), and provided further that the Corporation may not redeem or
call for redemption any shares of Series A Convertible Preferred Stock from and
including November 15, 2001 through January 15, 2002 and shall not thereafter be
entitled to call for redemption any shares of Series A Convertible Preferred
Stock with respect to which notice of conversion has been given pursuant to
Section 5(a) of this Certificate of Designation. The "Make Whole Payment" per
share shall be equal to:
(i) on and after November 15, 2001, zero;
(ii) on and after November 15, 2000 but prior to
November 15, 2001, an amount equal to the excess, if any, of (1) an
amount sufficient to provide a Unit (as defined in the Unit Purchase
Agreement) a 20% cash-on-cash internal rate of return, over (2) the sum
of (x) the aggregate Stated Value of the Series A Convertible Preferred
Stock included in such Unit plus all Series A Convertible Preferred
Stock received as a dividend on such Series A Convertible Preferred
Stock (including dividends on such dividends) plus (y) the excess, if
any, of the aggregate market value of the number of shares of Common
Stock represented by a Warrant (as defined in the Unit Purchase
Agreement) (such market value to be the average Closing Price of the
Common Stock for the 10 Trading Days prior to the date of notice of
redemption), over the Exercise Price (as defined in the Unit Purchase
Agreement) with respect to the shares of Common Stock represented by
such Warrant;
(iii) on and after November 15, 1999 but prior to
November 15, 2000, the amount which represents the excess, if any, of
(1) an amount sufficient to provide a Unit a 25% cash-on-cash internal
rate of return, over (2) the sum of (x) the aggregate Stated Value of
the Series A Convertible Preferred Stock included in such Unit plus all
Series A Convertible Preferred Stock received as a dividend on such
Series A Convertible Preferred Stock (including dividends on such
dividends) plus (y) the excess, if any, of the aggregate market value
of the number of shares of Common Stock represented by a Warrant (such
market value to be the average Closing Price of the Common Stock for
the 10 Trading Days
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<PAGE> 29
prior to the date of notice of redemption), over the Exercise Price
with respect to the shares of Common Stock represented by such Warrant;
or
(iv) prior to November 15, 1999, in the event that
the Corporation consummates a Sale of the Company and to the extent
that the holders of the Series A Convertible Preferred Shares do not
exercise their conversion right under Section 5(h), an amount equal to
the excess, if any, of (1) an amount sufficient to provide a Unit a 30%
cash-on-cash internal rate of return, over (2) the sum of (x) the
aggregate Stated Value of the Series A Convertible Preferred Stock
included in such Unit plus all Series A Convertible Preferred Stock
received as a dividend on such Series A Convertible Preferred Stock
(including dividends on such dividends) plus (y) the excess, if any, of
the aggregate market value of the number of shares of Common Stock
represented by a Warrant (such market value to be the average Closing
Price of the Common Stock for the 10 Trading Days prior to the date of
consummation of the Sale of the Company), over the Exercise Price with
respect to the shares of Common Stock represented by such Warrant;
provided, that in the event such Sale of the Company is consummated
before November 15, 1997, the Make Whole Payment shall be calculated so
that the holders receive an amount sufficient to provide a Unit a 30%
cash-on-cash internal rate of return through November 15, 1997 without
giving any value to the Warrants or any Common Stock represented by
Warrants and without any reduction or discount as of the result of the
fact that the holders receive redemption proceeds prior to November 15,
1997.
(b) Selection of Shares to be Redeemed. Any partial
redemption of Series A Convertible Preferred Stock shall be for that number of
shares having an aggregate Stated Value of $5 million or such greater amount
that is an integral multiple of $1 million. In the event that fewer than all of
the outstanding shares of the Series A Convertible Preferred Stock are to be
called for redemption, the Series A Convertible Preferred Stock called for
redemption shall be redeemed ratably from each holder of Series A Convertible
Preferred Stock proportionate to the amount of Series A Convertible Preferred
Stock held by each holder.
(c) Notice of Redemptions. Notice of redemptions shall be
given by first class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the redemption date or, if such notice period is not
feasible in connection with a Sale of the Company, such notice period as is
practicable in the circumstances to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the books of the
Corporation. Each such notice shall state: (i) the redemption date; (ii) the
number of shares of the Series A Convertible Preferred Stock to be redeemed and,
if fewer than all of the shares held by such holder are to be redeemed, the
number of such shares to be redeemed from such holder; (iii) the formula for
determination of the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease to accrue
on the redemption date.
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(d) Cessation of Dividends on Shares Redeemed. Notice
having been mailed as stated in subsection (c) above, from and after the close
of business on the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the redemption price of the
shares called for redemption), dividends on the shares of the Series A
Convertible Preferred Stock redeemed shall cease to accrue, and said shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid. If fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the holder thereof.
(e) Status of Redeemed Shares. Upon redemption, any shares
of the Series A Convertible Preferred Stock which have been so redeemed shall be
retired and thereafter have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors or a
duly authorized committee thereof.
7 MANDATORY REDEMPTION.
On November 15, 2008 (the "Final Redemption Date"), the Corporation
shall redeem from any source of funds legally available therefor, in the manner
provided in Section 6(c) above, all of the shares of the Series A Convertible
Preferred Stock then outstanding at a redemption price equal to the Stated Value
per share, plus, without duplication, an amount in cash equal to all accumulated
and unpaid dividends per share to the Final Redemption Date.
8 TRIGGERING EVENTS.
Any of the following actions or events shall constitute a
"Triggering Event" for purposes hereof:
(a) Failure to Redeem. The Corporation shall fail to redeem
(i) the Series A Convertible Preferred Stock in accordance with Section 7 or
(ii) any Series A Convertible Preferred Stock called for redemption in
accordance with Section 6.
(b) Failure to Pay Dividends. The Corporation shall fail to
pay any dividend on any Series A Convertible Preferred Stock on any Dividend
Payment Date in accordance with Section 2 for any reason, including but not
limited to, that such payment is prohibited by applicable law or the Board of
Directors elect not to pay such dividend, or shall otherwise violate any term of
Section 2 and such failure shall not be cured within a period of 30 days after
such Dividend Payment
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Date or violation (which cure shall be effected in a manner ensuring the holders
the same yield as if such violation had not occurred).
(c) Failure of Voting Rights. The Corporation shall enter
into any transaction or take any action required to be approved by any holders
of Series A Convertible Preferred Stock without obtaining the requisite approval
of the holders of the Series A Convertible Preferred Stock.
(d) Failure of Stockholder Action. The stockholders of the
Corporation shall not have approved the amendment to the Certificate of
Incorporation described in Section 1.02 of the Unit Purchase Agreement by June
1, 1997.
(e) Failure to Convert; Warrant Agreement. The Corporation
shall (i) fail for any reason to issue Common Stock as required under Section 5
upon the request of any holder of Series A Convertible Preferred Stock as
provided in Section 5 or shall fail for any reason to comply with Section 5(f)
or any other term of Section 5 hereof or the Corporation; (ii) fail for any
reason to issue Common Stock as required under the Warrant Agreement dated as of
November 15, 1996 between the Corporation and the Warrant Agent (as amended, the
"Warrant Agreement") upon exercise of any Warrant then held by any purchaser
designated in Exhibit A of the Unit Purchase Agreement (Purchasers") or any of
their respective affiliates; or (iii) so long as any Purchasers or any of their
respective affiliates hold Warrants, fail to make any anti-dilution adjustment
thereunder and such failure to make such adjustment shall continue for 30 days
after notice from any affected Purchaser.
(f) Registration Rights Agreement. The Corporation shall
fail in any material respect to comply with the Registration Rights Agreement
dated as of November 15, 1996, as amended, among the Corporation, the Largest
Initial Holder, the Designated Holders and their permitted successors and
assigns, and such failure shall continue for a period of 30 days after notice
from any such holder.
(g) Unit Purchase Agreement. The Corporation shall fail to
comply with Sections 1.01, 1.02, 1.03, 4.15 (first sentence only), 5.03, 8.01 or
8.05 of the Unit Purchase Agreement and such failure shall continue for a period
of 30 days after notice from the Purchasers or the representations made under
Sections 4.01 (first sentence only), 4.02, 4.03 or 4.04(a) of the Unit Purchase
Agreement shall prove to have been incorrect or misleading in any material
respect when made pursuant thereto or any other material representation made
under the Unit Purchase Agreement shall prove to have been incorrect or
misleading in any substantial material respect when made.
(h) Limitation on Senior Securities. (i) The Corporation
shall incur or issue, or permit any subsidiary of the Corporation to incur or
issue, any Senior Securities, except that the Corporation or a subsidiary may
incur or issue Senior Securities if at the time of incurrance or issuance, the
ratio of (A) Senior Securities outstanding on such date to (B) Pro Forma
Consolidated Cash Flow for the most recently ended full fiscal quarter
multiplied by four, determined on a pro forma basis as if any such Senior
Securities had been incurred or issued and the proceeds thereof had been applied
at the beginning of such fiscal quarter, would be less than 7.0 to 1.0.
Notwithstanding
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the foregoing limitation, the Company may incur and, as applicable, may permit
its Subsidiaries to incur, Refinancing Debt.
(ii) For purposes of this Section,
(A) "Senior Securities" shall mean (i) all Debt,
and (ii) the shares of any classes or series of capital stock which are
senior to the Series A Convertible Preferred Stock in respect of the
right to receive dividends or to participate in any distribution of
assets other than by way of dividends or which are Redeemable Stock.
For the purposes of determining any particular amount of Senior
Securities described in Clause (ii) of the definition of Senior
Securities, said amount shall be the greater of the market value or the
minimum amount payable by the Corporation or any of its subsidiaries
upon the redemption, purchase, or the retirement of such Senior
Securities.
(B) "Pro Forma Consolidated Cash Flow" shall mean
for any period the Corporation's Consolidated Cash Flow for such period
calculated on a pro forma basis to give effect to any Asset Disposition
or acquisition of assets not in the ordinary course of business
(including acquisitions by merger, consolidation or purchase of capital
stock) during such period or thereafter as if such Asset Disposition or
acquisition had taken place on the first day of such period.
(C) "Consolidated Cash Flow" shall mean for any
period the Corporation's Consolidated Net Income for such period plus
(i) the Corporation's Consolidated Interest Expense for such period
plus (ii) the consolidated income tax expense of the Corporation and
its consolidated subsidiaries for such period, plus (iii) the
consolidated depreciation and amortization expense included in the
income statement of the Corporation and its consolidated subsidiaries
for such period plus (iv) other non-cash charges reducing Consolidated
Net Income for such period (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in
any future period), minus (v) non-cash items increasing Consolidated
Net Income for such period. Notwithstanding the foregoing, the
provision for taxes on the income or profits of and the depreciation
and amortization and other non-cash charges of any of the Corporation's
consolidated subsidiaries shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the net income of such subsidiary was included in
calculating the Consolidated Net Income of the Corporation and only if
and to the extent such subsidiary could have paid such amount at the
date of determination as a dividend to the Corporation by such
subsidiary without prior governmental approval (that has not been
obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that subsidiary or its
stockholders.
(D) "Consolidated Net Income" shall mean for any
period the net income (or loss) of the Corporation and its subsidiaries
for such period, determined on a consolidated
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basis in accordance with GAAP; provided that there shall be excluded
therefrom (i) the net income (but not the loss) of any subsidiary which
is subject to restrictions which prevent the payment of dividends and
the making of distributions (by loans, advances, intercompany transfers
or otherwise) to the Corporation except to the extent of the amount of
dividends or other distributions actually paid to the Corporation by
such subsidiary without violation of any such restrictions, (ii) the
net income (or loss) of any Person that is not a consolidated
subsidiary of the Corporation except to the extent of the amount of
dividends or other distributions actually paid to the Corporation by
such Person during any period, (iii) any gain or loss on any Asset
Disposition by the Corporation or any of its subsidiaries and (iv) any
extraordinary gain or loss.
(E) "Consolidated Interest Expense" shall mean for
any period the consolidated interest expense included in a consolidated
income statement (without deduction of interest income) of the
Corporation and its consolidated subsidiaries for such period
determined in accordance with GAAP, including without limitation or
duplication (or, to the extent not so included, with the addition of),
(i) the amortization of Debt discounts; (ii) any payments of fees with
respect to letters of credit, bankers' acceptances or similar
facilities; (iii) fees with respect to interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements,
other than fees or charges related to the acquisition or termination
thereof which are not allocable to interest expense in accordance with
GAAP; and (iv) the interest component associated with capital lease
obligations.
(F) "Asset Disposition" shall mean any transfer,
conveyance, sale, lease or other disposition by the Corporation or any
of its subsidiaries (including a consolidation or merger or other sale
of any such subsidiary with, into or to another Person in a transaction
in which such subsidiary ceases to be a subsidiary, but excluding a
disposition by a subsidiary of such Person to such Person or a wholly
owned subsidiary of such Person or by such Person to a wholly owned
subsidiary of such Person, and excluding the creation of a lien, pledge
or security interest) of (i) shares of capital stock (other than
directors' qualifying shares) or other ownership interests of a
subsidiary of such Person, (ii) substantially all of the assets of such
Person or any of its Subsidiaries representing a division or line of
business or (iii) other assets or rights of such Person or any of its
Subsidiaries outside of the ordinary course of business, in any case
where the consideration received by such Person or a subsidiary of such
Person or the fair market value of the assets subject to such
disposition exceeds $1 million.
(G) "Debt" shall mean (without duplication),
whether recourse is to all or a portion of the assets of the
Corporation or any of its subsidiaries, and whether or not contingent,
(i) every obligation of the Corporation or any of its subsidiaries for
money borrowed, (ii) every obligation of the Corporation or any of its
subsidiaries evidenced by bonds, debentures, notes or other similar
instruments, (iii) every reimbursement obligation of the Corporation or
any of its subsidiaries with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of the
Corporation or any of its
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subsidiaries, (iv) every obligation of the Corporation or any of
its subsidiaries issued or assumed as the deferred purchase price of
property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), (v) every
capital lease obligation of the Corporation or any of its subsidiaries,
(vi) Attributable Debt of the Corporation or any of its subsidiaries,
(vii) the maximum fixed redemption or repurchase price of Redeemable
Stock of the Corporation or any of its subsidiaries at the time of
determination, (viii) every obligation of the Corporation or any of its
subsidiaries secured by a lien on any asset of the Corporation or any
of its subsidiaries (whether or not such obligation is assumed by the
Corporation or any of its subsidiaries); provided, however, that,
unless such Debt constitutes Debt of the referent Person pursuant to
any other clause of this definition, the amount of such Debt shall be
the lesser of (A) the fair market value of such asset and (B) the
amount of such Debt, and (ix) every obligation of the type referred to
in clauses (i) through (viii) of the Corporation or any of its
subsidiaries and all dividends of the Corporation or any of its
subsidiaries the payment of which, in either case, the Corporation has
guaranteed or for which the Corporation is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise and provided
further that none of the following shall constitute Debt: (i)
guarantees by subsidiaries of Debt under any bank credit facility
incurred by the Corporation; (ii) Debt owed by the Corporation to any
wholly owned subsidiary of the Corporation or owed by any wholly owned
subsidiary of the Corporation to the Corporation or any other wholly
owned subsidiary of the Corporation (but only so long as such Debt is
held by the Corporation or such wholly owned subsidiary); (iii) debt
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument drawn against insufficient funds in
the ordinary course of business, provided that such Debt is
extinguished within two business days of its incurrence; and (iv)
renewals of guarantees permitted by clause (i) above.
For purposes of determining any particular amount of
Debt under this covenant, guarantees of (or obligations with respect to
letters of credit supporting) Debt otherwise included in the
determination of such amount shall not also be included. For the
purpose of determining compliance with this covenant, (A) in the event
that an item of Debt meets the criteria of more than one of the types
of Debt described in the above clauses, the Corporation, in its sole
discretion, shall classify such item of Debt and only be required to
include the amount and type of such Debt in one of such clauses; and
(B) the amount of Debt issued at a price which is less than the
principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in accordance with GAAP.
(H) "Attributable Debt" in respect of a sale and
leaseback transaction shall mean, at the time of determination the
present value (discounted at the interest rate implicit in the lease,
compounded semiannually) of the obligation of the lessee of the
property subject to such sale and leaseback transaction for rental
payments during the remaining term of the lease included in such
transaction, including any period for which such lease has been
extended or may, at the option of the lessor, be extended or until the
earliest date on which the lessee may terminate such lease without
penalty or upon payment of penalty (in which
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case the rental payments shall include such penalty), after excluding
all amounts required to be paid on account of maintenance and repairs,
insurance, taxes, assessments, water, utilities and similar charges.
(I) "Person" shall mean an individual,
partnership, corporation, trust, unincorporated organization or other
business entity, and a government or agency or political subdivision
thereof.
(J) "Refinancing Debt" shall mean (i) any Debt of
the Corporation that renews, refunds or extends any outstanding Debt of
the Corporation or a subsidiary of the Corporation which Debt was
incurred in compliance with this Certificate, and (ii) any Debt of a
subsidiary of the Corporation that renews, refunds or extends any Debt
of such Subsidiary which Debt was incurred in compliance with this
Certificate of Designation in the case of both clauses (i) and (ii) in
an amount not to exceed the outstanding principal amount of the Debt so
refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the debt
refinanced or the amount of any premium reasonably determined by the
Corporation as necessary to accomplish such refinancing by means of a
tender offer or privately negotiated repurchase, plus the expenses of
the Corporation incurred in connection with such refinancing.
(h) Cross-Acceleration. A default shall have occurred under
any bonds, debentures, notes or other evidences of indebtedness of the
Corporation or any subsidiary of the Corporation or under any mortgages,
indentures or instruments under which there may be issued or by which there may
be secured or evidenced any indebtedness by the Corporation or any subsidiary of
the Corporation, in any case with a principal amount of at least $5 million
outstanding, and such indebtedness already is due and payable in full or such
default has resulted in the acceleration of the maturity of such indebtedness.
(i) Bankruptcy, etc.
(i) The Corporation or any of its Subsidiaries (A)
admits in writing its inability to pay its debts generally as they
become due, (B) commences a voluntary case or proceeding under any
bankruptcy law with respect to itself, (C) consents to the entry of a
judgment, decree or order for relief against it in an involuntary case
or proceeding under any bankruptcy law, (D) consents to the appointment
of a custodian of it or for substantially all of its property, (E)
consents to or acquiesces in the institution of a bankruptcy or an
insolvency proceeding against it, (F) makes a general assignment for
the benefit of its creditors, or (G) takes any corporate action to
authorize or effect any of the foregoing;
(ii) A court of competent jurisdiction enters a
judgment, decree or order for relief in respect of the Corporation or
any of its subsidiaries in an involuntary case or proceeding under any
bankruptcy law, which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in
respect of the
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<PAGE> 36
Corporation or any of its subsidiaries, (B) appoint a custodian of the
Corporation or any of its subsidiaries or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and
such judgment, decree or order shall remain unstayed and in effect for
a period of 60 consecutive days.
9. REMEDIES.
(a) Upon the occurrence and during the continuance of any
Triggering Event (i) the Dividend Rate on all outstanding Series A Convertible
Preferred Stock shall be increased as provided in Section 2 without any action
on the part of any holder of the Series A Convertible Preferred Stock or the
Corporation, and (ii) the holders of a majority of the outstanding Series A
Convertible Preferred Stock shall be entitled to elect additional directors of
the Corporation as provided in Section 4(a)(iii).
(b) In the event that a Triggering Event described in
Section 8(d) shall occur, and be continuing, all dividends on the Series A
Convertible Preferred Stock shall be paid in cash and not shares of Series A
Convertible Preferred Stock, to the extent but only to the extent, that such
cash payments are permitted under any applicable indenture or credit agreement
to which the Corporation is a party.
(c) The Corporation stipulates that the remedies at law of
each holder of Series A Convertible Preferred Stock in the event of any
Triggering Event or threatened Triggering Event or otherwise or other failure in
the performance of or compliance with any of the terms hereof are not and will
not be adequate and that, to the fullest extent permitted by law, such terms may
be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise without requiring any holder to post a bond or other
security except to the extent required by applicable law.
(d) Any holder of Series A Convertible Preferred Stock
shall be entitled to recover from the Corporation the reasonable attorneys' fees
and expenses incurred by such holder in connection with any Triggering Event or
enforcement by such holder of any obligation of the Corporation hereunder.
(e) No failure or delay on the part of any holder of Series
A Convertible Preferred Stock in exercising any right, power or remedy hereunder
or under applicable law or otherwise shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder or thereunder. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law or otherwise.
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10. PREEMPTIVE RIGHTS.
No shares of Series A Convertible Preferred Stock shall have any rights
of preemption whatsoever as to any securities of the Corporation, or any
warrants, rights or options issued or granted with respect thereto, regardless
of how such securities or such warrants, rights or options may be designated,
issued or granted.
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Exhibit 4.3(c)(iii) to Restated Certificate of Incorporation
<PAGE> 39
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
METROCALL, INC.
Metrocall, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors,, adopted the
following resolution by unanimous written consent as of June 19, 1998:
WHEREAS, the Board of Directors of the Corporation is
authorized by the Amended and Restated Certificate of Incorporation to issue up
to 1,000,000 shares of preferred stock in one or more classes or series and, in
connection with the creation of any class or series, to fix by the resolutions
providing for the issuance of shares the powers, designations, preferences and
relative, participating, optional or other rights of the class or series and the
qualifications, limitations or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to such authority, to authorize and fix the terms and
provisions of a series of preferred stock and the number of shares constituting
the series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized a series of preferred stock on the terms and with the provisions
herein set forth on Annex A attached to this resolution.
/s/ Shirley B. White
--------------------
Shirley B. White
Assistant Secretary
ATTEST:
/s/ Vincent D. Kelly
- --------------------
Vincent D. Kelly
Chief Financial Officer
<PAGE> 40
ANNEX A
SERIES C CONVERTIBLE PREFERRED STOCK
The powers, designations, preferences and relative,
participating, optional or other rights of the Series C Convertible Preferred
Stock of Metrocall, Inc. (the "Corporation") are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series
C Convertible Preferred Stock," and shall have $0.01 par value per share. The
number of authorized shares constituting this series shall be 25,000 shares.
Shares of the Series C Convertible Preferred Stock shall have a stated value of
$10,000.00 per share (the "Stated Value"). The Corporation may issue fractional
shares of Series C Convertible Preferred Stock.
2. DIVIDENDS.
(a) Right to Receive Dividends. Holders of the Series C
Convertible Preferred Stock shall be entitled to receive, when and as declared
by the Board of Directors of the Corporation (the "Board of Directors"), to the
extent permitted by the General Corporation Law of the State of Delaware,
cumulative dividends at the rate, in the form, at the times and in the manner
set forth in this Section 2. Such dividends shall accrue on any given share from
the day of issuance of such share and shall accrue from day to day whether or
not earned or declared, provided, that dividends shall accrue on any shares of
Series C Convertible Preferred Stock issued pursuant to Section 4.3(b) of that
certain Stock Purchase Agreement dated June 26, 1998 by and among AT&T Wireless
Services, Inc., et al. and the Corporation from the date of the initial issuance
of Series C Convertible Preferred Stock by the Corporation (the "Initial
Issuance Date").
(b) Form of Dividend. Any dividend payment made with respect
to the Series C Convertible Preferred Stock may be made, at the sole discretion
of the Board of Directors, in cash out of funds legally available for such
purpose or by issuing the number of shares of Series C Convertible Preferred
Stock equal to the amount of the dividend divided by the Stated Value. Any such
dividend payment may be made, in the sole discretion of the Board of Directors,
partially in cash and partially in shares of Series C Convertible Preferred
Stock determined in accordance with the preceding formula; provided, that, in
the event that any such dividend payment is made partially in cash and partially
in shares of Series C Convertible Preferred Stock, each holder of Series C
Convertible Preferred Stock shall receive a ratable amount of cash and Series C
Convertible Preferred Stock that is proportionate to the amount of Series C
Convertible
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Preferred Stock held by such holder on which such dividend is paid. All shares
of Series C Convertible Preferred Stock issued as a dividend shall be fully paid
and nonassessable.
(c) Dividend Rate. The dividend rate on the Series C
Convertible Preferred Stock shall be 8% of the Stated Value per share per annum.
(d) Payment of Dividends. Dividends shall be payable in
arrears, when and as declared by the Board of Directors, on May 15 and November
15 of each year (each such semiannual payment date a "Dividend Payment Date"),
except that if any such date is a Saturday, Sunday or legal holiday then such
dividend shall be payable on the first immediately succeeding calendar day which
is not a Saturday, Sunday or legal holiday. Dividends shall accrue on each share
of Series C Convertible Preferred Stock as set forth in Section 2(a), and, after
payment of a dividend as required hereunder, from and after each Dividend
Payment Date based on the number of days elapsed and a 365-day year. If a
payment of a dividend as required hereunder is not made, dividends shall accrue
from the date of the last payment in full of the required dividend. The dividend
payable on each Dividend Payment Date after issuance of any share of Series C
Convertible Preferred Stock shall be the pro rata portion of the Dividend Rate
based upon the number of days from and including the date of issuance or the
last Dividend Payment Date, as the case may be, up to and including such
Dividend Payment Date and a 365-day year. Each dividend shall be paid to the
holders of record of shares of the Series C Convertible Preferred Stock as they
appear on the books of the Corporation on such record date, not more than 45
days nor fewer than 10 days preceding the respective Dividend Payment Date, as
shall be fixed by the Board of Directors.
(e) Dividend Preference. Dividends in cash on the Series C
Convertible Preferred Stock shall be payable after dividends are paid on the
Series A Convertible Preferred Stock, $.01 par value, of the Corporation (the
"Series A Preferred Stock"), on the Series B Junior Convertible Preferred Stock,
$.01 par value of the Corporation (the "Series B Preferred Stock"), and on any
other class or series of preferred stock of the Corporation that by its terms is
senior to the Series C Convertible Preferred Stock in right of payment of
dividends or liquidation preference (together with the Series A Preferred Stock
and the Series B Preferred Stock, "Senior Stock") and before any dividends or
distributions or other payments shall be paid or set aside for payment upon the
Common Stock or any other stock ranking on liquidation or as to dividends or
distributions junior to the Series C Convertible Preferred Stock (any such
stock, together with the Common Stock, being referred to hereinafter as "Junior
Stock"), other than a dividend, distribution or payment paid solely in shares of
Common Stock or other Junior Stock that is not Redeemable Stock. If at any time
dividends on the outstanding Series C Convertible Preferred Stock at the rate
set forth herein shall not have been paid or declared and set apart for payment
with respect to all preceding and current periods, the amount of the deficiency
shall be fully paid or declared and set apart for payment, before any dividend,
distribution or payment shall be declared or paid upon or set apart for the
shares of any class of Junior Stock, other than a dividend, distribution or
payment paid solely in shares of Common Stock or other Junior Stock that is not
Redeemable Stock. The term "Redeemable Stock" shall mean any equity security
that
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by its terms or otherwise is required to be redeemed for cash on or prior to the
Final Redemption Date (as defined in Section 7) or is redeemable for cash at the
option of the holder thereof at any time prior to the Final Redemption Date.
If there shall be outstanding shares of any Parity Securities
(as defined below), no full dividends shall be declared or paid or set apart for
payment on any such Parity Securities for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum or additional shares of Series C Convertible Preferred Stock as permitted
hereunder sufficient for the payment thereof set apart for such payment on the
Series C Convertible Preferred Stock for all dividend periods terminating on or
prior to the date of payment of such dividends; provided that in no event shall
any dividends be declared or paid in cash on Parity Securities unless dividends
in cash of not less than a ratable amount are declared and paid on Series C
Convertible Preferred Stock. The term "Parity Securities" shall mean any class
or series of capital stock which is entitled to share ratably with the Series C
Convertible Preferred Stock in the payment of dividends, including
accumulations, if any, and, in the event that the amounts payable thereon on
liquidation are not paid in full, are entitled to share ratably with the Series
C Convertible Preferred Stock in any distribution of assets; provided that
Parity Securities shall not include any shares of Series C Convertible Preferred
Stock issued as dividends pursuant to this Section 2.
If dividends on the Series C Convertible Preferred Stock and
on any other series of Parity Securities are in arrears, in making any dividend
payment on account of such arrears, the Corporation shall make payments ratably
(and ratably as to cash, in-kind or other payments) upon all outstanding shares
of the Series C Convertible Preferred Stock and shares of such other Parity
Securities in proportion to the respective aggregate amounts of dividends in
arrears on the Series C Convertible Preferred Stock and on such other series of
Parity Securities to the date of such dividend payment.
(f) Common Stock Dividends. If prior to October 1, 2003,
the Corporation pays or sets aside for payment any dividend or distribution on
the Common Stock (a "Common Stock Dividend") (other than dividends or
distributions paid solely in shares of Common Stock or rights, options or
warrants to purchase Common Stock), the Series C Convertible Preferred Stock
will be entitled to receive Common Stock Dividends, as and when paid on the
Common Stock, in an amount per share equal to (i) the Accreted Stated Value (as
defined below) per share divided by the Conversion Price, times (ii) the amount
of the Common Stock Dividend payable per share of Common Stock. Any Common Stock
Dividend shall be paid to the holders of record of shares of the Series C
Convertible Preferred Stock as they appear on the books of the Corporation on
such record date as shall be fixed by the Board of Directors for the payment of
the Common Stock Dividend. If the Corporation declares any Common Stock Dividend
on or after October 1, 2003, the Corporation will provide notice of the record
date for such dividend to the holders of record of shares of the Series C
Convertible Preferred Stock as they appear on the books of the Corporation, such
notice to be provided no later than at least fifteen (15) business days prior to
the record date and no later than the date on which the Corporation is required
to
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give notice of the record date for such dividend under Rule 10b-17 of the
Securities and Exchange Commission or any successor rule or applicable law.
3. LIQUIDATION PREFERENCE.
In the event of any bankruptcy, liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, each holder of
Series C Convertible Preferred Stock at the time thereof shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
funds of the Corporation to the holders of the Common Stock or other Junior
Stock by reason of their ownership of such stock, but after payment to holders
of the Senior Stock of any amounts to which they are entitled, an amount per
share of Series C Convertible Preferred Stock equal to the Stated Value plus any
accrued and unpaid dividends to the date of liquidation. If the assets and funds
legally available for distribution among the holders of Series C Convertible
Preferred Stock shall be insufficient to permit the payment to the holders of
the full aforesaid preferential amount, then the assets and funds shall be
distributed ratably among holders of Series C Convertible Preferred Stock in
proportion to the number of shares of Series C Convertible Preferred Stock owned
by each holder. If any Parity Securities are outstanding, and the assets and
funds legally available for distribution among the Series C Convertible
Preferred Stock and the Parity Securities shall be insufficient to permit the
payment to holders of Series C Convertible Preferred Stock the full aforesaid
preferential amount and the preferential amount payable upon liquidation to any
outstanding Parity Securities, the holders of Series C Convertible Preferred
Stock and the holders of such other Parity Securities shall share ratably (and
ratably as to cash or other distributions) in any distribution of assets of the
Corporation in proportion to the full respective preferential amounts to which
they are entitled.
4. VOTING RIGHTS.
The holders of the Series C Convertible Preferred Stock shall
have no voting rights except as set forth in the Corporation's Amended and
Restated Certificate of Incorporation, as it may be amended or restated from
time to time (the "Certificate of Incorporation") or as provided by applicable
law, and except for the following:
(a) Changes in Organizational Documents. So long as the
Series C Convertible Preferred Stock is outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of a majority of the then outstanding shares of Series C Convertible Preferred
Stock, voting as a single class, amend, repeal, modify or supplement (i) any
provision of the Certificate of Incorporation or the Bylaws of the Corporation,
each as in effect on the Initial Issuance Date, or any successor bylaws, if such
amendment, repeal, modification or supplement in any way adversely affects the
powers, designations, preferences or other rights of the Series C Convertible
Preferred Stock, provided, that nothing contained herein shall be construed to
prohibit the Corporation from issuing any
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<PAGE> 44
debt or equity securities, regardless of ranking, or (ii) this Certificate of
Designation, Number, Powers, Preferences and Relative, Participating, Optional
and Other Rights of Series C Convertible Preferred Stock ("Certificate of
Designation").
(b) Means of Voting. The rights of the holders of Series C
Convertible Preferred Stock under this Section 4 may be exercised (i) at a
meeting of the holders of shares of such Series C Convertible Preferred Stock,
called for the purpose by the Corporation; or (ii) by written consent signed by
the holders of the requisite percentage of the then outstanding shares of the
Series C Convertible Preferred Stock, delivered to the Secretary or Assistant
Secretary of the Corporation. Except to the extent otherwise provided herein or
to the extent that holders of a majority of the Series C Convertible Preferred
Stock decide otherwise, any meeting of the holders of Series C Convertible
Preferred Stock shall be conducted in accordance with the provisions of the
By-Laws of the Corporation applicable to meetings of stockholders. In the event
of a conflict or inconsistency between the By-Laws of the Corporation and any
term of this Certificate of Designation, including, but not limited to this
Section 4, the terms of this Certificate of Designation shall prevail.
5. CONVERSION
Shares of Series C Convertible Preferred Stock may be
converted into shares of Common Stock, on the terms and conditions set forth in
this Section 5.
(a) Optional Conversion. Beginning on October 1, 2003
(except as to any shares which shall have been called for redemption prior to
October 1, 2003), each holder of Series C Convertible Preferred Stock shall have
right, at any time and from time to time thereafter, to convert all, but not
less than all, of the shares of Series C Convertible Preferred Stock held by
such holder or its affiliates into that number of shares of Common Stock equal
to the Accreted Stated Value of the shares converted divided by the Conversion
Price, provided, that in the event that on or after October 1, 2003 the
Corporation delivers a notice of redemption of Series C Convertible Preferred
Stock pursuant to Section 6(c), the right to convert may be exercised with
respect to shares of Series C Convertible Preferred Stock called for redemption
in such notice only during the period ending fifteen (15) days prior to the
redemption date specified in such notice.
(b) Change of Control. (i) If a Change of Control occurs
prior to October 1, 2003, each holder of shares of Series C Convertible
Preferred Stock may, at its option, at times specified below, convert all, but
not less than all, such shares held by such holder into the number of fully paid
and nonassessable shares of Common Stock determined by dividing (x) the Stated
Value multiplied by the number of shares surrendered plus any accrued but unpaid
dividends on such shares by (y) the Conversion Price.
- 5 -
<PAGE> 45
(ii) For the purposes of this Section 5(b), "Change
of Control" means the occurrence of one or more of the following events:
(A) a person or entity or group (as that
term is used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended) of persons or entities (in each case, a "Beneficial
Owner") shall have become the beneficial owner of a majority (by voting
power or otherwise) of the securities of the Corporation ordinarily
having the right to vote in the election of directors;
(B) during any consecutive three-year
period commencing on or after October 1, 1998, individuals who at the
beginning of such period constituted the Board of Directors (together
with any director elected by the Series A Preferred Stock and any new
directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Corporation was approved by a
vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors then in
office;
(C) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of
all, or substantially all, the assets of the Corporation to any
Beneficial Owner (other than any wholly owned subsidiary of the
Corporation);
(D) the merger or consolidation of the
Corporation with or into another corporation or the merger of another
corporation into the Corporation with the effect that immediately after
such transaction any Beneficial Owner shall have become the beneficial
owner of securities of the surviving corporation of such merger or
consolidation representing a majority of the combined voting power of
the outstanding securities of the surviving corporation ordinarily
having the right to vote in the election of directors; or
(E) the adoption of a plan leading to the
liquidation or dissolution of the Corporation;
(iii) (A) The Corporation shall give the holders
notice pursuant to Section 5(g) of a Change of Control within five
business days after the occurrence of such Change of Control. Except as
set forth in Section 5(b)(iii)(B), the right to convert set forth in
this Section 5(b) shall be exercised by any holder only within 10
business days after such notice has been given of the occurrence of the
Change of Control.
(B) If the Corporation agrees to enter
into a transaction that, when consummated, would result in a Change of
Control defined in Sections 5(b)(ii)(C) or (D), the Corporation shall
give notice to the holders of such transaction at least 15
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<PAGE> 46
business days prior to the consummation of the transaction, and the
holders may, within 10 business days after the date of such notice,
exercise the right to convert the Series C Convertible Preferred Stock
into Common Stock, such conversion to take effect at or immediately
prior to the record date for holders of Common Stock to receive the
consideration to be paid to such holders in the transaction. In
addition, if the transaction results is a Going Private Transaction (as
defined below), then the Conversion Price for purposes of conversion as
described in the preceding sentence shall be the lesser of (x) the
Conversion Price in effect immediately prior to the notice by the
Corporation given to holders pursuant to the preceding sentence and (y)
the value of the consideration per share of Common Stock (determined by
the Board of Directors, in good faith, as of the date of the first
public announcement of the transaction) to be paid to holders of Common
Stock in the transaction times 1.1, provided, that in no event shall
the Conversion Price for this purpose be less than $7.40 (as such
amount may be adjusted pursuant to that certain Warrant Agreement
between the Corporation and The First National Bank of Boston dated as
of November 15, 1996, which adjustment provisions are substantially
similar to the adjustment provision in 5(i)). For purposes hereof, a
"Going Private Transaction" shall mean a Change of Control defined in
Sections 5(b)(ii) (C) or (D), as a result of which, immediately after
consummation of such transaction, the securities into which the Series
C Convertible Preferred Stock would be convertible are not listed on a
national securities exchange or the NASDAQ National Market System or,
even if such securities are so listed, the number of issued and
outstanding shares of such securities (excluding (x) shares owned by
any beneficial owner of a majority of such shares and (y) "restricted"
shares within the meaning of Rule 144 under the Securities Act of 1933,
or any successor rule, that cannot be sold without limitation under
Rule 144) is less than three (3) times the number of shares into which
all outstanding shares of the Series C Convertible Preferred Stock
would be convertible after giving effect to the transaction.
(c) Conversion Price. The Conversion Price of the shares of
Series C Convertible Preferred Stock shall be $10.40, adjusted as set forth
herein.
(d) Common Stock. The Common Stock to be issued upon
conversion hereunder shall be fully paid and nonassessable.
(e) Procedures for Conversion. (i) In order to convert
shares of Series C Convertible Preferred Stock into shares of Common Stock, the
holder shall surrender the certificate or certificates therefore, duly endorsed
for transfer, at any time during normal business hours, to the Corporation at
its principal or at such other office or agency then maintained by it for such
purpose (the "Payment Office"), accompanied (or preceded as required by Section
5(a)) by written notice to the Corporation of such holder's election to convert
and (if so required by the Corporation or any conversion agent) by an instrument
of transfer, in form reasonably satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or by his duly
authorized attorney, and any cash payment required pursuant to Section
5(e)(iii). As promptly as practicable after the surrender for conversion of any
share of the Series
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<PAGE> 47
C Convertible Preferred Stock in the manner provided in the preceding sentence,
and the payment in cash of any amount required by the provisions of Section
5(e)(iii), but in any event within three Trading Days of such surrender for
payment, the Corporation will deliver or cause to be delivered at the Payment
Office to or upon the written order of the holder of such shares, certificates
representing the number of full shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares in proper order for
conversion, and all rights of the holder of such share as a holder of such
shares shall cease at such time and the person or persons in whose name or names
the certificates for such shares of Common Stock are to be issued shall be
treated for all purposes as having become the record holder or holders thereof
at such time; provided, however, that any such surrender and payment on any date
when the stock transfer books of the Corporation shall be closed shall
constitute the person or persons in whose name or names the certificates for
such shares of Common Stock are to be issued as the record holder or holders
thereof for all purposes immediately prior to the close of business on the next
succeeding day on which such stock transfer books are opened.
(ii) The Corporation shall not be required to
issue fractional shares of Common Stock upon conversion of shares of
Series C Convertible Preferred Stock. At the Corporation's discretion, in the
event the Corporation determines not to issue fractional shares, in lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the Conversion
Price.
(iii) The issuance of certificates for shares of
Common Stock upon conversion shall be made without charge for any issue, stamp
or other similar tax in respect of such issuance. However, if any such
certificate is to be issued in a name other than that of the holder of record of
the shares converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid or is not payable.
(f) Reservation of Stock Issuable Upon Conversion. The
Corporation shall reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Convertible Preferred Stock, 11,500,000 shares of
Common Stock. If at any time the number of authorized and unissued shares of
Common Stock that are reserved for issuance upon conversion of the shares of
Series C Convertible Preferred Stock, shall not be sufficient to effect the
conversion of all then outstanding shares of the Series C Convertible Preferred
Stock, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, taking appropriate board action, recommending
such an increase to the holders of Common Stock, holding shareholders meetings,
soliciting votes and proxies in favor of such increase to obtain the requisite
stockholder approval and upon such
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<PAGE> 48
approval, the Corporation shall reserve and keep available such additional
shares solely for the purpose of effecting the conversion of the shares of the
Series C Convertible Preferred Stock.
(g) Notices. Any notice required by the provisions of this
Certificate of Designation to be given to the holders of shares of Series C
Convertible Preferred Stock shall be deemed given five days after such notice is
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at its address appearing on the books of the Corporation, or
the next business day after such notice is delivered to a recognized overnight
courier service with next-business day delivery specified.
(h) Reorganization, Merger or Sale of the Corporation.
(i) Notwithstanding any other provision hereof, in
case of (A) any reorganization or any reclassification of the capital
stock of the Corporation or (B) any merger or consolidation of the
Corporation, that in any such case results in the Common Stock being
converted into other securities or property, or the right to receive
other securities or property, then, to the extent the Corporation or
the holders do not otherwise redeem or convert all outstanding shares
of Series C Convertible Preferred Stock, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application
of the provisions herein set forth with respect to the rights and
interests of the holders of the Series C Convertible Preferred Stock,
to the end that the provisions set forth herein shall thereafter be
applicable, as nearly as equivalent as is practicable, in relation to
any shares of stock thereafter deliverable upon the conversion of the
shares of Series C Convertible Preferred Stock.
(ii) In case of any merger, consolidation,
reclassification or other similar reorganization, to the extent the
Corporation is not the surviving entity, and the Corporation or the
holders do not otherwise redeem or convert all outstanding shares of
Series C Convertible Preferred Stock, the Series C Convertible
Preferred Stock shall be converted into or exchanged for and shall
become shares of the surviving corporation having, in respect of the
surviving corporation, substantially the same powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the Series C
Convertible Preferred Stock had immediately prior to such transaction.
In the case the Corporation is not the surviving entity, the Conversion
Price shall be adjusted at the closing of the transaction to equal the
Conversion Price in effect immediately prior to the closing divided by
the fair market value of the common stock immediately prior to the
closing multiplied by the fair market value of the common stock of the
surviving entity at the closing.
(iii) References in this Section 5 to "Common Stock"
shall include all stock or other securities or property (including
cash) into which Common Stock is converted following any merger,
reorganization or reclassification of the capital stock of the
Corporation.
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<PAGE> 49
(i) Adjustments. The number of shares of Common
Stock issuable upon conversion of shares of the Series C Convertible Preferred
Stock that are then outstanding and the Conversion Price shall be subject to
adjustment from time to time as follows:
(i) Stock Dividends; Stock Splits; Reverse Stock
Splits. In case the Corporation shall (A) declare or pay a dividend on
its outstanding Common Stock in shares of Common Stock or make a
distribution to all holders of its outstanding Common Stock in shares
of Common Stock, (B) subdivide its outstanding Common Stock into a
greater number of shares or reclassify its outstanding Common Stock, or
(C) combine its outstanding Common Stock into a smaller number of
shares, the number of shares of Common Stock issuable upon conversion
of each share of Series C Convertible Preferred Stock shall be adjusted
so that the holder of each such share shall thereafter be entitled to
receive the kind and number of shares of Common Stock that such holder
would have owned or have been entitled to receive after the happening
of any of the events described above, had such share been converted in
full immediately prior to the happening of such event or any record
date with respect thereto (with any record date requirement being
deemed to have been satisfied), and, in any such case, the number of
shares of Common Stock issuable upon conversion of each such share
shall be subject to further adjustments under this Section 5(i). An
adjustment made pursuant to this Section 5(i)(i) shall become effective
at the record date, if any, for such event.
(ii) Distributions to Stockholders. In case the
Corporation shall issue to holders of its Common Stock rights, options,
warrants or convertible or exchangeable securities (collectively, the
"rights") entitling them to subscribe for or purchase Common Stock at a
price per share of Common Stock (determined by dividing (A) the total
amount receivable by the Corporation in consideration of the issuance
of such rights plus the total consideration payable to the Corporation
upon exercise, conversion or exchange thereof, by (B) the total number
of shares of Common Stock covered by such rights) that is lower than
the Current Market Price per share of Common Stock in effect
immediately prior to such issuance, then the number of shares of Common
Stock issuable upon conversion of all shares of Series C Convertible
Preferred Stock shall be increased in a manner determined by
multiplying the number of shares of Common Stock theretofore issuable
upon the conversion of all shares of Series C Convertible Preferred
Stock by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of
such rights plus the number of additional shares of Common Stock
offered for subscription or purchase, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such rights plus the number of shares of
Common Stock which the aggregate consideration to be received by the
Corporation in connection with such issuance (as defined in the
following sentence) would purchase at the then Current Market Price per
share of Common Stock. For purposes of this Section 5(i), the "Current
Market Price" per share of Common Stock for any date shall mean average
of the closing prices of the
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<PAGE> 50
Common Stock for the 10 trading days prior to such date. For purposes
of this Section 5(i)(ii), the "aggregate consideration to be received
by the Corporation" in connection with any issuance of such rights
shall be deemed to be the consideration received by the Corporation for
such rights plus any consideration or premiums stated in such rights to
be paid for the shares of Common Stock covered thereby.
(iii) Issuance of Common Stock at Lower Values. In
case the Corporation shall, in a transaction to which Section 5(i)(i)
is inapplicable (and, in any event, other than upon conversion of
Series A Preferred Stock, Series B Preferred Stock, or Series C
Convertible Preferred Stock, or upon exercise of any warrants or
employee stock options that were outstanding on the Initial Issuance
Date or pursuant to contractual commitments to which the Corporation
was bound on the Initial Issuance Date), issue or sell shares of Common
Stock, or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock, at a price per share of Common Stock (determined, in the
case of rights, options, warrants or convertible or exchangeable
securities, by dividing (A) the total amount receivable by the
Corporation in consideration of the issuance and sale of such rights,
options, warrants or convertible or exchangeable securities, plus the
total consideration payable to the Corporation upon exercise,
conversion or exchange thereof, by (B) the total number of shares of
Common Stock covered by such rights, options, warrants or convertible
or exchangeable securities) that is lower (at the date of such sale or
issuance) than the Current Market Price per share of Common Stock in
effect immediately prior to such sale or issuance or for no
consideration, then in each case the number of shares of Common Stock
thereafter issuable upon the conversion of the shares of Series C
Convertible Preferred Stock shall be increased in a manner determined
by multiplying the number of shares of Common Stock theretofore
issuable upon the conversion of all shares of Series C Convertible
Preferred Stock by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately prior to the
sale or issuance, plus the number of additional shares of Common Stock
offered for subscription or purchase or to be issued upon conversion or
exchange of such convertible or exchangeable securities, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock which the aggregate consideration to be
received by the Corporation (as defined in the following paragraph) in
connection with such sale or issuance would purchase at the then
Current Market Price per share of Common Stock.
For the purpose of such adjustments the "aggregate
consideration to be received by the Corporation" therefor shall be
deemed to be the consideration received by the Corporation for such
rights, options, warrants or convertible or exchangeable securities
plus any consideration or premiums stated in such rights, options,
warrants or convertible or exchangeable securities to be paid for the
shares of Common Stock covered thereby.
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<PAGE> 51
In case the Corporation shall issue or sell shares of
Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting, in
whole or in part, of property other than cash or its equivalent, then
in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Corporation for
purposes of Sections 5(i)(ii) and 5(i)(iii), the Board of Directors of
the Corporation shall determine, in good faith, the fair value of such
property. In case the Corporation shall issue and sell rights, options,
warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of Common Stock, together with one
or more other securities as part of a unit at a price per unit, then in
determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Corporation for
purposes of Sections 5(i)(ii) and 5(i)(iii), the Board of Directors of
the Corporation shall determine, in good faith, the fair value of the
rights, options, warrants or convertible or exchangeable securities
then being sold as part of such unit.
Any increase of the number of shares of Common Stock issuable
upon conversion of shares of Series C Convertible Preferred Stock
pursuant to this Section 5(i)(iii) shall be allocated among such Series
C Convertible Preferred Stock on a pro rata basis.
(iv) Expiration of Rights, Options and Conversion
Privileges. Upon the expiration of any rights, options, warrants or
conversion or exchange rights that have previously resulted in an
adjustment under this Section 5(i), if any thereof shall not have been
exercised, the number of shares of Common Stock issuable upon
conversion of Series C Convertible Preferred Stock shall be readjusted
and shall thereafter, upon any future exercise, be such as they would
have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only
shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights, options,
warrants or conversion or exchange rights and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise plus the
consideration, if any, actually received by the Corporation for
issuance, sale or grant of all such rights, options, warrants or
conversion or exchange rights whether or not exercised; provided that
no such readjustment shall have the effect of decreasing the number of
shares issuable upon conversion of Series C Convertible Preferred Stock
by a number that is in excess of the amount or number of the adjustment
initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights or shall
have the effect of decreasing the number of shares of Common Stock that
have been issued upon conversion of any shares of Series C Convertible
Stock prior to the date of such readjustment.
(v) De minimis Adjustments. No adjustment in the
number of shares of Common Stock issuable under any Series C
Convertible Preferred Stock shall be
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<PAGE> 52
required unless such adjustment would require an increase or decrease
of at least one percent (1%) in the number of shares of Common Stock
purchasable upon a conversion of Series C Convertible Preferred Stock;
provided, that any adjustments which by reason of this Section 5(i) are
not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations shall be made to the
nearest one-thousandth of a share.
(vi) Notice of Adjustment. Whenever the number of
shares of Common Stock or other stock or property issuable upon the
conversion of Series C Convertible Preferred Stock is adjusted, as
herein provided, the Corporation shall deliver to the holders thereof a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Corporation (who may be the regular
accountants employed by the Corporation) setting forth the number of
shares of Common Stock or other stock or property issuable upon the
conversion of each share of Series C Convertible Preferred Stock after
such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such
adjustment was made and shall promptly mail by first class mail,
postage prepaid, to each holder notice of such adjustment or
adjustments.
(vii) Adjustment of Conversion Price. Whenever the
number of shares of Common Stock issuable upon conversion of the Series
C Convertible Preferred Stock is adjusted as provided in this Section
5(i), the Conversion Price shall be adjusted by multiplying such
Conversion Price immediately prior to such adjustment by a fraction,
the numerator of which shall be the number of shares issuable upon
conversion of a share of Series C Convertible Preferred Stock
immediately prior to such adjustment, and the denominator of which is
the number of shares so issuable immediately thereafter.
6. OPTIONAL REDEMPTION
(a) Redemption Price. Beginning on October 1, 2001, the
Corporation, at its sole option, may redeem all, but not less than all, shares
of the Series C Convertible Preferred Stock for cash, at any time or from time
to time, for the redemption price per share set forth below:
<TABLE>
<CAPTION>
DATE OF REDEMPTION REDEMPTION PRICE
------------------ ----------------
<S> <C>
October 1, 2001 to September 30, 2002 105.0% of Redemption Value
October 1, 2002 to September 30, 2003 102.5% of Redemption Value
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
DATE OF REDEMPTION REDEMPTION PRICE
------------------ ----------------
<S> <C>
After September 30, 2003 100.0% of Accreted Stated
Value
</TABLE>
For purposes hereof, "Redemption Value" for a share of Series
C Convertible Preferred Stock shall equal the greater of (i) Accreted Stated
Value, and (ii) if the Current Market Price of the Common Stock on the date of
the notice of redemption is greater than the Conversion Price, then an amount
determined in accordance with the following formula:
RV = (CMP)(SV)/CP
For purposes of this formula:
RV = Redemption Value per share
SV = Accreted Stated Value per share
CMP = Current Market Price
CP = Conversion Price
"Accreted Stated Value" per share means the Stated Value per
share plus accrued and unpaid dividends, if any, on such share through the date
of redemption.
(b) Notice of Redemptions. Notice of redemptions shall be
given by first class mail, postage prepaid, not less than 20 nor more than 60
business days prior to the redemption date or, if such notice period is not
feasible in connection with a transaction described in Section 5(g), such notice
period as is practicable in the circumstances, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the books
of the Corporation. Each such notice shall state: (i) the redemption date; (ii)
the place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (iii) that dividends on the shares to be
redeemed will cease to accrue on the redemption date.
(c) Cessation of Dividends on Shares Redeemed. Notice
having been mailed as stated in subsection (c) above, from and after the close
of business on the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the redemption price of the
shares called for redemption), dividends on the shares of the Series C
Convertible Preferred Stock redeemed shall cease to accrue, and said shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid.
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<PAGE> 54
(d) Status of Redeemed or Converted Shares. Upon
redemption or conversion, any shares of the Series C Convertible Preferred Stock
which have been so redeemed or converted shall be retired and thereafter have
the status of authorized but unissued shares of preferred stock, without
designation as to series until such shares are once more designated as part of a
particular series by the Board of Directors or a duly authorized committee
thereof.
7. MANDATORY REDEMPTION.
On October 1, 2010 (the "Final Redemption Date"), the Corporation
shall redeem from any source of funds legally available therefor, in the manner
provided in Section 6(c) above, all of the shares of the Series C Convertible
Preferred Stock then outstanding at a redemption price equal to the Stated Value
per share, plus, without duplication, an amount in cash equal to all accrued and
unpaid dividends per share to the Final Redemption Date.
8. PREEMPTIVE RIGHTS.
No shares of Series C Convertible Preferred Stock shall have any
rights of preemption whatsoever as to any securities of the Corporation, or any
warrants, rights or options issued or granted with respect thereto, regardless
of how such securities or such warrants, rights or options may be designated,
issued or granted.
9. TRANSFERABILITY.
No shares of Series C Convertible Preferred Stock shall be
transferable without the consent of the Corporation until April 1, 2000;
provided, however, this provision shall terminate and be of no further force or
effect immediately upon the occurrence of a Problematic Regulatory Change of
Control. A "Problematic Regulatory Change of Control" is a Change of Control
which causes the Holder and/or its affiliates to receive an attributable
interest in any radio spectrum or FCC Service with respect to which the FCC or
applicable law imposes a spectrum cap (including, without limitation, spectrum
caps imposed on the holding of broadband CMRS or narrowband PCS spectrum),
multiple ownership restriction, or other material limitation. "FCC Service"
shall mean any service subject to FCC (or successor agency) regulation or
oversight.
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<PAGE> 55
Exhibit 4.3(c)(iii) to Restated Certificate of Incorporation
<PAGE> 56
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION, NUMBER, POWERS
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF
SERIES E JUNIOR PARTICIPATING PREFERRED STOCK
OF
METROCALL, INC.
Metrocall, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors, adopted the
following resolution at a meeting on February 18, 2000.
WHEREAS, the Board of Directors of the Corporation is authorized by the
Restated Certificate of Incorporation, as amended, to issue up to 1,000,000
shares of preferred stock in one or more classes or series and, in connection
with the creation of any class or series, to fix by the resolutions providing
for the issuance of shares the designation, number, powers, preferences and
relative, participating, optional and other rights of the class or series and
the qualifications, limitations or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to such authority, to authorize and fix the terms and provisions of a
series of preferred stock and the number of shares constituting the series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a
series of preferred stock on the terms and with the provisions herein set forth
on Annex A attached to this resolution.
/s/ Shirley B. White
---------------------
Shirley B. White
Assistant Secretary
ATTEST:
/s/ Vincent D. Kelly
- --------------------
Vincent D. Kelly
Chief Financial Officer
<PAGE> 57
ANNEX A
SERIES E JUNIOR PARTICIPATING PREFERRED STOCK
The designation, number, powers, preferences and relative,
participating, optional and other rights of the Series E Junior Participating
Preferred Stock of Metrocall, Inc. (the "Corporation") are as follows:
SECTION 1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as "Series E Junior
Participating Preferred Stock," and shall have $0.01 par value per share. The
number of authorized shares constituting this series shall be 100,000 shares.
The Corporation may issue fractional shares of Series E Junior Participating
Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(a) The rate of dividends payable per share of Series E
Preferred Shares on the first day of January, April, July and October in each
year or such other quarterly payment date as shall be specified by the Board of
Directors (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of the Series E Preferred
Shares, shall be (rounded to the nearest cent), subject to the provision for
adjustment hereinafter set forth, equal to 1000 times the aggregate per share
amount of all cash dividends, and 1000 times the aggregate per share amount
(payable in cash, based upon the fair market value at the time the non-cash
dividend or other distribution is declared or paid as determined in good faith
by the Board of Directors) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $0.01 per share, of the Corporation since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of the Series E Preferred Shares. Dividends on the Series E
Preferred Shares shall be paid out of funds legally available for such purpose.
In the event the Corporation shall at any time after February 25, 2000 (the
"Rights Dividend Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, then in each such case the amounts to which holders of
Series E Preferred Shares were entitled immediately prior to such event shall be
adjusted by multiplying each such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
<PAGE> 58
(b) Dividends shall begin to accrue and be cumulative on
outstanding Series E Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series E Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series E Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the Series E Preferred Shares in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rat a share-by-share basis among all such shares
at the time outstanding.
SECTION 3. VOTING RIGHTS.
In addition to any other voting rights required by law, subject to the
provision for adjustment hereinafter set forth, each Series E Preferred Share
shall entitle the holder thereof to 1000 votes on all matters submitted to a
vote of the stockholders of the Corporation. If the Corporation at any time
after the Rights Declaration Date (i) declares any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivides the outstanding shares of
Common Stock, or (iii) combines the outstanding shares of Common Stock into a
smaller number of shares, then in each such case the number of votes per share
to which holders of Series E Preferred Shares were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Except as otherwise provided herein, in the certificate of incorporation of the
Corporation or by laws, the holders of Series E Preferred Shares and the holders
of Common Stock (and the holders of shares of any other series or class entitled
to vote thereon) shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
SECTION 4. REACQUIRED SHARES.
Any Series E Preferred Shares purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued preferred stock and may be reissued as part of a
new series of preferred stock to be created by resolution or resolutions of the
Board of Directors.
SECTION 5. LIQUIDATION, DISSOLUTION OR WINDING UP.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of Series E Preferred Shares shall
be entitled to receive the greater of (a) $1.00 per share, plus accrued
dividends to the date of distribution, whether or not earned or declared, or (b)
an amount per share, subject to the provision for adjustment hereinafter set
forth,
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<PAGE> 59
equal to 1000 times the aggregate amount to be distributed per share to
holders of Common Stock. If the Corporation at any time after the Rights
Declaration Date (i) declares any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivides the outstanding shares of Common Stock, or (iii)
combines the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amount to which holders of Series E Preferred Shares
were entitled immediately prior to such event pursuant to clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 6. CONSOLIDATION, MERGER, ETC.
If the Corporation enters into any consolidation, merger, combination
or other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the Series E Preferred Shares shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. If the Corporation at any time after the Rights Declaration Date (i)
declares any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivides the outstanding shares of Common Stock, or (iii) combines the
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series E Preferred Shares shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SERIES 7. NO REDEMPTION.
The Series E Preferred Shares shall not be redeemable.
SERIES 8. RANKING.
The Series E Preferred Shares shall rank junior to all other series of
the Corporation's preferred stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
SERIES 9. FRACTIONAL SHARES.
Series E Preferred Shares may be issued in fractions of a share which
shall entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series E Preferred Shares.
3
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
SECURITIES EXCHANGE AGREEMENT
BY AND BETWEEN
AT&T WIRELESS SERVICES, INC.
AND
METROCALL, INC.
DATED AS OF FEBRUARY 2, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECURITIES EXCHANGE AGREEMENT.....................................................................................1
ARTICLE 1 EXCHANGE OF SECURITIES; THE CLOSING....................................................................1
1.1 EXCHANGE OF SECURITIES..........................................................................1
1.2 THE CLOSING.....................................................................................2
1.3 TIME AND PLACE OF CLOSING.......................................................................2
1.4 TRANSACTIONS AT THE CLOSING.....................................................................2
ARTICLE 2 REPRESENTATION AND WARRANTIES..........................................................................2
2.1 REPRESENTATIONS AND WARRANTIES OF WIRELESS......................................................2
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................4
ARTICLE 3 COVENANTS..............................................................................................6
3.1 ANTITRUST LAWS..................................................................................6
3.2 LISTING OF ADDITIONAL SHARES....................................................................6
3.3 LIMITATIONS ON TRANSFER.........................................................................6
3.4 FCC APPLICATIONS................................................................................9
ARTICLE 4 CONDITIONS PRECEDENT...................................................................................9
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES..................................................9
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY..............................................9
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WIRELESS............................................10
4.4 WAIVER OF CONDITIONS...........................................................................12
ARTICLE 5 TERMINATION AND DEFAULT...............................................................................12
5.1 GENERAL........................................................................................12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.2 PROCEDURE UPON TERMINATION.....................................................................12
5.3 EFFECT OF TERMINATION..........................................................................12
ARTICLE 6 MISCELLANEOUS.........................................................................................13
6.1 BROKERS........................................................................................13
6.2 NOTICES........................................................................................13
6.3 FEES AND EXPENSES..............................................................................14
6.4 ASSIGNMENT.....................................................................................14
6.5 COUNTERPARTS...................................................................................14
6.6 ENTIRE AGREEMENT...............................................................................14
6.7 GOVERNING LAW..................................................................................14
6.8 HEADINGS.......................................................................................14
6.9 SEVERABILITY...................................................................................15
6.10 MODIFICATION AND AMENDMENT.....................................................................15
6.11 WAIVER.........................................................................................15
6.12 PARTIES OBLIGATED AND BENEFITED................................................................15
6.13 ACTIONS........................................................................................15
6.14 TERMS..........................................................................................15
EXHIBIT A........................................................................................................17
EXHIBIT B........................................................................................................18
SCHEDULE 3.3.....................................................................................................19
</TABLE>
ii
<PAGE> 4
SECURITIES EXCHANGE AGREEMENT
THIS SECURITIES EXCHANGE AGREEMENT (this "Agreement"), dated as of
February 2, 2000, is entered into by and between AT&T WIRELESS SERVICES, INC., a
Delaware corporation ("Wireless"), and METROCALL, INC., a Delaware corporation
(the "Company").
RECITALS
A Wireless is the legal and beneficial owner of 10,378 issued
and outstanding shares (the "Series C Shares") of the Company's Series C
Convertible Preferred Stock (the "Series C Preferred").
B Wireless and the Company desire to effect an exchange of the
Series C Shares for shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock") and, in certain circumstances, for shares of Series
D Non-Voting Participating Convertible Preferred Stock of the Company ("Series D
Preferred"), upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, and intending
to be legally bound, Wireless and the Company hereby agree as follows:
ARTICLE 1
EXCHANGE OF SECURITIES; THE CLOSING
1.1 EXCHANGE OF SECURITIES. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date the Series C Shares
will be exchanged for (a) that number of shares of Common Stock (the "Wireless
Common Shares") equal to the lesser of (i) 13,250,000 (equitably adjusted to
take into account any combination or subdivision of the Common Stock effected
prior to the Closing Date) and (ii) 19.99% of the total number of shares of
Common Stock that will be issued and outstanding on the Closing Date after
giving effect to the transactions contemplated by this Agreement, and (b) in the
event that the number of shares of Common Stock to be issued pursuant to clause
(a) is less than 13,250,000 (equitably adjusted as aforesaid), that number of
shares of Series D Preferred (the "Series D Shares") equal to (i) the difference
between 13,250,000 (equitably adjusted as aforesaid) and the number of shares of
Common Stock to be issued pursuant to clause (a), divided by (ii) 100. The
Series D Preferred shall be issued pursuant to a Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and Other
Rights in the form set forth on Exhibit A to this Agreement (the "Series D
Certificate of Designation").
<PAGE> 5
1.2 THE CLOSING. Subject to the satisfaction or waiver of the
conditions set forth in Article 4, the closing (the "Closing") shall occur on
the first business day after the expiration of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the receipt of any required consent of the Federal
Communications Commission ("FCC"), or such other date as the parties may agree.
The "Closing Date" shall be the date the Closing occurs.
1.3 TIME AND PLACE OF CLOSING. The Closing shall take place at the
offices of Wilmer, Cutler & Pickering, 2445 M Street, N.W., Washington, D.C.
20037 at 10:00 a.m., Washington, D.C. time, on the Closing Date or at such other
place agreed to by the parties.
1.4 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the terms
and conditions of this Agreement:
1.4.1 The Company. The Company shall issue and deliver to Wireless a
certificate or certificates representing the Wireless Common Shares and, if
applicable, the Series D Shares.
1.4.2 Wireless. Wireless shall deliver to the Company (a) the
certificate or certificates representing the Series C Shares and (b) an
irrevocable proxy granting a person to be designated by the Company full power
and authority, for a period commencing on the Closing Date and ending on the
first anniversary of the Closing Date, to vote all the Wireless Common Shares
and any shares of Common Stock into which the Series D Shares may be converted
in accordance with the recommendation of the Board of Directors of the Company,
which proxy shall be coupled with an interest, provided, however, the proxy
shall not apply to any matter as to which the holders of the Series D Preferred
have the right to vote under the Series D Certificate of Designation or
applicable law.
ARTICLE 2
REPRESENTATION AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF WIRELESS. Wireless represents and
warrants to the Company, as of the date hereof and as of the Closing Date
(unless another date or period of time is specifically stated herein for a
representation or warranty), as follows:
2.1.1 Corporate Organization; the Shares.
(a) Wireless is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Wireless has all
requisite corporate power and authority to own and operate its business as it
currently is being conducted and to own and lease the properties and assets
owned or leased by it. Wireless is licensed or qualified to do business as a
foreign corporation and is in good
2
<PAGE> 6
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of its business makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed would not have a material adverse effect on the business, results of
operations, properties, financial condition, assets and liabilities of Wireless
and its subsidiaries, taken as a whole.
(b) Wireless has all requisite corporate power and authority to enter
into this Agreement and perform its obligations hereunder.
(c) All of the Series C Shares are owned of record and beneficially by
Wireless free and clear of all liens, claims, encumbrances, mortgages, pledges,
security interests or charges of any kind ("Liens"). No option, warrant, call,
subscription right, conversion right or other contract or commitment of any kind
exists of any character, written or oral, which may obligate Wireless to offer,
sell, transfer or otherwise dispose of any of the Series C Shares.
2.1.2 Authorization and Validity of Agreement. The execution, delivery
and performance by Wireless of this Agreement and the other agreements,
certificates, documents, and instruments contemplated hereby or referred to
herein, and the consummation by Wireless of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action of Wireless.
This Agreement has been duly executed and delivered by Wireless and, assuming
the due authorization, execution and delivery hereof by the Company, is a legal,
valid and binding obligation of Wireless, enforceable against it in accordance
with its terms, except as and to the extent such enforceability may be subject
to bankruptcy or similar laws affecting creditor rights and general equitable
principles.
2.1.3 No Conflicts. The execution, delivery and performance by Wireless
of this Agreement, the consummation by Wireless of the transactions contemplated
hereby, and the fulfillment by Wireless of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, the
provisions of any of the certificate of incorporation or bylaws (or comparable
instruments) of Wireless;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under or
require notice under any material document, material agreement or other material
instrument to which Wireless is a party or by which Wireless is bound (the
"Third Party Contracts") or, require any third party consent, waiver or approval
in order that any Third Party Contract remain in effect without material
modification after the Closing Date and without giving rise to any right to
termination, cancellation, acceleration or loss of any material right or
benefit;
(c) result in the creation or imposition of any Lien on Wireless'
properties pursuant to (i) any law or regulation to which Wireless or any of its
property
3
<PAGE> 7
is subject, or (ii) any judgment, order or decree to which Wireless is bound or
any of its property is subject; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which Wireless is subject or bound.
2.1.4 Acquisition for Investment. Wireless is acquiring the Wireless
Common Shares and, if applicable, the Series D Shares without a present
intention of resale or distribution in violation of the Securities Act of 1933,
as amended (the "Securities Act") and shall not sell or otherwise transfer such
Shares except when such sale or transfer is made in compliance with the
Securities Act and all applicable state laws.
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Wireless, as of the date hereof and as of the Closing
Date (unless another date or period of time is specifically stated herein for a
representation or warranty), as follows:
2.2.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own and
operate its business as it currently is being conducted and to own and lease the
properties and assets owned or leased by it. The Company is licensed or
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
would not have a material adverse effect on the business, results of operations,
properties, financial condition, assets and liabilities of the Company and its
subsidiaries, taken as a whole. The Company has all requisite corporate power
and authority to enter into this Agreement and perform its obligations
hereunder.
2.2.2 Authorization and Validity of Agreement. The execution, delivery
and performance by the Company of this Agreement and the other agreements,
certificates, documents and instruments contemplated hereby or referred to
herein, and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of the Company. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution, and delivery hereof by Wireless, is a legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, except as and to the extent such enforceability may be subject to
bankruptcy or similar laws affecting creditors rights and general equitable
principles.
2.2.3 No Conflicts. The execution, delivery and performance by the
Company of this Agreement, the consummation by the Company of the transactions
contemplated hereby, and the fulfillment by the Company of the terms hereof will
not:
4
<PAGE> 8
(a) conflict with, or result in a breach or violation of, the
provisions of the certificate of incorporation or bylaws of the Company;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under or
require notice under any material document, material agreement or other material
instrument to which the Company is a party or by which the Company is bound (the
"Company Third Party Contracts") or, require any third party consent, waiver or
approval in order that any Company Third Party Contract remain in effect without
material modification after the Closing Date and without giving rise to any
right to termination, cancellation, acceleration or loss of any material right
or benefit;
(c) result in the creation or imposition of any Lien on the Company's
properties pursuant to (i) any law or regulation to which the Company or any of
its property is subject, or (ii) any judgment, order or decree to which the
Company is bound or any its property is subject; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company is subject or bound.
2.2.4 Capital Stock of the Company. The duly authorized capital stock
of the Company consists of 200,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, par value $.01 per share ("Metrocall Preferred
Stock"). As of January 26, 2000, 42,103,017 shares of Common Stock were issued
and outstanding. As of January 26, 2000, 249,895 shares of Metrocall Preferred
Stock were issued and outstanding, of which 239,517 shares were issued and
outstanding shares of Series A Convertible Preferred Stock, par value $.01 per
share, and of which 10,378 shares were issued and outstanding shares of Series C
Preferred. All of the issued and outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and nonassessable.
Except pursuant to the Company's stock option plans or employee stock purchase
plans or as disclosed in the SEC Filings (as defined below), there are no
outstanding options, warrants or other rights to subscribe for or purchase or
otherwise acquire any shares of capital stock (or securities directly or
indirectly convertible into or exchangeable or exercisable for shares of capital
stock) of the Company. "SEC Filings" mean the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, and all other reports,
statements and registration statements filed by the Company with the Securities
and Exchange Commission ("SEC") since January 1, 1999 (collectively, the "SEC
Filings").
2.2.5 Financial Statements and Reports. The SEC Filings were prepared
and filed in accordance with the rules and regulations of the SEC. As of their
respective dates, the SEC Filings did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Filings were prepared in accordance with generally accepted
accounting principles as in effect from
5
<PAGE> 9
time to time applied on a consistent basis (except as otherwise noted in such
financial statements) and present fairly in all material respects the
consolidated financial condition, results of operations and cash flows of the
Company as of the dates and for the periods indicated, subject, in the case of
interim financial statements, to normal year end audit adjustments.
2.2.6 Validity of Securities. At Closing, the Wireless Common Shares
and the Series D Shares to be issued to Wireless will be duly and validly
authorized and issued, fully paid and nonassessable, free and clear of any
preemptive rights or Liens.
ARTICLE 3
COVENANTS
3.1 ANTITRUST LAWS. Wireless will, or will cause its "ultimate parent"
to file as soon as practicable all filings that are required under the HSR Act,
to respond as soon as practicable to all inquiries received from the Federal
Trade Commission or the Antitrust Division of the Department of Justice for
additional information or documentation, to respond as soon as practicable to
all inquiries received from any other government agency in connection with
antitrust matters, and to seek early termination of any waiting period under the
HSR Act.
3.2 LISTING OF ADDITIONAL SHARES. The Company will file with the Nasdaq
National Market a Notification Form for Listing of Additional Shares for an
amount of shares of Common Stock equal to at least the amount of the Wireless
Common Shares and any shares of Common Stock reserved for issuance upon
conversion under the terms of the Series D Certificate of Designation.
3.3 LIMITATIONS ON TRANSFER. Notwithstanding any other provision of
this Agreement (other than Section 2.1.4) or the Series D Certificate of
Designation, other than as specifically approved by the Company, Wireless will
not sell, transfer or otherwise dispose of any of the Wireless Common Shares,
the Series D Shares, or any shares of Common Stock issued upon conversion of the
Series D Shares, except as follows (sales, transfers and dispositions of such
securities as permitted by any of the following Sections 3.3(a), 3.3(b), 3.3(c)
and 3.3(d) shall not reduce the number of such securities that may be sold,
transferred or disposed of pursuant to any of the other of such sections):
(a) Wireless may sell all or any portion of such securities at any time
or times more than six (6) months after the Closing, in one or more privately
negotiated sales to any person or group that is not a "Restricted Person," as
identified in Schedule 3.3 hereto, so long as Wireless and the transferee comply
with the following:
(i) Prior to consummating any such sale, Wireless shall give written
notice thereof to the Company specifying the number of securities that Wireless
desires to sell. For a period of five (5) business days following such notice,
the
6
<PAGE> 10
Company shall have the exclusive right to negotiate with Wireless with respect
to the purchase of such securities by the Company or its nominee. Such exclusive
right shall not be deemed to be a right of first offer or right of first
refusal, and Wireless shall have the right to reject any offer made by the
Company or its nominee during such period. If no such offer is made and accepted
prior to the expiration of such period, Wireless shall have the right for a
period of three (3) months following expiration of such period to offer and sell
such securities on such terms and conditions as shall be acceptable to Wireless.
If any of such securities remain unsold at the end of such period and Wireless
desires to sell such securities under this Section 3.3(a), Wireless shall again
be required to comply with the notice and other provisions of this Section
3.3(a).
(ii) The transferee of any securities sold pursuant to this Section
3.3(a) shall consent in writing to be bound by the provisions of this Agreement,
and an original of such consent shall be delivered to the Company.
(b) At any time or times more than twelve months after the Closing
Date, Wireless may sell all or any portion of the Wireless Common Shares and any
shares of Common Stock issued upon conversion of the Series D Shares in one or
more sales in any available over-the-counter market for the Common Stock and/or
through any exchange on which the Common Stock is then traded, subject to the
following:
(i) The aggregate number of shares of Common Stock sold during each
period shown in the following table (a "Period") shall not exceed the sum of (A)
the number of shares (which number shall be equitably adjusted to take into
account any combination or subdivision of the Common Stock effected prior to or
following the Closing Date) indicated in the table for that Period, plus (B) the
number of such shares that could have been but were not sold pursuant to this
Section 3.3(b) (determined without regard to Section 3.3(b)(ii)) during any
prior Period (the number of shares determined by such sum for any Period will be
referred to as the "Permitted Period Shares"):
Period (after Closing Date) Permitted Sales
12 months - 18 months 2,650,000 shares
18 months - 24 months 2,650,000 shares
24 months - 30 months 2,650,000 shares
After 30 months 5,300,000 shares
(ii) Prior to making any sale of such shares in any Period, Wireless
shall give the Company notice of its intention to do so. For a period of five
(5) business days following receipt of such notice, the Company shall have the
option, exercisable by written notice to Wireless, to conduct an underwritten
offering of all of the Permitted Period Shares pursuant to a registration
statement under the Securities Act filed in accordance with Section 2.02 and the
other terms and conditions of the Registration Rights Agreement (as defined
below). The number of shares to be included in the registration statement may be
reduced to the extent that the managing underwriter
7
<PAGE> 11
determines that inclusion of the shares would adversely affect the marketing of
the offering, provided that the reduction shall apply first to all holders of
such shares other than Wireless and second to the number of Permitted Period
Shares, and provided further that if the number of Permitted Period Shares to be
included by Wireless in the registration statement is reduced, Wireless may
elect to sell such number of Permitted Period Shares pursuant to this Section
3.3(b) without regard to this Section 3.3(b)(ii). If (a) the Company does not
exercise its option to conduct an underwritten offering of all of the Permitted
Period Shares under this Section 3.3(b)(ii) or (b) having exercised its option,
the Company's registration statement is not filed and declared effective within
ninety (90) days following the Company's receipt of the notice from Wireless
under this Section 3.3(b)(ii), then Wireless may elect to sell all or any
portion of the Permitted Period Shares pursuant to this Section 3.3(b) without
regard to this Section 3.3(b)(ii).
(c) Wireless may sell, transfer or otherwise dispose of all or any
portion of such securities pursuant to a tender offer, merger, sale of all or
substantially all the Company's assets or any similar transaction that offers
each holder of Common Stock (other than, if applicable, the person proposing
such transaction and its affiliates) the opportunity to dispose of Common Stock
for the same consideration or otherwise contemplates the acquisition of Common
Stock beneficially owned by each such holder for the same consideration; and
(d) Wireless may sell, transfer or otherwise dispose of all or any
portion of such securities upon the occurrence of a Problematic Regulatory
Change of Control. A "Problematic Regulatory Change of Control" is a change of
control which causes the holder and/or its affiliates to receive an attributable
interest in any radio spectrum or FCC Service with respect to which the FCC or
applicable law imposes a spectrum cap (including, without limitation, spectrum
caps imposed on the holding of broadband CMRS or narrowband PCS spectrum),
multiple ownership restriction, or other material limitation. "FCC Service"
shall mean any service subject to FCC (or successor agency) regulation or
oversight.
8
<PAGE> 12
3.4 FCC APPLICATIONS. If necessary to effectuate the transactions
contemplated by this Agreement, the Company shall prepare, file and prosecute
any required applications for the FCC's consent to the subject transactions.
Wireless shall cooperate with the Company in the preparation, filing and
prosecution of any such applications.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. The respective
obligations of Wireless, on the one hand, and the Company, on the other, to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
4.1.1 No Injunction, Etc. No preliminary or permanent injunction or
other order shall have been issued by any federal or state court of competent
jurisdiction in the United States or by any U.S. federal or state governmental
or regulatory body , and no statute, rule, regulation or executive order shall
have been promulgated or enacted by any U.S. federal or state governmental
authority which restrains, enjoins or otherwise prohibits in any material
respects the transactions contemplated hereby .
4.1.2 HSR Act. Any waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired.
4.1.3 No Proceeding or Litigation. No suit, action or proceeding before
any court or any governmental or regulatory authority shall have been commenced
and be pending , and no investigation by any governmental or regulatory
authority shall have been commenced and be pending, against any of the parties
hereto or any of their affiliates, associates, officers or directors seeking to
restrain, prevent or change in any material respect the transactions
contemplated hereby or seeking material damages in connection with any such
transactions.
4.1.4 Registration Rights Agreement. The parties shall have amended the
Registration Rights Agreement dated as of October 1, 1998 between the Company
and McCaw Communications Companies, Inc., in the form provided in Exhibit B (the
"Registration Rights Agreement").
4.1.5 FCC Approval. If required, the parties shall have obtained the
prior approval of the FCC to the transactions contemplated by this Agreement.
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<PAGE> 13
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. In addition to
the conditions set forth in Section 4.1, the obligations of the Company to
consummate the transactions to be consummated at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of each of the additional
conditions set forth below:
4.2.1 Accuracy of Representations and Warranties. The representations
and warranties of Wireless contained herein or in any certificate delivered
pursuant to this Agreement shall be true and correct in all material respects on
the date when made and shall be repeated at and as of the Closing Date and shall
be true and correct in all material respects on the Closing Date as so made
again (unless a representation is made as of a specific date, and in such event
it shall be true and correct in all material respects as of such date).
4.2.2 Performance of Agreements. Wireless shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions contained in this Agreement, to be
performed or complied with by it prior to or at the Closing Date.
4.2.3 Certificates. The Company shall have received a certificate from
Wireless, dated the Closing Date, signed by the President or any authorized Vice
President of Wireless, in his capacity as an officer of Wireless, to the effect
that, to the best of his knowledge, information and belief, the conditions
specified in Section 4.2.1 and Section 4.2.2 have been satisfied.
4.2.4 Opinion of Counsel for Wireless. The Company shall have received
an opinion of Wireless' counsel dated the Closing Date in a form agreed to by
the parties.
4.2.5 Other Deliveries. Wireless shall have delivered to the Company at
the Closing the following:
(a) a certificate of incumbency for the officers executing documents on
behalf of Wireless;
(b) a certified copy of the resolutions duly adopted by the directors
of Wireless and signed by the Secretary or Assistant Secretary of Wireless
authorizing the transactions contemplated by this Agreement;
(c) a certificate of the Secretary or Assistant Secretary certifying
that the resolutions referred to in Section 4.2.5(b) have not been rescinded,
modified, or withdrawn and that such resolutions are in full force and effect as
of the Closing Date; and
(d) such further certificates and documents evidencing consummation by
Wireless of the transactions contemplated hereby as the Company shall reasonably
request.
10
<PAGE> 14
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WIRELESS. In addition to
the conditions set forth in Section 4.1, the obligations of Wireless to
consummate the transactions to be consummated at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of each of the additional
conditions set forth below:
4.3.1 Accuracy of Representations and Warranties. The representations
and warranties of the Company contained herein or in any certificate delivered
pursuant to this Agreement shall be true and correct in all material aspects on
the date when made and shall be repeated at and as of the Closing Date and shall
be true and correct in all material respects on the Closing Date as so made
again (unless a representation is made as of a specific date, and in such event
it shall be true and correct in all material respects as of such date).
4.3.2 Performance of Agreements. The Company shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this Agreement,
to be performed or complied with by it prior to or at the Closing Date.
4.3.3 Certificates. Wireless shall have received a certificate from the
Company, dated the Closing Date, signed by the President or any authorized Vice
President of the Company, in his capacity as an officer of the Company, to the
effect that, to the best of his knowledge, information and belief, the
conditions specified in Section 4.3.1 and Section 4.3.2 have been satisfied.
4.3.4 Opinion of Counsel for the Company. Wireless shall have received
an opinion of the Company's counsel dated the Closing Date in a form agreed to
by the parties.
4.3.5 Other Deliveries. The Company shall have delivered to Wireless at
the Closing the following:
(a) a certificate of incumbency for the officers executing the
documents on behalf of the Company;
(b) a certified copy of the resolutions duly adopted by the directors
of the Company and signed by the Secretary or Assistant Secretary authorizing
the transactions contemplated by this Agreement;
(c) a certificate of the Secretary or Assistant Secretary certifying
that the resolutions referred to in Section 4.3.5(b) have not been rescinded,
modified or withdrawn and that such resolutions are in full force and effect as
of the Closing Date; and
(d) such further certificates and documents evidencing the consummation
by the Company of the transactions contemplated hereby as Wireless shall
reasonably request.
11
<PAGE> 15
4.3.6 Filing of Series D Certificate of Designation. If Series D Shares
are to be issued to Wireless, the Series D Certificate of Designation shall have
been filed with the Secretary of State of the State of Delaware.
4.4 WAIVER OF CONDITIONS. Each of the parties, in its discretion, may
waive, in whole or in part, at or prior to the Closing Date, the failure of
satisfaction of any of the conditions precedent to its obligations set forth
herein. No such waiver by either of the parties shall be effective unless made
in writing.
ARTICLE 5
TERMINATION AND DEFAULT
5.1 GENERAL. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
set forth below:
5.1.1 Mutual Consent. This Agreement may be terminated by the mutual
consent of the parties.
5.1.2 Order or Decree. This Agreement may be terminated by Wireless or
the Company if any court of competent jurisdiction in the United States or other
U.S. governmental body shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting in any material
respects the transactions contemplated hereby and such order, decree, ruling or
other action shall have become final and nonappealable.
5.1.3 Outside Date. This Agreement may be terminated by either party
(a) if the Closing shall not have occurred by September 1, 2000 (the "Outside
Date") or (b) if one or more conditions to such party's obligation to consummate
the transactions contemplated hereby cannot be satisfied by the Outside Date;
provided, however, that no party may exercise its rights under this Section
5.1.3 if such party is in material breach or default under this Agreement.
5.2 PROCEDURE UPON TERMINATION. In the event of the termination of this
Agreement, written notice thereof shall promptly be given to the other party
hereto and this Agreement shall terminate, all further obligations of the
parties hereunder to satisfy the conditions precedent to the Closing shall
terminate, and the transactions contemplated hereby shall be abandoned without
further action by any of the parties hereto.
5.3 EFFECT OF TERMINATION. Nothing in this Article 5 shall relieve
any party hereto of any liability for intentional or willful breach of this
Agreement. The parties shall have no liability for termination of this Agreement
for any reason other than an intentional or willful breach of this Agreement.
12
<PAGE> 16
ARTICLE 6
MISCELLANEOUS
6.1 BROKERS. The transactions contemplated hereby have been and shall
be carried on by parties in such manner as not to give rise to any valid claims
against the parties for a brokerage commission, finder's fee or other like
payment. Each party agrees to indemnify and hold the other harmless from and
against any claims for brokerage commissions or finder's fees insofar as such
claims shall be alleged to be based upon arrangements or agreements made by the
indemnifying party or on its behalf. Such indemnity shall include the cost of
reasonable counsel fees in connection with the defense of any such claims.
6.2 NOTICES. Except as otherwise provided, all notices which are
permitted or required under this Agreement shall be in writing and shall be
deemed given (a) when delivered personally, (b) if by fax upon transmission with
confirmation of receipt by the receiving party's facsimile terminal, (c) if sent
by documented overnight delivery service on the date delivered or (d) if sent by
mail, five (5) business days after being mailed by registered or certified mail,
postage prepaid, addressed as follows, or to such other person or address as may
be designated by notice to the other party:
If to the Company, to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly, Chief Financial Officer and Treasurer
Fax Number: (703) 768-9625
with a copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attn: Thomas W. White
Fax Number: (202) 663-6363
If to Wireless, to:
AT&T Wireless Services, Inc.
7277 164th Avenue N.E.
Redmond, Washington 98052
Attn: Michael C. Schwartz, Vice President
Fax Number (425) 580-8405
With a copy (which shall not constitute notice) to:
13
<PAGE> 17
Riddell Williams P.S.
1001 Fourth Avenue Plaza
Suite 4500
Seattle, Washington 98154-1065
Attn: Frank C. Woodruff
Fax Number: (206) 389-1708
6.3 FEES AND EXPENSES. Each party shall pay the filing fee relating to
any filing required by it, if any, in accordance with the HSR Act. Each party
shall pay the filing fee relating to any filing required by it, if any, with
respect to requisite applications to obtain the FCC's consent to the
transactions contemplated by this Agreement. All other expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement shall be paid by the party incurring such expenses.
6.4 ASSIGNMENT. This Agreement and the transactions contemplated hereby
may not be assigned or otherwise transferred, in whole or in part, by operation
of law or otherwise, without the prior written consent of the other party.
6.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered, shall be an original
instrument, but such counterparts together shall constitute a single agreement.
6.6 ENTIRE AGREEMENT. This Agreement, including all Exhibits hereto,
and all certificates and documents executed and delivered in connection with
this Agreement, when executed and delivered, shall constitute the entire
agreement of the parties, superseding and extinguishing all prior agreements and
understandings, representations and warranties, relating to the subject matter
hereof.
6.7 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by the substantive laws of the State of
Delaware applicable to contracts made and to be performed therein, without
reference to the principles of conflicts of laws.
6.8 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
6.9 SEVERABILITY. Any provision of this Agreement which is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, provided that such invalidity or unenforceability does not
deny any party the material benefits of the transactions for which it has
bargained, such invalidity or unenforceability shall not affect in any way the
remaining provisions hereof.
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<PAGE> 18
6.10 MODIFICATION AND AMENDMENT. This Agreement may not be modified
or amended except by written agreement specifically referring to this Agreement
and signed by the parties hereto.
6.11 WAIVER. No waiver of a breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
6.12 PARTIES OBLIGATED AND BENEFITED. Subject to the limitations
set forth below, this Agreement will be binding upon the parties hereto and
their respective assignees and successors in interest and will inure solely to
the benefit of such parties and their respective assigns and successors in
interest, and no other person will be entitled to any of the benefits conferred
by this Agreement.
6.13 ACTIONS. Each party will execute and deliver to the other,
from time to time at or after the Closing, for no additional consideration and
at no additional cost to the requesting party, (without incurring any obligation
to pay money) such further assignments, certificates, instruments, records or
other documents, assurances or things as may be reasonably necessary to give
full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
6.14 TERMS. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The words "include" and "exclude" and derivatives of
those words are used in this Agreement in an illustrative sense rather than
limiting sense.
[Execution Page Following]
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<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Securities Exchange
Agreement to be executed by their respective duly authorized representatives,
officers or agents on the date first written above.
AT&T WIRELESS SERVICES, INC.
By: ________________________________
Its: _______________________________
METROCALL, INC.
By: ________________________________
Its: _______________________________
16
<PAGE> 20
EXHIBIT A
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS OF
SERIES D NON-VOTING PARTICIPATING
CONVERTIBLE PREFERRED STOCK
OF
METROCALL, INC.
Metrocall, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors adopted the
following resolution at a meeting on January 21, 2000:
WHEREAS, the Board of Directors of the Corporation is authorized by the
Restated Certificate of Incorporation, as amended, to issue up to 1,000,000
shares of preferred stock in one or more classes or series and, in connection
with the creation of any class or series, to fix by the resolutions providing
for the issuance of shares the powers, designations, preferences and relative,
participating, optional or other rights of the class or series and the
qualifications, limitations or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to such authority, to authorize and fix the terms and provisions of a
series of preferred stock and the number of shares constituting the series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a
series of preferred stock on the terms and with the provisions herein set forth
on Annex A attached to this resolution.
---------------------
Shirley B. White
Assistant Secretary
Attest:
- -------------------
Vincent D. Kelly
Chief Financial Officer
<PAGE> 21
ANNEX A
SERIES D NON-VOTING PARTICIPATING CONVERTIBLE PREFERRED STOCK
The designation, number, powers, designations, preferences and
relative, participating, optional and other rights of the Series D Non-Voting
Participating Convertible Preferred Stock of Metrocall, Inc. (the "Corporation")
are as follows:
1. DESIGNATION AND AMOUNT.
This series of preferred stock shall be designated as Series D
Non-Voting Participating Convertible Preferred Stock (the "Series D Preferred
Stock") and shall have $0.01 par value per share. The number of authorized
shares constituting this series shall be _______ shares1/. The Corporation may
issue fractional shares of Series D Preferred Stock.
2. DIVIDENDS.
If the Corporation pays or sets aside for payment any dividend or
distribution on the Common Stock (a "Common Stock Dividend") (other than
dividends or distributions paid solely in shares of Common Stock or rights,
options or warrants to purchase shares of Common Stock), the Series D Preferred
Stock will be entitled to receive Common Stock Dividends, as and when paid on
the Common Stock, in an amount per share equal to the amount that would have
been payable on the number of shares of Common Stock into which each share of
Series D Preferred Stock would have been converted if the share had been
converted to Common Stock pursuant to the provisions of Section 5 hereof as of
the record date for the determination of holders of Common Stock entitled to
receive the dividend. Any Common Stock Dividend shall be paid to the holders of
record of shares of the Series D Preferred Stock as they appear on the books of
the Corporation on such record date as shall be fixed by the Board of Directors
for the payment of the Common Stock Dividend.
3. LIQUIDATION PREFERENCE.
In the event of any bankruptcy, liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, each holder of shares of
Series D Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets or funds of the Corporation to the
holders of the Common Stock by reason of their ownership of such stock, but
after payment to holders of the Series A Convertible Preferred Stock, $.01 par
value, of the Corporation (the "Series A Preferred Stock") and any other class
or series of preferred stock of the Corporation that by its terms is senior to
the Series D Preferred Stock in right of payment of dividends or liquidation
preference (together with the Series A Preferred Stock, "Senior Stock") of any
amounts to which they are entitled, an amount per share of Series D Preferred
Stock equal to one dollar plus the amount which the shares of Common Stock into
which such share of Series D Preferred is convertible would receive (after
giving effect to the payment of one dollar per share of Series D Preferred and
assuming all shares of Series D Preferred were converted immediately prior to
such distribution) . If the assets and funds legally available for distribution
among the holders of Series D Preferred Stock shall be insufficient to permit
the payment to the holders of the full aforesaid preferential amount, then the
assets and funds shall be distributed ratably among holders of Series D
Preferred Stock in proportion to the number of shares of Series D Preferred
Stock owned by each holder.
4. VOTING RIGHTS.
The holders of the Series D Preferred Stock shall have no voting rights
except as set forth in the Corporation's Restated Certificate of Incorporation,
as it may be amended or restated from time to time (the "Certificate of
Incorporation"), or as provided by applicable law, and except for the following:
(a) Changes in Organizational Documents. So long as the Series
D Preferred Stock is outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of the holders
- --------
1/ Number of shares to be issued pursuant to the Securities Exchange
Agreement.
<PAGE> 22
of a majority of the then outstanding shares of Series D Preferred Stock, voting
as a single class, amend, repeal, modify or supplement (i) any provision of the
Certificate of Incorporation or the Bylaws of the Corporation if such amendment,
repeal, modification or supplement in any way adversely affects the powers,
designations, preferences or other rights of the Series D Preferred Stock;
provided, that nothing contained herein shall be construed to prohibit the
Corporation from issuing any debt or equity securities, regardless of ranking,
or (ii) this Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Rights of Series D Non-Voting
Participating Convertible Preferred Stock ("Certificate of Designation").
(b) Means of Voting. The rights of the holders of Series D
Preferred Stock under this Section 4 may be exercised (i) at a meeting of the
holders of shares of such Series D Preferred Stock, called for the purpose by
the Corporation, or (ii) by written consent signed by the holders of the
requisite percentage of the then outstanding shares of the Series D Preferred
Stock, delivered to the Secretary or Assistant Secretary of the Corporation.
Except to the extent otherwise provided herein or to the extent that holders of
a majority of the Series D Preferred Stock decide otherwise, any meeting of the
holders of Series D Preferred Stock shall be conducted in accordance with the
provisions of the Bylaws of the Corporation applicable to meetings of
stockholders. In the event of a conflict or inconsistency between the Bylaws of
the Corporation and any term of this Certificate of Designation, including, but
not limited to this Section 4, the terms of this Certificate of Designation
shall prevail.
5. CONVERSION.
Shares of Series D Preferred Stock may be converted into shares of
Common Stock, on the terms and conditions set forth in this Section 5.
(a) Optional Conversion.
(i) The Corporation shall have the right, at any
time and from time to time, to convert all or a portion of the shares of Series
D Preferred Stock into one hundred (100) shares of Common Stock per share of
Series D Preferred Stock that is converted. Notwithstanding the foregoing, the
Corporation may not exercise its right to convert shares of the Series D
Preferred Stock to the extent that such conversion would cause any holder of
record to own 20% or more of the Common Stock issued and outstanding as of the
time of the conversion.
(ii) Each holder shall have the right, at any
time and from time to time, to convert all or a portion of the shares of Series
D Preferred Stock held by such holder into one hundred (100) shares of Common
Stock per share of Series D Preferred Stock that is converted.
(b) Automatic Conversion. After the initial issuance
thereof, each share of Series D Preferred Stock not previously converted into
Common Stock shall automatically convert (an "Automatic Conversion") without
further action on the part of the holder thereof into one hundred (100) shares
of Common Stock upon any sale or transfer of such share of Series D Preferred
Stock by the holder to any person or entity who is not an Affiliate of such
holder. From and after an Automatic Conversion, each certificate formerly
representing shares of Series D Preferred Stock that were converted pursuant to
such Automatic Conversion shall thereafter be deemed to represent the number of
shares of Common Stock into which such shares of Series D Preferred Stock have
been converted pursuant to such Automatic Conversion (and no holder shall
thereafter have any rights in respect of such shares of Series D Preferred
Stock). For purposes hereof, "Affiliate" shall mean, with respect to any person,
any other person, directly or indirectly controlling, controlled by, or under
common control with, such person.
(c) Common Stock. The Common Stock to be issued upon
conversion hereunder shall be fully paid and nonassessable.
(d) Procedures for Conversion.
(i) Upon the Corporation's notice to a holder
of shares of the Series D Preferred Stock of the Corporation's exercise of its
right to convert all or any portion of such shares of Series D Preferred
<PAGE> 23
Stock into shares of Common Stock under Section 5(a)(i), a holder's election to
convert all or any portion of its shares of Series D Preferred Stock under
Section 5(a)(ii), or an Automatic Conversion pursuant to Section 5(b),the holder
shall surrender the certificate or certificates therefor, duly endorsed for
transfer, during normal business hours, to the Corporation at its principal or
at such other office or agency then maintained by it for such purpose (the
"Payment Office"), and, if so required by the Corporation or any conversion
agent, an instrument of transfer, in form reasonably satisfactory to the
Corporation and to any conversion agent, duly executed by the registered holder
or by its duly authorized attorney, and any cash payment required pursuant to
Section 5(d)(ii). As promptly as practicable after the surrender of the
certificate or certificates for any shares of Series D Preferred Stock converted
in the manner provided in the preceding sentence, but in any event within three
(3) trading days of such surrender, the Corporation will deliver or cause to be
delivered at the Payment Office to or upon the written order of the holder of
such shares, certificates representing the number of full shares of Common Stock
issuable upon such conversion and any shares of Series D Preferred Stock
represented by the certificate or certificates surrendered that have not been
converted, issued in such name or names as such holder may direct. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the certificate or certificates in
proper order for conversion, and all rights of the holder of the shares of
Series D Preferred Stock so converted as a holder of such shares shall cease at
such time and the person or persons in whose name or names the certificates for
such shares of Common Stock are to be issued shall be treated for all purposes
as having become the record holder or holders thereof at such time; provided,
however, that any such surrender and payment on any date when the stock transfer
books of the Corporation shall be closed shall constitute the person or persons
in whose name or names the certificates for such shares of Common Stock are to
be issued as the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which such stock
transfer books are opened.
(ii) The issuance of certificates for shares of
Common Stock upon conversion shall be made without charge for any issue, stamp
or other similar tax in respect of such issuance. However, if any such
certificate is to be issued in a name other than that of the holder of record of
the shares converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid or is not payable.
(iii) Upon any conversion of shares of Series D
Preferred Stock in accordance with the provisions of this Certificate of
Designation, the Corporation shall pay to the holder thereof, simultaneously
with the issuance of the shares of Common Stock into which such shares of Series
D Preferred Stock have been converted, the amount of any accrued but unpaid
dividends on such shares of Series D Preferred Stock the record date for payment
of which is prior to the date of issuance of such shares of Common Stock.
(e) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series D Preferred Stock, the number of shares
of Common Stock that would be issuable if all then outstanding shares of Series
D Preferred Stock were converted. If at any time the number of authorized and
unissued shares of Common Stock that are reserved for issuance upon conversion
of the shares of Series D Preferred Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series D Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, taking appropriate board action, recommending
such an increase to the holders of Common Stock, holding stockholders meetings,
soliciting votes and proxies in favor of such increase to obtain the requisite
stockholder approval and upon such approval, the Corporation shall reserve and
keep available such additional shares solely for the purpose of effecting the
conversion of the shares of the Series D Preferred Stock.
(f) Notices. Any notice required by the provisions of
this Certificate of Designation to be given to the holders of shares of Series D
Preferred Stock shall be deemed given five (5) days after such notice is
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at its address appearing on the books of the Corporation, or
the next business day after such notice is delivered to a recognized overnight
courier service with next-business day delivery specified.
<PAGE> 24
(g) Reorganization, Merger or Sale of the Corporation.
Notwithstanding any other provision hereof, in case of (A) any reorganization or
reclassification of the capital stock of the Corporation or (B) any merger or
consolidation of the Corporation, that in any such case results in the Common
Stock being converted into other securities or property, or the right to receive
other securities and property, then, to the extent the Corporation or the
holders do not otherwise convert all outstanding shares of Series D Preferred
Stock, each share of Series D Preferred Stock that is not converted into the
right to receive other securities or property prior to such transaction shall
thereafter be convertible into, in lieu of Common Stock, the kind and amount of
securities and property receivable upon consummation of such transaction by a
holder of that number of shares of Common Stock into which one share of Series D
Preferred Stock was convertible immediately prior to such transaction.
(h) Adjustments. The number of shares of Common Stock
issuable upon conversion of shares of the Series D Preferred Stock that are then
outstanding shall be subject to adjustment from time to time as follows:
(i) Stock Dividends; Stock Splits; Reverse Stock
Splits. In case the Corporation shall (A) declare or pay a dividend on its
outstanding Common Stock in shares of Common Stock or make a distribution to all
holders of its outstanding Common Stock in shares of Common Stock, (B) subdivide
its outstanding Common Stock into a greater number of shares or reclassify its
outstanding Common Stock, or (C) combine its outstanding Common Stock into a
smaller number of shares, the number of shares of Common Stock issuable upon
conversion of each share of Series D Preferred Stock shall be adjusted so that
the holder of each such share shall thereafter be entitled to receive upon
conversion thereof the kind and number of shares of Common Stock or other
securities that such holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such share been
converted in full immediately prior to the happening of such event or any record
date with respect thereto (with any record date requirement being deemed to have
been satisfied), and, in any such case, the number of shares of Common Stock or
other securities issuable upon conversion of each such share shall be subject to
further adjustments under this Section 5(h). An adjustment made pursuant to this
Section 5(h)(i) shall become effective at the record date, if any, for such
event.
(ii) Distributions to Stockholders. In case the
Corporation shall issue to holders of its Common Stock rights, options, warrants
or convertible or exchangeable securities (collectively, the "rights") entitling
them to subscribe for or purchase Common Stock at a price per share of Common
Stock (determined by dividing (A) the total amount receivable by the Corporation
in consideration of the issuance of such rights plus the total consideration
payable to the Corporation upon exercise, conversion or exchange thereof, by (B)
the total number of shares of Common Stock covered by such rights) that is lower
than the Current Market Price per share of Common Stock in effect immediately
prior to such issuance, then the number of shares of Common Stock issuable upon
conversion of all shares of Series D Preferred Stock shall be increased in a
manner determined by multiplying the number of shares of Common Stock
theretofore issuable upon the conversion of all shares of Series D Preferred
Stock by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such rights plus
the number of additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights plus the
number of shares of Common Stock which the aggregate consideration to be
received by the Corporation in connection with such issuance (as defined in the
following sentence) would purchase at the then Current Market Price per share of
Common Stock. For purposes of this Section 5(h), the "Current Market Price" per
share of Common Stock for any date shall mean average of the closing prices of
the Common Stock for the 10 trading days prior to such date. For purposes of
this Section 5(h)(ii), the "aggregate consideration to be received by the
Corporation" in connection with any issuance of such rights shall be deemed to
be the consideration received by the Corporation for such rights plus any
consideration or premiums stated in such rights to be paid for the shares of
Common Stock covered thereby.
(iii) Issuance of Common Stock at Lower Values.
In case the Corporation shall, in a transaction to which Section 5(h)(i) is
inapplicable (and, in any event, other than upon conversion of Series A
Preferred Stock or Series D Preferred Stock, or upon exercise of any warrants or
employee stock options that were outstanding on the date of issuance of the
Series D Preferred Stock or pursuant to contractual commitments to which the
Corporation was bound on such date), issue or sell shares of Common Stock, or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock, at a price per
share of Common Stock (determined, in the case of rights, options, warrants or
convertible or
<PAGE> 25
exchangeable securities, by dividing (A) the total amount receivable by the
Corporation in consideration of the issuance and sale of such rights, options,
warrants or convertible or exchangeable securities, plus the total consideration
payable to the Corporation upon exercise, conversion or exchange thereof, by (B)
the total number of shares of Common Stock covered by such rights, options,
warrants or convertible or exchangeable securities) that is lower (at the date
of such sale or issuance) than the Current Market Price per share of Common
Stock in effect immediately prior to such sale or issuance or for no
consideration, then in each case the number of shares of Common Stock thereafter
issuable upon the conversion of the shares of Series D Preferred Stock shall be
increased in a manner determined by multiplying the number of shares of Common
Stock theretofore issuable upon the conversion of all shares of Series D
Preferred Stock by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or issuance,
plus the number of additional shares of Common Stock offered for subscription or
purchase or to be issued upon conversion or exchange of such convertible or
exchangeable securities, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or issuance
plus the number of shares of Common Stock which the aggregate consideration to
be received by the Corporation (as defined in the following paragraph) in
connection with such sale or issuance would purchase at the then Current Market
Price per share of Common Stock.
For the purpose of such adjustments the "aggregate consideration to be
received by the Corporation" therefore shall be deemed to be the consideration
received by the Corporation for such rights, options, warrants or convertible or
exchangeable securities plus any consideration or premiums stated in such
rights, options, warrants or convertible or exchangeable securities to be paid
for the shares of Common Stock covered thereby.
In case the Corporation shall issue or sell shares of Common Stock or
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the "price per share of Common Stock" and
the "consideration" receivable by or payable to the Corporation for purposes of
Sections 5(h)(ii) and 5(h)(iii), the Board of Directors of the Corporation shall
determine, in good faith, the fair value of such property. In case the
Corporation shall issue and sell rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock, together with one or more other securities as part of a unit at
a price per unit, then in determining the "price per share of Common Stock" and
the "consideration" receivable by or payable to the Corporation for purposes of
Sections 5(h)(ii) and 5(h)(iii), the Board of Directors of the Corporation shall
determine, in good faith, the fair value of the rights, options, warrants or
convertible or exchangeable securities then being sold as part of such unit.
Any increase of the number of shares of Common Stock issuable upon
conversion of shares of Series D Preferred Stock pursuant to this Section
5(h)(iii) shall be allocated among such Series D Preferred Stock on a pro rata
basis.
(iv) Expiration of Rights, Options and Conversion
Privileges. Upon the expiration of any rights, options, warrants or conversion
or exchange rights that have previously resulted in an adjustment under this
Section 5(h), if any thereof shall not have been exercised, the number of shares
of Common Stock issuable upon conversion of Series D Preferred Stock shall be
readjusted and shall thereafter, upon any future exercise, be such as they would
have been had they been originally adjusted (or had the original adjustment not
been required, as the case may be) as if (i) the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants or conversion or exchange rights and
(ii) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise plus the
consideration, if any, actually received by the Corporation for issuance, sale
or grant of all such rights, options, warrants or conversion or exchange rights
whether or not exercised; provided that no such readjustment shall have the
effect of decreasing the number of shares issuable upon conversion of Series D
Preferred Stock by a number that is in excess of the amount or number of the
adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights or shall have the
effect of decreasing the number of shares of Common Stock that have been issued
upon conversion of any shares of Series D Stock prior to the date of such
readjustment.
(v) De minimis Adjustments. No adjustment in
the number of shares of Common Stock issuable under any Series D Preferred Stock
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in the number of shares of Common Stock purchasable
upon a
<PAGE> 26
conversion of Series D Preferred Stock; provided, that any adjustments which by
reason of this Section 5(h) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations shall be
made to the nearest one-thousandth of a share.
(vi) Notice of Adjustment. Whenever the number
of shares of Common Stock or other stock or property issuable upon the
conversion of Series D Preferred Stock is adjusted, as herein provided, the
Corporation shall deliver to the holders thereof a certificate of a firm of
independent public accountants selected by the Board of Directors of the
Corporation (who may be the regular accountants employed by the Corporation)
setting forth the number of shares of Common Stock or other stock or property
issuable upon the conversion of each share of Series D Preferred Stock after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made
and shall promptly mail by first class mail, postage prepaid, to each holder
notice of such adjustment or adjustments.
(i) Status of Converted Shares. Upon conversion, any
shares of the Series D Preferred Stock that have been so converted shall be
retired and thereafter have the status of authorized but unissued shares of
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors or a
duly authorized committee thereof.
6. PREEMPTIVE RIGHTS.
No shares of Series D Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Corporation, or any warrants,
rights or options issued or granted with respect thereto, regardless of how such
securities or such warrants, rights or options may be designated, issued or
granted.
<PAGE> 27
EXHIBIT B
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is entered into as of ________, 2000, by and among METROCALL, INC.,
a Delaware corporation (the "Company"), AT&T WIRELESS SERVICES, INC., a Delaware
corporation ("Wireless"), and McCAW COMMUNICATIONS COMPANIES, INC., a Delaware
corporation ("McCaw").
RECITALS
WHEREAS, Wireless is the record and beneficial owner of 10,378 shares
of the Company's Series C Convertible Preferred Stock, a portion of which it
received as assignee of McCaw;
WHEREAS, the Company and McCaw are parties to that certain Registration
Rights Agreement dated as of October 1, 1998 (the "Registration Rights
Agreement");
WHEREAS, the Company and Wireless are parties to that certain
Securities Exchange Agreement, dated as of February 2, 2000 (the "Securities
Exchange Agreement"), pursuant to which Wireless will exchange (the "Exchange")
all of its shares of the Series C Convertible Preferred Stock (the "Series C
Shares") of the Company for shares of Common Stock, $.01 par value of the
Company (the "Common Shares") and, if applicable, shares of Series D Non-Voting
Participating Convertible Preferred Stock (the "Series D Shares"); and
WHEREAS, pursuant to the Securities Exchange Agreement, the Company and
Wireless have agreed to amend and restate the Registration Rights Agreement to
provide that the Company will register the Common Shares and the shares of
Common Stock into which the Series D Shares are converted, upon the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Closing" means the closing of the Exchange pursuant to which the
Company will have issued the Common Shares and, if applicable, the Series D
Shares in accordance with the Securities Exchange Agreement.
1.02 "Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.03 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
1.04 "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.05 "Holder" means Wireless and each transferee permitted pursuant to
Section 6.04(a) of this Agreement that has become a party to this Agreement as
provided in Section 6.04(a).
<PAGE> 28
1.06 "Person" means an individual or corporation, partnership, trust,
unincorporated organization, association or other entity and includes any
Governmental Authority.
1.07 "Registrable Securities" means (a) the Common Shares received by
Wireless from the Company pursuant to the Securities Exchange Agreement, (b) any
shares of Common Stock issued to Wireless upon conversion of Series D Shares,
and (c) any other shares of Common Stock or other securities issued with respect
to any of the shares described in the foregoing clauses (a) or (b) or this
clause (c) pursuant to any stock dividend, stock split, recapitalization or
similar event; provided, however, that any Registrable Security will cease to be
a Registrable Security when (i) such Registrable Security has been transferred
pursuant to an effective registration statement under the Securities Act
covering such Registrable Security (but not including any transfer exempt from
registration under the Securities Act), (ii) such Registrable Security is no
longer held of record by a Holder, or (iii) the Holder of such Registrable
Security is then able to use Rule 144 of the Securities Act (or any successor
provision) to transfer such Registrable Security without registration under the
Securities Act and without regard to the volume limitations under Rule 144(e).
1.08 "Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
1.09 "Shares" means shares of the Registrable Securities.
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<PAGE> 29
ARTICLE II
REGISTRATION RIGHTS
The Company shall file registration statements (each a "Registration
Statement") under the Securities Act with respect to the Registrable Securities
as provided in this Article II.
2.01 Shelf Registration.
(a) The Company shall prepare and file with the Commission a
Registration Statement under the Securities Act (the "Shelf Registration
Statement") for the resale of the Registrable Securities, including but not
limited to the shares of Common Stock issuable upon conversion of Series D
Shares that have not yet been converted, and shall use all its reasonable
efforts to cause the Shelf Registration Statement to become effective promptly
after filing. The Shelf Registration Statement shall be filed with the
Commission within one hundred eighty (180) days of the Closing.
(b) Except as provided in Section 2.01(c), the Company shall
use all its reasonable efforts to maintain the effectiveness of the Shelf
Registration Statement filed pursuant to this Section 2.01 until such time as
all Series D Shares have been converted into shares of Common Stock and either
(i) all Shares registered pursuant to the Shelf Registration Statement have been
transferred pursuant to the Shelf Registration Statement, or (ii) no more
Registrable Securities remain outstanding.
(c) The obligations of the Company under this Section 2.01 are
subject to the condition that the Company shall be entitled to require each
Holder to suspend for up to ninety (90) days, once in any twelve month period
after the Shelf Registration Statement has become effective, the sale of Shares
pursuant to the Shelf Registration Statement if and for so long as (i) the Board
of Directors of the Company determines, in its reasonable judgment, that the
sale of Shares pursuant thereto would materially interfere with any material
financing, acquisition, corporate reorganization or other material transaction
by the Company, (ii) the Company promptly gives each Holder of Shares written
notice of such determination, and (iii) all other shareholders of the Company
holding registration rights shall also be subject to the same suspension. The
Company shall have no obligation to maintain the effectiveness of the Shelf
Registration Statement with respect to the Shares during periods when each
Holder is required to suspend the sale of such Shares as provided in this
Section 2.01(c). As soon as practicable after the expiration of such periods,
the Company shall amend the Shelf Registration Statement as necessary to permit
each Holder to sell Shares pursuant to the Shelf Registration Statement.
2.02 Underwritten Offering. This Section 2.02 shall apply to any
underwritten offering of Permitted Period Shares (as defined in the Securities
Exchange Agreement) that the Company makes an election (the "Election") to
conduct pursuant to Section 3.3(b) of the Securities Exchange Agreement.
(a) Promptly following the Election, the Company shall use its
best efforts to register the Permitted Period Shares (subject to any cutback in
the number of such shares permitted under the terms of the Securities Exchange
Agreement) under the Securities Act, for public sale in a firm commitment
underwritten secondary offering. The Company shall have the right to designate
the managing underwriter of any such offering subject to the consent of the
Holder or Holders of the Permitted Period Shares, which consent shall not be
unreasonably withheld.
(b) The Company shall be entitled to include in any
Registration Statement under this Section 2.02 (each an "Underwritten
Registration Statement"), for sale in the underwritten offering, shares of
Common Stock to be sold by the Company for its own account or for the account of
every other Person, except as and to the extent that, in the opinion of the
managing underwriter, such inclusion would adversely affect the marketing of the
shares to be sold.
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<PAGE> 30
ARTICLE III
REGISTRATION PROCEDURES
3.01 Company Obligations. Following the Closing, the Company will:
(a) furnish to each Holder, prior to the filing of any
Registration Statement, or any prospectus, amendment or supplement thereto,
copies of each such document as proposed to be filed, which documents will be
subject to the reasonable review and comments of each Holder (and its legal
counsel), and the Company will not file the Registration Statement, any
prospectus or any amendment or supplement thereto to which a Holder shall
reasonably object in writing; and thereafter furnish to each Holder such number
of copies of such Registration Statement, each amendment and supplement thereto
(including any exhibits thereto), the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents as
the Holder may reasonably request in writing in order to facilitate the
disposition of the Shares registered pursuant to such Registration Statement;
provided, however, that the obligation of the Company to deliver copies of
prospectuses or preliminary prospectuses to each Holder shall be subject to the
receipt by the Company of reasonable assurances from the Holder that the Holder
will comply with the applicable provisions of the Securities Act and of such
other securities or blue sky laws as may be applicable in connection with any
use of such prospectuses or preliminary prospectuses;
(b) use its best efforts to register or qualify the Shares
registered pursuant to such Registration Statement under such other securities
or blue sky laws of such jurisdictions as any Holder may reasonably request and
do any and all other acts and things which may be reasonably necessary to enable
the Holder to consummate the disposition in such jurisdictions of such Shares;
provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection, (ii) subject itself to taxation in
any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;
(c) apply, prior to or concurrently with the filing of the
Registration Statement, to the Nasdaq SmallCap Market System (or, if the Company
is not listed on the Nasdaq SmallCap Market System, any other over-the-counter
market or exchange on which the Company's Common Stock is then traded or listed)
for the listing of the Shares and use its best effort to obtain the listing of
such Shares;
(d) notify each Holder in writing, at any time when a
prospectus relating to the Shares registered pursuant to such Registration
Statement is required to be delivered under the Securities Act, of the
occurrence of each event requiring the preparation of a supplement or amendment
to such prospectus or filing of a report to be incorporated in the prospectus by
reference so that, as thereafter delivered to the purchasers of such Shares,
such prospectus (including documents incorporated therein by reference) will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and promptly prepare, file with the Commission and make
available to each Holder any such supplement, amendment or report incorporated
in the prospectus by reference, including, without limitation, after any period
or suspension referred to in Section 2.01(c);
(e) make available for inspection by each Holder of Shares to
be registered pursuant to the Registration Statement and any attorney,
accountant or other professional retained thereby (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Inspectors in connection
with such Registration Statement; provided, that the Company shall not be
required to make such information available to more than one law firm on behalf
of all Holders of Shares to be registered pursuant to the Registration
Statement. Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors in writing are confidential
shall not be disclosed by the Inspectors unless (i) in the judgment of counsel
to the Company the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, or (iii) the information in such Records is generally
available to the public. As a condition of receiving access to such confidential
information described in clause (i) or
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<PAGE> 31
(ii) of the preceding sentence, each Holder of such Shares shall agree that such
confidential information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such information
is made generally available to the public, it being understood that nothing in
this sentence shall reduce the Company's obligations hereunder, including under
Section 3.01(d). Each Holder further shall agree that it will, upon learning
that disclosure of such Records from the Holder is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(f) make generally available to the Holders earnings
statements, which need not be audited, satisfying the provisions of Section
11(a) of the Securities Act no later than forty-five days after the end of the
twelve-month period beginning with the first month of the first fiscal quarter
commencing after the effective date of the Registration Statement, which
earnings statements shall cover said twelve-month period;
(g) promptly notify each Holder of the issuance or threatened
issuance of any stop order or other order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any preliminary
prospectus, prospectus or prospectus supplement, use reasonable efforts to
prevent the issuance of any such threatened stop order or other order, and, if
any such order is issued, use all its reasonable efforts to obtain the lifting
or withdrawal of such order at the earliest possible moment and promptly notify
the Holder of any such lifting or withdrawal;
(h) if requested by any Holder, the Company will promptly
incorporate in a prospectus supplement or post-effective amendment to the
Registration Statement such information concerning such Holder and such Holder's
intended method of distribution as such Holder requests to be included therein
(and which is not violative of an applicable law, rule or regulation, in the
reasonable judgment of the Company, after consultation with its outside legal
counsel), including, without limitation, with respect to any change in the
intended method of distribution, the amount or kind of Shares being offered by
such Holder, the offering price for such Shares or any other terms of the
offering or distribution of the Shares, and the Company will make all required
filings of such prospectus supplement or post-effective amendment as soon as
possible after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(i) obtain consents from its independent public accountants in
customary form as required to obtain and maintain effectiveness of the
Registration Statement, and in connection with its obligations under Section
2.02, obtain a "cold comfort" letter from such accountants in customary form;
(j) obtain an opinion or opinions from its counsel in
customary form and reasonably satisfactory to the Holders and their respective
legal counsel;
(k) in an underwritten offering, make available its management
personnel for meetings with potential purchasers and "road shows" for a period
of not more than seven consecutive business days;
(l) as promptly as practicable after the filing with the
Commission of any document which is incorporated by reference into the
Registration Statement, notify each Holder of such filing and deliver a copy of
such document to the Holder;
(m) cooperate with each Holder to facilitate the timely
preparation and delivery of certificates, not bearing any restrictive legends,
unless otherwise required by the Holder, representing the Shares to be sold
under the Registration Statement, and enable such Shares to be in such
denominations and registered in such names as such Holder may request;
(n) cooperate with each Holder, its legal counsel and any
other interested party (including any interested broker-dealer) in making any
filings or submissions required to be made, and the furnishing of all
appropriate information in connection therewith, with the NASD;
(o) cause its subsidiaries to take all action necessary to
effect the registration of the Shares contemplated hereby, including preparing
and filing any required financial or other information;
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<PAGE> 32
(p) make available to the transfer agent for each class or
series of Shares a supply of certificates or other instruments evidencing or
constituting such Shares which shall be in a form complying with the
requirements of such transfer agent, promptly after a registration thereof; and
(q) use all its reasonable efforts to keep each such
registration or qualification effective, including through new filings,
amendments or renewals, during the period the Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable in connection with such registration or qualifications in
all jurisdictions in which qualification or registration is necessary.
3.02 Information from Holder. The Company may require each Holder to
promptly furnish in writing to the Company such information regarding the
distribution of the Shares as it may from time to time reasonably request and
such other information as may be legally required in connection with such
registration.
3.03 Suspension of Sales. Each Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
subsection 3.01(d) hereof, it will immediately discontinue disposition of Shares
pursuant to the Registration Statement until it receives copies of the
supplemented or amended prospectus contemplated by subsection 3.01(d) hereof,
and, if so directed by the Company, the Holder will deliver to the Company all
copies, other than permanent file copies then in their possession, of the most
recent prospectus (including any prospectus supplement) covering such Shares at
the time of receipt of such notice or destroy all such copies.
ARTICLE IV
REGISTRATION EXPENSES
4.01 Except as provided in Section 4.02, all fees and expenses incident
to the Company's performance of or compliance with this Agreement shall be borne
by the Company, including, without limitation, the following fees and expenses:
(a) all Commission, National Association of Securities Dealers, Inc., stock
exchange or other registration and filing fees and listing fees; (b) the fees
and expenses of the Company's compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Shares); (c) printing expenses; (d) the fees and
disbursements of counsel for the Company and of one counsel for the Holders for
each registration, and the fees and expenses for independent certified public
accountants and other persons retained by the Company in connection with such
registration; (e) fees of transfer agents and registrars; and (f) messenger and
delivery expenses. In connection with any underwritten offering, the Company
shall also pay all underwriting discounts and commissions. In addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by the Company, and the expenses and
fees for listing or authorizing for quotation the securities to be registered on
each securities exchange on which any shares of the Common Stock are then listed
or quoted.
4.02 Each Holder shall pay all its internal expenses incurred in
connection with the registration (including, without limitation, all salaries
and expenses of the Holder's officers and employees performing legal or
accounting duties).
ARTICLE V
INDEMNIFICATION; CONTRIBUTION
5.01 Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Holder, each of the Holder's officers, directors,
partners and members, and the Holder's legal counsel and independent
accountants, if any, and each person controlling any such persons within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
with respect to which registration, qualification or compliance
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<PAGE> 33
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation, any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, and any of the foregoing incurred in settlement of
any litigation, commenced or threatened) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus contained therein or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction by the Company in connection with any
registration, qualification or compliance required hereunder or arising out of
or based upon the Company's breach of any representation, warranty, covenant or
agreement contained in this Agreement; provided, however, that the Company shall
not be liable in any such case to the extent any of such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon information
furnished in writing to the Company by the Holder expressly for use therein.
5.02 Indemnification by Holder. Each Holder agrees to indemnify and
hold harmless the Company, its directors and officers and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and each underwriter, if any,
and each person who controls any underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company set forth above in Section 5.01, but only
with respect to information furnished in writing by the Holder, or on its behalf
expressly for use, under the heading "Selling Shareholders" and "Distribution,"
in the Registration Statement or prospectus relating to the Shares, any
amendment or supplement thereto or any preliminary prospectus; provided,
however, that the obligation of each Holder shall be several and not joint. In
case any action or proceeding shall be brought against the Company or its
directors or officers, any such controlling person, or any such underwriter or
controlling person of an underwriter in respect of which indemnity may be sought
against the Holder, the Holder shall have the rights and duties given to the
Company, and the Company or its directors or officers or such controlling person
or any such underwriter or controlling person of an underwriter shall have the
rights and duties given to the Holder, by the preceding Section 5.01 hereof.
5.03 Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Person entitled to indemnification under Section 5.01 or
5.02 above (an "Indemnified Party") in respect of which indemnity may be sought
from any party who has agreed to provide such indemnification (an "Indemnifying
Party"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all expenses. Such Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (a) the Indemnifying Party has agreed
to pay such fees and expenses, or (b) such Indemnified Party shall have been
advised by counsel that there is an actual or potential conflict of interest on
the part of counsel employed by the Indemnifying Party to represent such
Indemnified Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that Indemnified Party elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense of such action or proceeding on behalf
of such Indemnified Party; it being understood, however, that the Indemnifying
Party shall not, in connection with any one cause of action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all such Indemnified
Parties, which firm shall be designated in writing by such Indemnified Parties
unless there shall be conflicts of interest among such Indemnified Parties, in
which case the Indemnifying Party shall be liable for the fees and expenses of
additional counsel). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding or any threatened action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action or proceedings, the
Indemnifying Party shall indemnify and hold harmless such Indemnified Parties
from and against any loss or liability (to the extent stated above) by reason of
such settlement or judgment. The failure of any Indemnified Party to give prompt
notice
7
<PAGE> 34
of a claim for indemnification hereunder shall not limit the Indemnifying
Party's obligations to indemnify under this Agreement, except to the extent such
failure is prejudicial to the ability of the Indemnifying Party to defend the
action. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement unless (x) there is no finding or
admission of any violation of any rights of any Person and no effect on any
other claims that be made against any Indemnified Party, (y) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party and
(z) such judgment or settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
5.04 Contribution. If the indemnification provided for in this Article
V is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or judgment referred to herein, then such Indemnifying
Party, in lieu of Indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities and judgments in the following manner: as between
the Company on the one hand and any Indemnified Party entitled to
indemnification under Section 5.01 on the other, in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and any
Indemnified Party entitled to indemnification under Section 5.01 on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of any Indemnified Party entitled to indemnification under Section 5.01 on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person guilty
of fraudulent misrepresentation (within the means of subsection 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
5.05 Survival. The indemnity and contribution agreements contained in
this Article V shall remain operative and in full force and effect with respect
to any sales of Shares made pursuant to the Registration Statement regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of the Company, and (c) the
consummation of the sale or successive resale of the Shares.
ARTICLE VI
MISCELLANEOUS
6.01 Rules 144 and 144A. The Company covenants that following the
registration of Shares it will timely file any reports required to be filed by
it under the Securities Act and the Exchange Act so as to enable each Holder
holding Shares to sell such Shares without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rules 144 and 144A under
the Securities Act, as each such Rule may be amended from time to time, or (b)
any similar rule or rules hereafter adopted by the Commission. Upon the request
of any Holder, the Company will forthwith deliver to the Holder a written
statement as to whether it has complied with such requirements.
6.02 Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given other than as mutually agreed upon in
writing by the Company and Holders of at least 75% of the Registrable Securities
then outstanding (with any Holder of Series D Shares being deemed to hold the
shares of Common Stock into which such Series D Shares are convertible).
6.03 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, regular mail,
registered first-class mail, confirmed facsimile or recognized express courier
service by next business day delivery:
8
<PAGE> 35
(i) if to the Company, to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Chief Financial Officer
Fax Number: (703) 768-9625
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Thomas W. White, Esq.
Fax Number: (202) 663-6363
(ii) if to a Holder, to its address appearing on the
stock records of the Company.
Notices shall be deemed given on the day on which delivered by hand or
facsimile, if delivered by 5:00 p.m. Eastern time; on the fifth business day
after mailing if delivered by mail; or the business day after delivery to an
overnight air courier if next-day delivery is specified.
6.04 Successors and Assigns.
(a) A Holder shall not assign any rights or benefits under
this Agreement without the prior written consent of the Company or as otherwise
provided in this Section 6.04. A Holder may, subject to compliance with any
applicable provisions of the Securities Exchange Agreement, assign to any
transferee without the Company's consent such Holder's rights and benefits with
respect to Registrable Securities, so long as the transferee executes and
delivers to the Company a consent to be bound by the terms of this Agreement, in
which case the transferee shall be a Holder and shall retain the rights and
benefits of the transferor under this Agreement. The Company shall not assign
any rights, benefits or obligations under this Agreement without prior written
consent of the Holders of at least a majority of the Registrable Securities then
outstanding (with any Holder of Series D Shares being deemed to hold the shares
of Common Stock into which such Series D Shares are convertible); provided,
however, that the Company shall assign its rights, benefits and obligations to
any Person the Company is merged with or consolidated into or to any Person to
whom the Company sells substantially all of its assets. This Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of the Company and the Holder.
(b) McCaw hereby acknowledges that it assigned to Wireless
(but not in writing), simultaneously with its assignment to Wireless of the
shares of Series C Convertible Preferred Stock assigned by McCaw to Wireless,
all of its rights and benefits under the Registration Rights Agreement and the
Company, to the extent such consent was required, hereby acknowledges that it
consented thereto.
6.05 Counterparts. This Agreement may be executed in a number of
identical counterparts and it shall not be necessary for the Company, Wireless
and McCaw to execute each of such counterparts, but when each has executed and
delivered one or more of such counterparts, the several parts, when taken
together, shall be deemed to constitute one and the same instrument, enforceable
against each in accordance with its terms. In making proof of this Agreement, it
shall not be necessary to produce or account for more than one such counterpart
executed by the party against whom enforcement of this Agreement is sought.
6.06 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
9
<PAGE> 36
6.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.
6.08 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or further laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
6.09 Entire Agreement. This Agreement and the Securities Exchange
Agreement (including schedules and exhibits thereto) are intended by the Company
and Wireless as the final expression of their agreement and are intended to be a
complete and exclusive statement of their agreement and understanding in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the Company, on the one hand, and McCaw or
Wireless, on the other, with respect to such subject matter.
6.10 Third Party Beneficiaries. Other than Indemnified Parties not a
party hereto, this Agreement is intended for the benefit of the Company,
Wireless and their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other person or
entity.
6.11 Obligations Several; Independent Nature of Each Holder's Rights.
Each obligation of any Holder is several and no such Holder shall be responsible
for the obligations of any other Holder. Nothing contained herein, and no action
taken by any such Holder pursuant hereto, shall be deemed to constitute such
Holders as a partnership, an association, a joint venture or any other kind of
entity. Each Holder shall be entitled to protect and enforce its rights arising
out of this Agreement without notice to or the consent of any other person and
it shall not be necessary for any other such Holder to be joined as an
additional party in any proceeding for such purpose.
6.12 Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the Holder shall
operate as a waiver of or otherwise prejudice such Holder's rights, powers or
remedies.
6.13 Remedies. The Company acknowledges that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Agreement are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise without requiring such Holder to post any bond or
other security, unless otherwise required by applicable law (which cannot be
waived by the Company).
[Execution page following]
10
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
METROCALL, INC.
By: __________________________________
Name:
Title:
AT&T WIRELESS SERVICES, INC.
By: __________________________________
Name:
Title:
McCAW COMMUNICATIONS COMPANIES, INC.
By: __________________________________
Name:
Title:
11
<PAGE> 38
SCHEDULE 3.3
RESTRICTED PERSONS
1. Any entity with annual revenues in excess of $500 million and a market
capitalization of $500 million that is principally engaged in the
business of providing telecommunications services.
2. Any beneficial owner (as defined under Section 13(d) of the Securities
Exchange Act of 1934) of 5% or more of the issued and outstanding
Common Stock, other than a beneficial owner described in Rule
13d-1(b)(1) under such act that is reporting such holdings on Schedule
13G, or $25 million or more in principal amount of the outstanding
debt, of any entity described in the preceding paragraph or any of the
following companies or their successors:
Arch Communications Group, Inc.
Weblink Wireless, Inc.
Paging Network, Inc.
19
<PAGE> 1
EXHIBIT 10.3
COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
HMTF BRIDGE MC I, LLC
AND
METROCALL, INC.
DATED AS OF FEBRUARY 2, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK PURCHASE AGREEMENT...................................................................................1
ARTICLE 1 ISSUANCE AND SALE OF COMMON STOCK; THE CLOSING..........................................................1
1.1 Issuance and Sale of Common Stock...............................................................1
1.2 The Closing.....................................................................................1
1.3 Time and Place of Closing.......................................................................2
1.4 Transactions at the Closing.....................................................................2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES..........................................................................2
2.1 Representations and Warranties of Purchaser.....................................................2
2.2 Representations and Warranties of the Company...................................................4
ARTICLE 3 COVENANTS...............................................................................................7
3.1 Antitrust Laws..................................................................................7
3.2 Listing of Additional Shares....................................................................7
3.3 Operation of Business...........................................................................7
3.4 Access to Books and Records.....................................................................8
3.5 Agreement to Take Necessary and Desirable Actions...............................................8
3.6 Compliance with Conditions; Reasonable Best Efforts.............................................8
3.7 Periodic Information............................................................................8
3.8 Legends.........................................................................................9
3.9 Other Limitations on Purchaser..................................................................9
3.10 Board Representative...........................................................................10
3.11 Rights Plan....................................................................................10
3.12 Inciscent, Inc.................................................................................10
3.13 Demand Requests................................................................................11
3.14 FCC Applications...............................................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 4 CONDITIONS PRECEDENT...................................................................................11
4.1 Conditions Precedent to Obligations of Parties.................................................11
4.2 Conditions Precedent to Obligations of the Company.............................................12
4.3 Conditions Precedent to the Obligations of Purchaser...........................................12
4.4 Waiver of Conditions...........................................................................13
ARTICLE 5........................................................................................................13
5.1 Survival of Representations, Etc...............................................................13
5.2 Indemnification by Company.....................................................................14
5.3 Indemnification by Purchaser...................................................................14
5.4 Limitations on Liability.......................................................................14
5.5 Claims for Indemnification.....................................................................15
5.6 Defense by Indemnifying Party..................................................................15
ARTICLE 6 TERMINATION AND DEFAULT................................................................................15
6.1 General........................................................................................15
6.2 Procedure Upon Termination.....................................................................16
6.3 Effect of Termination..........................................................................16
ARTICLE 7 MISCELLANEOUS..........................................................................................16
7.1 Brokers........................................................................................16
7.2 Notices........................................................................................16
7.3 Fees and Expenses..............................................................................17
7.4 Assignment.....................................................................................17
7.5 Counterparts...................................................................................18
7.6 Entire Agreement...............................................................................18
7.7 Governing Law..................................................................................18
7.8 Headings.......................................................................................18
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
7.9 Severability...................................................................................18
7.10 Modification and Amendment.....................................................................18
7.11 Waiver.........................................................................................18
7.12 Parties Obligated and Benefited................................................................18
7.13 Actions........................................................................................18
7.14 Terms..........................................................................................18
7.15 Specific Performance...........................................................................19
7.16 No Purchaser Affiliate Liability...............................................................19
</TABLE>
ANNEX I .........DEFINITIONS
EXHIBITS
EXHIBIT A.........REGISTRATION RIGHTS AGREEMENT
EXHIBIT B.........OPTION AGREEMENT
SCHEDULES
SCHEDULE 2.2.4 ...CAPITALIZATION
SCHEDULE 2.2.5....UNDISCLOSED MATERIAL LIABILITIES
SCHEDULE 2.2.6....LITIGATION
SCHEDULE 3.3......EXCEPTIONS TO PRE-CLOSING COVENANTS
SCHEDULE 7.1 ....FINDERS, ETC.
iii
<PAGE> 5
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 2, 2000, is entered into by and between HMTF BRIDGE MC I, LLC, a
Delaware limited liability company ("Purchaser") and METROCALL, INC., a Delaware
corporation (the "Company").
RECITALS
A. Purchaser desires to purchase, and the Company desires to
issue and sell, shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the conditions set
forth in this Agreement.
B. As provided herein, it is contemplated that Purchaser and
Company will enter into an option agreement dated as of the Closing Date (the
"Option Agreement"), pursuant to which it is intended that Company will grant to
Purchaser options for shares of Common Stock. Subject to adjustment as provided
therein, Option I will be for 8,333,333 shares of Common Stock at an exercise
price of $3.00 per share with an exercise period of 12 months from the Closing.
Subject to adjustment as provided therein, Option II will be for (i)12,500,000
shares of Common Stock at an exercise price of $4.00 per share and (ii) if the
Option I has not been exercised, 8,333,333 shares of Common Stock at an exercise
price of $3.00 per share, with an exercise period of 24 months from the Closing;
Option II is contingent on the occurrence of a Qualified Transaction (as that
term is defined in the Option Agreement).
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, and intending
to be legally bound, Purchaser and the Company hereby agree as follows:
ARTICLE 1
ISSUANCE AND SALE OF COMMON STOCK; THE CLOSING
1.1 ISSUANCE AND SALE OF COMMON STOCK. Upon the terms and subject to
the conditions set forth in this Agreement, the Purchaser agrees to purchase
shares of Common Stock representing 9.9% of the issued and outstanding shares of
Common Stock determined as of the Closing Date and giving effect to the issuance
of any other shares of Common Stock to occur on the Closing Date including,
without limitation, the conversion or exchange of all of the outstanding shares
of Series C Preferred (as defined herein) as contemplated by Section 4.1.5 (the
"Shares"). The parties contemplate that the Shares shall represent 7,822,422
shares of Common Stock. The purchase price for the Shares will be $2.19 per
share in cash.
1.2 THE CLOSING. Subject to the satisfaction or waiver of the
conditions set forth in Article 4, unless the parties otherwise agree, the
closing (the "Closing") shall occur on the fourth business day after (i) the
expiration of the applicable waiting period under the Hart-Scott-Rodino
<PAGE> 6
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (ii) the
Federal Communications Commission has (x) granted any required consent to the
transactions contemplated by this Agreement (the "FCC Consents") or (y) issued
special temporary authorizations to permit the Closing to occur prior to
obtaining the FCC Consents. The "Closing Date" shall be the date the Closing
occurs.
1.3 TIME AND PLACE OF CLOSING. The Closing shall take place at the
offices of Wilmer, Cutler & Pickering, 2445 M Street, N.W., Washington, D.C.
20037 at 10:00 a.m., Washington, D.C. time, on the Closing Date or at such other
place agreed to by the parties.
1.4 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the terms
and conditions of this Agreement (a) the Company shall deliver to the Purchaser
a certificate representing the Shares being purchased thereby against payment of
the purchase price therefor by wire transfer to the Company's bank account; and
(b) the Purchaser and the Company shall execute and deliver (i) a Registration
Rights Agreement in the form set forth in Exhibit A hereto (the "Registration
Rights Agreement")and (ii) an Option Agreement in the form set forth in Exhibit
B hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
represents and warrants to the Company, as of the date hereof and as of the
Closing Date (unless another date or period of time is specifically stated
herein for a representation or warranty), as follows:
2.1.1 Authorization. The Purchaser has all requisite power and
authority to enter into this Agreement and the other agreements contemplated
hereby or referred to herein (the "Other Transaction Documents"). This Agreement
has been duly executed and delivered by the Purchaser and, assuming the due
authorization, execution and delivery hereof by the Company, is a legal, valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and any other laws of general application
affecting enforcement of creditors' rights generally, and as limited by laws
relating to the availability of a specific performance, injunctive relief, or
other equitable remedies or principles.
2.1.2 Purchase Entirely for Own Account. The Shares to be
acquired by the Purchaser will be acquired for investment for the Purchaser's
own account (or for accounts over which it exercises investment authority), not
as a nominee or agent, and not with a view to the public resale or distribution
of any part thereof in violation of any securities laws, and the Purchaser has
no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of any securities laws. The Purchaser does
not presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Shares.
2
<PAGE> 7
2.1.3 Interim Operations of Purchaser. The Purchaser has been
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement and, except for obligations or liabilities incurred in connection
with its organization and the transactions, agreements and arrangements
contemplated by this Agreement, has engaged in no other business or activities,
has incurred no other obligations or liabilities and has no material assets. The
Purchaser has available to it sufficient funds to purchase the Shares at
Closing.
2.1.4 Restricted Securities. The Purchaser understands that the
Shares have not been registered under the Securities Act of 1933 (the
"Securities Act"), by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein. The Purchaser understands that the Shares
are "restricted securities" under applicable U.S. federal and state securities
laws and that, pursuant to these laws, the Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the
Shares for resale except as set forth in the Registration Rights Agreement. The
Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Shares, and on requirements relating to the Company which are outside of
the Purchaser's control, and which (except as provided in the Registration
Rights Agreement) the Company is under no obligation and may not be able to
satisfy.
2.1.5 Legends. The Purchaser understands that the certificates
representing the Shares may bear one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF IN VIOLATION OF APPLICABLE SECURITIES LAWS. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OTHER
THAN PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
(b) Any legend required by the Blue Sky laws of any state
to the extent such laws are applicable to the shares
represented by the certificate so legended.
2.1.6 Accredited Investor. The Purchaser is (i) an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act or (ii) is a sophisticated investor, experienced in investing in
securities of emerging growth companies and acknowledges that the Purchaser is
able to fend for itself, can bear the economic risk of its investment and has
(either alone or together with its advisors) such knowledge and experience in
financial or
3
<PAGE> 8
business matters that it is capable of evaluating the merits and risks of the
investment in the Shares.
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Purchaser, as of the date hereof and as of the
Closing Date (unless another date or period of time is specifically stated
herein for a representation or warranty), as follows:
2.2.1 Corporate Organization. The Company and its subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdiction of organization. Each of the Company and
its subsidiaries has all requisite corporate power and authority to own and
operate its respective business as it is currently is being conducted and to own
and lease the properties and assets owned or leased by it. Each of the Company
and its subsidiaries is licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of its respective business makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed has not had and could not
reasonably be expected to have a Material Adverse Effect (as defined in Annex
I). The Company has all requisite corporate power and authority to enter into
this Agreement and the other Transaction Documents and perform its obligations
hereunder and thereunder.
2.2.2 Authorization and Validity of Agreement. The execution,
delivery and performance by the Company of this Agreement, the Other Transaction
Documents and any other certificates, documents and instruments contemplated
hereby or referred to herein, and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of the Company. The purchase and sale of the Shares and the granting of the
Option Agreement as contemplated herein have been approved by the Company's
Board of Directors. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution, and delivery hereof by
Purchaser, is a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as and to the extent such
enforceability may be subject to bankruptcy or similar laws affecting creditors
rights and general equitable principles.
2.2.3 No Conflicts. The execution, delivery and performance by the
Company of this Agreement, the consummation by the Company of the transactions
contemplated hereby, and the fulfillment by the Company of the terms hereof will
not:
(a) conflict with, or result in a breach or violation of, the
provisions of the certificate of incorporation or bylaws of the Company;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under, or
require notice under, any material document, material agreement or other
material instrument to which the Company is a party or by which the Company is
bound (the "Company Third Party Contracts") or, require any third party consent,
waiver or approval in order that any Company Third Party Contract remain in
effect without material modification after the Closing Date and without giving
rise to any right to termination, cancellation, acceleration or loss of any
material right or benefit;
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(c) result in the creation or imposition of any charge, claim,
judgment, lease, liability, mortgage, lien, pledge, restriction, security
interest, tax lien, or encumbrance on the Company's assets or properties
pursuant to any Applicable Law; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company is subject or bound.
2.2.4 Capital Stock of the Company. The authorized capital stock of
the Company consists solely of 200,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock"). As of
January 26, 2000, 42,103,017 shares of Common Stock were issued and outstanding.
As of January 26, 2000, 249,895 shares of Preferred Stock were issued and
outstanding, of which 239,517 shares were issued and outstanding shares of
Series A Convertible Preferred Stock ("Series A Preferred"), par value $.01 per
share, and of which 10,378 shares were issued and outstanding shares of Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred").
All of the issued and outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and nonassessable. Except as set
forth in Schedule 2.2.4, there are (i) no outstanding options, warrants or other
rights (whether or not contingent) to subscribe for or purchase or otherwise
acquire any issued or unissued shares of capital stock (or securities directly
or indirectly convertible into or exchangeable or exercisable for shares of
capital stock) of the Company, (ii) no restrictions upon, or agreements or
understandings of the Company or any subsidiary, or to the knowledge of the
Company, or understandings of any other person, with respect to, the voting or
transfer of any shares of capital stock of the Company or any subsidiary and
(iii) no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its subsidiaries. Company is the sole beneficial
owner of all the issued and outstanding capital stock of its subsidiaries.
2.2.5 Financial Statements and Reports. Since January 1, 1997, the
Company has filed all reports, registration statements and other filings,
together with any amendments or supplements required to be made with respect
thereto, that it has been required to file with the SEC under the Securities Act
and the Exchange Act (the "SEC Filings"). The SEC Filings were prepared and
filed in accordance with the rules and regulations of the SEC. As of their
respective dates, the SEC Filings did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
(including any related notes or schedules) included in the SEC Filings were
prepared in accordance with generally accepted accounting principles in the
United States, as in effect from time to time applied on a consistent basis
("GAAP") (except as otherwise noted in such financial statements) and present
fairly in all material respects the consolidated financial condition, results of
operations and cash flows of the Company as of the dates thereof and for the
periods indicated, subject, in the case of interim financial statements, to
normal year end audit adjustments. Except as set forth or reflected in the SEC
Filings filed subsequent to July 1, 1999 or in Schedule 2.2.5, the Company does
not have any liabilities or obligations of any nature whatsoever (whether
accrued, absolute, contingent, or otherwise) that individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
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2.2.6 Litigation. Schedule 2.2.6 sets forth, as of November 3,
1999, each claim, action, suit, proceeding or investigation pending against the
Company or any of its subsidiaries by or before any Governmental Authority and
each outstanding order, writ, injunction or decree to which the Company or any
subsidiary is subject. There is no claim, action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against or affecting the Company, its properties, assets or business, that
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby or thereby, or
that could reasonably be expected, either individually or in the aggregate, to
have a Material Adverse Effect or that seeks to materially alter or materially
delay the transactions contemplated hereby.
2.2.7 Validity of Securities. At Closing, the Shares to be issued
to Purchaser will be duly and validly authorized and issued, fully paid and
nonassessable, free and clear of any preemptive rights or Liens. Based in part
on the representations of the Purchaser in Section 2.1, the issuance and sale of
the Shares pursuant to this agreement is exempt from registration under the
Securities Act and does not otherwise violate Applicable Law
2.2.8 Absence of Material Adverse Change. Since September 30, 1999
to February 2, 2000, there has not been a Material Adverse Change with respect
to the Company.
2.2.9 Government Approvals. Except for (i) the filings by the
Company or Purchaser, if any, required by the HSR Act, (ii) the obtaining of the
FCC Consents, if any, required by the FCC, and (iii) applicable filings, if any,
required by applicable federal and state securities laws, in each case, which
shall be made (or are not required to be made) on or prior to the Closing Date,
no consent, authorization or order of, or filing or registration with, any
Governmental Authority or other Person is required to be obtained or made by the
Company for the execution, delivery and performance of this Agreement, or for
the execution, delivery and performance by the Company of the Other Transaction
Documents, except where the failure to obtain such consents, authorizations or
orders, or make such filings or registrations, would not individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Company to consummate the transactions contemplated hereby.
"Governmental Authority" means (i) any foreign, federal, state or local court or
governmental or regulatory agency or authority, (ii) any arbitration board,
tribunal or mediator and (iii) any national stock exchange or SEC recognized
trading market on which securities issued by the Company or any of the
subsidiaries are listed or quoted.
2.2.10 Disclosure. No representation or warranty by the Company
contained in this Agreement, and no statement contained in any document,
certificate or schedule delivered or to be delivered by or on behalf of the
Company pursuant to this Agreement or in connection with the consummation of the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact necessary,
in light of the circumstances under which it as or will be made, in order to
make the statements herein or therein not misleading or necessary in order to
fully and fairly provide the information required to be provided in any such
document, certificate or schedule.
2.2.11 Permit and Licenses. The Company and its subsidiaries have
obtained all governmental permits, licenses, franchises and authorizations
required for the Company and its
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subsidiaries to conduct their respective businesses as currently conducted,
except for those of which the failure to obtain would not have a Material
Adverse Effect with respect to the Company.
2.2.12 Intellectual Property, etc. The Company owns or is licensed
or otherwise has the right to use, without payment to any other Person all
patents, patent applications, trademarks, mask works, service marks and
copyrights ("Intellectual Property") used in or necessary for the Company's
business, as presently conducted and as proposed to be conducted. The Company's
ownership and/or use of Intellectual Property in its business, as presently
conducted, does not conflict with, or result in any violation of, or default
(with or without notice or lapse of time or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or result in any
loss of a material benefit under or the creation of any Lien in or upon any of
the properties or assets of the Company under, any contract between the Company
and any Person or any other intellectual property rights of any other Person,
except for any such conflict, violation, default, right of termination,
cancellation, acceleration, loss of material benefit or creation of any Lien
which would not have a Material Advise Effect with respect to the Company. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business, would infringe upon the intellectual
property rights of any other Person. The Company is not aware of any
infringements or misappropriation by others of any of its Intellectual Property.
ARTICLE 3
COVENANTS
3.1 ANTITRUST LAWS. The parties will file as soon as practicable
all filings that are required under the HSR Act, respond as soon as practicable
to all inquiries received from the Federal Trade Commission or the Antitrust
Division of the Department of Justice for additional information or
documentation, respond as soon as practicable to all inquiries received from any
other government agency in connection with antitrust matters, and seek early
termination of any waiting period under the HSR Act.
3.2 LISTING OF ADDITIONAL SHARES. The Company will file with the
Nasdaq Small Cap Market a Notification Form for Listing of Additional Shares for
an amount of shares of Common Stock equal to at least the amount of the Shares
and the amount of shares of Common Stock initially subject to the Option
Agreement and will use its reasonable best efforts to ensure that the Shares are
encompassed within its listing on the Nasdaq Small Cap Market.
3.3 OPERATION OF BUSINESS. From the date hereof until the Closing
Date, except as set forth in Schedule 3.3, the Company shall, and shall cause
each of its subsidiaries to:
(i) operate its business in all material respects in
the ordinary course and in compliance with Applicable Laws;
(ii) not adopt any amendment to its charter or bylaws
or comparable organizational documents;
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(iii) not split, combine or reclassify any shares of
the Company's capital stock;
(iv) not declare or pay any dividend or distribution
(whether in cash, stock or property) in respect of its capital
stock or increase the number of shares subject to the Company's
stock incentive and option plan;
(v) not take any action, or knowingly omit to take any
action, that would, or that would reasonably be expected to, result
in (A) any of the representations and warranties of the Company set
forth in Article 2 becoming untrue or (B) any of the conditions or
the obligations set forth in Section 4.1 and Section 4.3 not being
satisfied; or
(vi) enter into any agreement or commitment to do any
of the foregoing.
3.4 ACCESS TO BOOKS AND RECORDS. The Company shall afford to the
Purchaser and the Purchaser's accountants, counsel and representatives full
access during normal business hours throughout the period prior to the Closing
Date (or the earlier termination of this Agreement pursuant to Section 5.1) to
all its properties, books, contracts, commitments and records (including, but
not limited to, tax returns) and, during such period, shall, upon request,
furnish promptly to the Purchaser (i) a copy of each report, schedule and other
document filed or received by any of them pursuant to the requirements of
federal or state securities laws and (ii) all other information concerning its
business, properties and personnel as the Purchaser may reasonably request,
provided that no investigation or receipt of information pursuant to this
Section 3.4 shall affect any representation or warranty of the Company or the
conditions to the obligations of the Purchaser.
3.5 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS. The Company
and Purchaser shall (a) subject to the satisfaction of the conditions set forth
in Section 4.1, Section 4.2 and Section 4.3, execute and deliver the Other
Transaction Documents and such other documents, certificates, agreements and
other writings and (b) take such other actions, in each case, as may be
necessary or reasonably requested by any of the other party in order to
consummate or implement the issuance of the Shares in accordance with the terms
of this Agreement.
3.6 COMPLIANCE WITH CONDITIONS; REASONABLE BEST EFFORTS. The
Company and Purchaser shall use reasonable best efforts to cause all conditions
precedent to the obligations of the Company and the Purchaser to be satisfied.
Upon the terms and subject to the conditions of this Agreement, the Company and
Purchaser will use reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable consistent with Applicable Law to consummate the transaction
contemplated herein and make effective in the most expeditious manner
practicable the issuance of the Shares in accordance with the terms of this
Agreement.
3.7 PERIODIC INFORMATION. For so long as the Shares are outstanding
the Company shall file all reports required to be filed by the Company under
Section 13 and 15(d) of the
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Exchange Act and shall provide the holders of the Shares and prospective
purchasers of such shares with the information specified in Rule 144A(d) under
the Securities Act.
3.8 LEGENDS. After the requirement for the restrictive legend
described in Section 2.1.5 hereof is no longer applicable because the Shares are
freely transferable under the Securities Act, the Company shall remove such
legend upon request from the holder of such Shares, if outside counsel for such
holder reasonably determines that the transfer of such Shares is no longer
restricted by the Securities Act and outside counsel for the Company reasonably
concurs in such determination.
3.9 OTHER LIMITATIONS ON PURCHASER. For a period of 24 months after
the Closing Date, The Purchaser agrees that, unless it is specifically invited
in writing to do so by the Company, it will not, and will cause each person or
entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, Purchaser
("Affiliates") not to, directly or indirectly:
(a) in any way acquire or agree to acquire beneficial ownership of
any securities or any direct or indirect rights or options to acquire beneficial
ownership of any securities of the Company, including upon exercise of any
options, warrants or convertible securities, if as a result of such acquisition,
Purchaser and its Affiliates would be the beneficial owner, within the meaning
of Rule 13(d)(3) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of more than 15% of the then outstanding Common Stock; provided,
that not withstanding the foregoing, the shares of Common Stock issuable under,
or purchased pursuant to, the Option Agreement shall not be considered in
determining such 15% ownership limit.
(b) form, join or in any way participate in a "group" (within the
meaning of Section 13(d) (3) of the Exchange Act), for the purpose of making any
proposal for the acquisition of securities of the Company or for or with respect
to any merger, consolidation or business combination involving the Company or
its affiliates or for or with respect to any purchase of a substantial portion
of the assets of the Company or its affiliates, whether or not any parties other
than such Purchaser and its affiliates are involved and whether or not such
proposal might require the making of a public announcement by the Company;
(c) make, or in any way participate in, any "solicitation" of
"proxies" to vote any securities of the Company or become a "participant" in any
"election contest" (as such terms are defined or used in Regulation 14A under
the Exchange Act), as such Regulation is currently in effect, provided that
nothing herein restricts the ability of the Purchasers to vote proxies
distributed by the Company;
(d) propose any matter for submission to a vote of shareholders of
the Company;
(e) grant any proxy with respect to any securities of the Company
to any Person not approved by the Company;
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(f) deposit any voting securities of the Company in a voting trust
or subject any such securities to any arrangement or agreement with respect to
the voting of such securities or other agreement having similar effect;
(g) take any action which would be reasonably likely to require the
Company to make a public announcement regarding any of the matters specified in
clauses (a)-(g) of this Section 3.9;
(h) seek to influence or influence the management or policies of
the Company for the purposes set forth in clause (b) above; provided, however,
that this clause (h) shall not prohibit any representative of Purchaser or its
Affiliates on the Company's Board of Directors from taking action and serving in
his or her capacity as a director of the Company in a manner consistent with his
or her fiduciary and other duties as a director; or
(i) disclose publicly any intention, plan or arrangement
inconsistent with the foregoing.
3.10 BOARD REPRESENTATIVE. On the first Business Day following the
Closing Date, the Company's Chief Executive Officer shall recommend to the
Company's Nominating and Governance Committee that the Company's Board of
Directors elect Michael Levitt to the Company's Board of Directors effective as
of the Closing Date, to serve in a class to be determined. If, at the end of the
term of that class, Purchaser beneficially owns (which ownership shall include
shares issuable under Option I, but shall exclude shares issuable under Option
II) at least 5% of the actually issued and outstanding shares of Common Stock,
such individual or another senior executive of Purchaser reasonably acceptable
to the Company will be nominated for another three-year term.
3.11 RIGHTS PLAN. At no time shall the Company adopt any "rights
plan or agreement" that would prevent, discourage or hinder Purchaser or its
Affiliates from acquiring beneficial ownership of any securities of the Company
as permitted by Section 3.9(a).
3.12 INCISCENT, INC. In connection with the proposed transaction
involving the formation of a new corporation ("Inciscent") and the investment
therein by the Company, the Purchaser or an Affiliate thereof and other third
parties, as such is contemplated by that certain "Summary of Terms" dated
February 2, 2000, the Company shall (a) afford the Purchaser or an Affiliate
thereof an opportunity to: (i) purchase shares of a proposed convertible "Series
A Preferred Stock" of Inciscent for $750,000 on terms substantially similar to
those set forth in the Summary of Terms, with such Series A Preferred Stock
representing on an "as converted basis" not less than 4.17% of the outstanding
shares of Common Stock of Inciscent (calculated without consideration to a
proposed "Employee Stock Plan" for not more than 8% of the outstanding shares of
Inciscent's Common Stock calculated as if such Series A Preferred Stock has been
fully converted) and (ii) receive registration rights with respect to the shares
of Inciscent common stock issuable, or issued, upon the conversion of such
Series A Preferred Stock, with such registration rights providing for (x) no
less than two demand registrations, one of which shall (A) only be exercisable
at the requests of holders that (1) collectively own at least 8% of the initial
registrable securities and (2) individually initially acquired no more than 10%
of the initial registrable securities and (B) provide that only holders
described in clause (2) may participate in,
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(y) unlimited number of piggyback registrations and (z) otherwise, terms
substantially similar to those previously discussed between the parties hereto,
and (b) cause any such proposed transaction to result in Inciscent having at
least a $30,000,000 equity capitalization in the form of contributed cash (or
debt) and services.
3.13 DEMAND REQUESTS. Without the prior written consent of
Purchaser, the Company shall not grant any contractual rights for any demand
registration under the Securities Act involving an underwritten offering with
respect to the shares of Common Stock purchased by PSINet Inc. and Aether
Systems, Inc. pursuant to those certain Common Stock Purchase Agreements, dated
of even date herewith, between the Company and PSINet Inc. and the Company and
Aether Systems, Inc., respectively.
3.14 FCC APPLICATIONS. In connection with the transactions
contemplated by this Agreement, Company shall prepare, file and prosecute all
applications necessary to obtain the FCC Consents. Purchaser shall cooperate
with Company in the preparation, filing, and prosecution of any such
applications.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. The respective
obligations of Purchaser, on the one hand, and the Company, on the other, to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
4.1.1 No Injunction, Etc. No preliminary or permanent injunction or
other order shall have been issued by any federal or state court of competent
jurisdiction in the United States or by any Governmental Authority and no
statute, rule, regulation or executive order shall have been promulgated or
enacted by any Governmental Authority which restrains, enjoins or otherwise
prohibits in any material respects the transactions contemplated hereby.
4.1.2 HSR Act. Any waiting period under the HSR Act applicable to
the consummation of the transactions contemplated hereby shall have expired.
4.1.3 Registration Rights Agreement. The other party shall have
tendered its execution and delivery of the Registration Rights Agreement in the
form set forth in Exhibit A.
4.1.4 Option Agreement. The other party shall have tendered its
execution and delivery of the Option Agreement in the form set forth in
Exhibit B.
4.1.5 Exchange of Series C Preferred. All of the issued and
outstanding shares of Series C Preferred shall have been converted into or
exchanged for no more than 13,250,000 shares of Common Stock in the aggregate.
4.1.6 FCC Approval. If required, the FCC Consents and all other
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of
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waiting periods imposed by the FCC necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred or
been obtained. The FCC Consents shall be in a form and substance typical of
consents customarily issued in transactions of this nature; provided, that this
condition shall be satisfied if the Company obtains special temporary authority
from the FCC to permit the Closing to occur prior to obtaining the FCC Consents.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. In addition
to the conditions set forth in Section 4.1, the obligations of the Company to
consummate the transactions to be consummated at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of each of the additional
conditions set forth below:
4.2.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser contained in this Agreement (i)
shall have been true and correct when made and (ii) shall be (A) in the case of
representations and warranties that are qualified as to materiality or material
adverse effect, true and correct and (B) in all other cases, true and correct in
all material respects, in the case of the clauses (A) and (B), as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date.
4.2.2 Performance of Agreements. Purchaser shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this Agreement,
to be performed or complied with by it prior to or at the Closing Date.
4.2.3 Certificates. The Company shall have received a certificate
from Purchaser, dated the Closing Date, signed an authorized signatory of
Purchaser, in his capacity as an officer of Purchaser, to the effect that, to
the best of his knowledge, information and belief, the conditions specified in
Section 4.2.1 and Section 4.2.2 have been satisfied.
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. In
addition to the conditions set forth in Section 4.1, the obligations of
Purchaser to consummate the transactions to be consummated at the Closing are
subject to the satisfaction, at or prior to the Closing Date, of each of the
additional conditions set forth below:
4.3.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in this Agreement (i)
shall have been true and correct when made and (ii) shall be (A) in the case of
representations and warranties that are qualified as to materiality or material
adverse effect, true and correct and (B) in all other cases, true and correct in
all material respects, in the case of the clauses (A) and (B), as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date.
4.3.2 Performance of Agreements. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this Agreement,
to be performed or complied with by it prior to or at the Closing Date.
4.3.3 Certificates. Purchaser shall have received a certificate
from the Company, dated the Closing Date, signed by the President or any
authorized Vice President of
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the Company, in his capacity as an officer of the Company, to the effect that,
to the best of his knowledge, information and belief, the conditions specified
in Section 4.3.1 and Section 4.3.2 have been satisfied.
4.3.4 Opinion of Counsel for the Company. Purchaser shall have
received a satisfactory opinion of the Company's counsel dated the Closing Date
as to matters set forth in Sections 2.2.1, 2.2.2, 2.2.3, 2.2.4, 2.2.7 and 2.2.9
in a form agreed to by the parties.
4.3.5 No Material Adverse Change. Since the date of this Agreement,
no Material Adverse Change shall have occurred or exist with respect to the
Company.
4.3.6 Other Deliveries. The Company shall have delivered to
Purchaser at the Closing the following:
(a) a certificate of incumbency for the officers executing the
documents on behalf of the Company;
(b) a certified copy of the resolutions duly adopted by the
directors of the Company and signed by the Secretary or Assistant Secretary
authorizing the transactions contemplated by this Agreement;
(c) a certificate of the Secretary or Assistant Secretary
certifying that the resolutions referred to in Section 4.3.7(b) have not been
rescinded, modified or withdrawn and that such resolutions are in full force and
effect as of the Closing Date; and
(d) such further certificates and documents evidencing the
consummation by the Company of the transactions contemplated hereby as Purchaser
shall reasonably request.
4.3.7 Other Stock Purchase Agreements. Contemporaneously with the
Closing, the Company shall have issued and sold at least 7,822,442 shares of
Common Stock to PSINet Inc. and at least 7,766,769 shares of Common Stock to
Aether Systems, Inc. at a purchase price of at least $2.19 per share and
otherwise in accordance with the terms of the Common Stock Purchase Agreements
of even date hereof, respectively, between the Company and PSINet Inc. and the
Company and Aether Systems, Inc.
4.4 WAIVER OF CONDITIONS. Each of the parties, in its discretion,
may waive, in whole or in part, at or prior to the Closing Date, the failure of
satisfaction of any of the conditions precedent to its obligations set forth
herein. No such waiver by either of the parties shall be effective unless made
in writing.
ARTICLE 5
INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in
any schedule or in any certificate delivered by or on behalf of a party pursuant
to this Agreement or in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties by such party hereunder.
The representations and warranties of the parties contained herein shall
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survive the Closing Date for a period of one year from the Closing Date. Each
covenant and agreement contained in this Agreement shall survive in accordance
with the specific terms thereof.
5.2 INDEMNIFICATION BY COMPANY. Subject to Section 5.4, Company
shall indemnify Purchaser and its Affiliates and their respective officers,
directors, managers, partners, employees, financial advisors, attorneys,
accountants, agents and affiliates ("Representatives") (Purchaser, its
Affiliates, and its Representatives collectively, the "Purchaser Indemnified
Parties") against, and hold each Purchaser Indemnified Party harmless from, any
damage, claim, loss, cost, liability or expense, including interest, penalties,
reasonable attorneys' fees and said party's expenses of investigation, response
action or remedial action (collectively "Damages"), incident to, arising out of,
in connection with or related to, whether directly or indirectly, any of the
following:
5.2.1 The breach of any representation or warranty of Company that
is identified by Purchaser with reasonable specificity in writing provided to
Company prior to termination of the representation and warranty pursuant to
Section 5.1.
5.2.2 Any breach by Company of any of its covenants or agreements
set forth in this Agreement that is identified by Purchaser with reasonable
specificity in written notice provided to Company (i) in the case of a covenant
or agreement required to be performed prior to the Closing, within six months
after the Closing Date, and (ii) in the case of any other covenant or agreement,
within six months following the time when such covenant or agreement was
required to be performed.
5.3 INDEMNIFICATION BY PURCHASER. Subject to Section 5.4, Purchaser
shall indemnify Company and its Affiliates and their respective Representatives
(the "Company Indemnified Parties") against, and hold the Company Indemnified
Party harmless from, any Damages incident to, arising out of, in connection with
or related to, whether directly or indirectly, any of the following:
5.3.1 The breach of any representation or warranty of Purchaser
that is identified by Seller with reasonable specificity in a written notice
provided to Seller prior to termination of the representation and warranty
pursuant to Section 5.1.
5.3.2 Any breach by Purchaser of any of its covenants or agreements
set forth in this Agreement that is identified by Seller with reasonable
specificity in a written notice provided to Purchaser (i) in the case of a
covenant or agreement required to be performed prior to the Closing, within six
months after the Closing Date, and (ii) in the case of any other covenant or
agreement, within six months following the time when such covenant or agreement
was required to be performed.
5.4 LIMITATIONS ON LIABILITY. The total amount of Company's and
Purchaser's indemnification liability to the Purchaser Indemnified Parties under
Section 5.2 and Purchaser's indemnification liability to the Company Indemnified
Parties under Section 5.3 respectively for all breaches of a party's
representations, warranties, covenants and agreements contained in this
Agreement shall in each case be limited to an amount equal to the sum of (a)
purchase price for
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the Shares hereunder plus (b) the reasonable attorneys' fees and other expenses
of the prevailing party..
5.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification under Article 5, the party entitled to indemnification (the
"indemnified party") shall promptly notify the other party (the "indemnifying
party") of the claim and, when known, the facts constituting the basis for such
claim. In the event of any claim for indemnification hereunder resulting from or
in connection with any claim or legal proceedings by a third party, the notice
to the indemnifying party shall specify, if known, the amount of the liability
arising therefrom. The indemnified party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the indemnifying party.
5.6 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim
giving rise to a right of indemnification under Article 5 resulting from or
arising out of any claim or legal proceeding by a person who is not a party to
this Agreement, the indemnifying party at its sole cost and expense may, upon
written notice to the indemnified party, assume the defense of any such claim or
legal proceeding. The indemnified party shall be entitled to participate in (but
not control) the defense of any such action, with its counsel and at its own
expense. If the indemnifying party does not timely assume the defense of any
such claim or litigation resulting therefrom, (a) the indemnified party may
defend against such claim or litigation, in such manner as it may deem
appropriate, including, but not limited to, settling such claim or litigation
with the written consent of the indemnifying party, and (b) the indemnifying
party shall be entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense.
ARTICLE 6
TERMINATION AND DEFAULT
6.1 GENERAL. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
set forth below:
6.1.1 Mutual Consent. This Agreement may be terminated by the
mutual consent of the parties.
6.1.2 Order or Decree. This Agreement may be terminated by
Purchaser or the Company if any Governmental Authority shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting in any material respects the transactions contemplated
hereby and such order, decree, ruling or other action shall have become final
and nonappealable.
6.1.3 Outside Date. This Agreement may be terminated by either
party (a) if the Closing shall not have occurred by July 1, 2000 (the "Outside
Date") or (b) if one or more conditions to such party's obligation to consummate
the transactions contemplated hereby cannot be satisfied by the Outside Date;
provided, however, that no party may exercise its rights under this Section
6.1.3 if such party is in material breach or default under this Agreement.
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<PAGE> 20
6.1.4 No Material Adverse Change. This Agreement may be terminated
by the Purchaser if an event described in Section 4.3.5 shall have occurred.
6.1.5 Breach. This Agreement may be terminated by either party if
the other party shall have breached any of its material representations or
warranties or obligations under this Agreement.
6.2 PROCEDURE UPON TERMINATION. In the event of the termination of
this Agreement, written notice thereof shall promptly be given to the other
party hereto and this Agreement shall terminate, all further obligations of the
parties hereunder to satisfy the conditions precedent to the Closing shall
terminate, and the transactions contemplated hereby shall be abandoned without
further action by any of the parties hereto. The provisions of Articles 6 and 7
of this Agreement shall survive any termination.
6.3 EFFECT OF TERMINATION. Nothing in this Article 6 shall relieve
any party hereto of any liability for intentional or willful breach of this
Agreement, including willful failure to fulfill a condition or to perform a
covenant. The parties shall have no liability for termination of this Agreement
for any reason other than an intentional or willful breach of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 BROKERS. The transactions contemplated hereby have been and
shall be carried on by parties in such manner as not to give rise to any valid
claims against the parties for a brokerage commission, finder's fee or other
like payment, except as disclosed in Schedule 7.1. Each party agrees to
indemnify and hold the other harmless from and against any claims for brokerage
commissions or finder's fees insofar as such claims shall be alleged to be based
upon arrangements or agreements made by the indemnifying party or on its behalf.
Such indemnity shall include the cost of reasonable counsel fees in connection
with the defense of any such claims.
7.2 NOTICES. Except as otherwise provided, all notices which are
permitted or required under this Agreement shall be in writing and shall be
deemed given (a) when delivered personally, (b) if by fax upon transmission with
confirmation of receipt by the receiving party's facsimile terminal, (c) if sent
by documented overnight delivery service on the date delivered or (d) if sent by
mail, five (5) business days after being mailed by registered or certified mail,
postage prepaid, addressed as follows, or to such other person or address as may
be designated by notice to the other party:
If to the Company, to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly, Chief Financial Officer and Treasurer
Fax Number: (703) 768-9625
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<PAGE> 21
with a copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attn: Thomas W. White
Fax Number: (202) 663-6363
If to Purchaser, to:
HMTF Bridge MC I, LLC
c/o Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, NY 10019
Attn: Michael Levitt
Telephone: (212) 424-1400
Fax Number: (212) 424-1450
With a copy (which shall not constitute notice) to:
Vinson & Elkins, L.L.P.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Attn: Eric S. Shube
Telephone: (917) 206-8005
Fax Number: (917) 206-8100
7.3 FEES AND EXPENSES. Upon request the Company shall promptly
reimburse Purchaser for all of the filing fee relating to any filing required by
it, (i) in accordance with the HSR Act and (ii) in connection with obtaining the
FCC Consents. All other expenses incurred in connection with the negotiation,
preparation, execution and performance of this Agreement shall be paid by the
party incurring such expenses; provided, however, that if this Agreement is
terminated by the Purchaser for any reason other than Purchaser's breach of this
Agreement, then (without limiting the Purchaser's right to recover damages
pursuant to Section 6.3) the Company shall reimburse the Purchaser for the
Purchaser's reasonable out of pocket expenses incurred in connection with this
Agreement.
7.4 ASSIGNMENT. This Agreement and the transactions contemplated
hereby may not be assigned or otherwise transferred, in whole or in part, by
operation of law or otherwise, without the prior written consent of the other
party, except that the Purchaser may assign its rights hereunder, in whole or in
part, to an Affiliate.
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<PAGE> 22
7.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered, shall be an original
instrument, but such counterparts together shall constitute a single agreement.
7.6 ENTIRE AGREEMENT. This Agreement, including all Exhibits
hereto, and all certificates and documents executed and delivered in connection
with this Agreement, when executed and delivered, shall constitute the entire
agreement of the parties, superseding and extinguishing all prior agreements and
understandings, representations and warranties, relating to the subject matter
hereof.
7.7 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the substantive laws of the State of
Delaware applicable to contracts made and to be performed therein, without
reference to the principles of conflicts of laws.
7.8 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
7.9 SEVERABILITY. Any provision of this Agreement which is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, provided that such invalidity or unenforceability does not
deny any party the material benefits of the transactions for which it has
bargained, such invalidity or unenforceability shall not affect in any way the
remaining provisions hereof.
7.10 MODIFICATION AND AMENDMENT. This Agreement may not be modified
or amended except by written agreement specifically referring to this Agreement
and signed by the parties hereto.
7.11 WAIVER. No waiver of a breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
7.12 PARTIES OBLIGATED AND BENEFITED. Subject to the limitations
set forth below, this Agreement will be binding upon the parties hereto and
their respective assignees and successors in interest and will inure solely to
the benefit of such parties and their respective assigns and successors in
interest, and no other person will be entitled to any of the benefits conferred
by this Agreement, except as set forth in Article 5 (Indemnification).
7.13 ACTIONS. Each party will execute and deliver to the other,
from time to time at or after the Closing, for no additional consideration and
at no additional cost to the requesting party, (without incurring any obligation
to pay money) such further assignments, certificates, instruments, records or
other documents, assurances or things as may be reasonably necessary to give
full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
7.14 TERMS. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The words
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<PAGE> 23
"include" and "exclude" and derivatives of those words are used in this
Agreement in an illustrative sense rather than limiting sense.
7.15 SPECIFIC PERFORMANCE. The Company hereby acknowledges and
agrees that the failure of the Company to perform its obligations under this
Agreement and the other Transaction Documents in accordance with their specific
terms or to otherwise comply with such obligations will cause irreparable injury
to Purchaser for which damages, even if available, will not be an adequate
remedy. Accordingly, the Company hereby consents to the issuance of injunctive
to prevent breaches, and to the granting by any such court of the remedy of
specific performance of the terms and provisions of this Agreement and the Other
Transaction Documents.
7.16 NO PURCHASER AFFILIATE LIABILITY. Each of the following is
herein referred to as a "Purchaser Affiliate:" (a) any direct or indirect holder
of any equity interests or securities of the Purchaser (whether such holder is a
limited or general partner, member, stockholder or otherwise), (b) any Affiliate
of Purchaser, or (c) any director, officer, employee, representative or agent of
(i) Purchaser, (ii) any Affiliate of Purchaser or (iii) any such holder of
equity interests or securities referred to in clause (a) above. No Purchaser
Affiliate shall have any liability or obligation of any nature whatsoever in
connection with or under this Agreement or any of the Other Transaction
Documents or the transactions contemplated hereby or thereby (whether or not
such Purchaser Affiliate has called or received capital for contribution to
Purchaser), and the Company hereby waives and releases all claims related to any
such liability or obligation.
[Execution Page Following]
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<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives, officers or agents
on the date first written above.
HMTF BRIDGE MC I, LLC
By: ________________________________
Its: _______________________________
METROCALL, INC.
By: ________________________________
Its: _______________________________
<PAGE> 25
ANNEX I
DEFINITIONS
"Applicable Laws" means all laws, rules, regulations, writs, injunctions,
decrees, and orders (including any award, decision, judgment, injunction,
ruling, subpoena, or verdict entered, issued, made, or tendered by any court,
administrative agency, or other Governmental Authority or by an arbitrator)
applicable to the Company or the Purchaser, as applicable, or to the ownership
or operation of its respective business, assets or property.
"Material Adverse Change" means, with respect to a Person, any effect, result,
occurrence, event, fact, set of facts or change (whether or not (a) within or
without the control of such Person, (b) foreseeable or known as of the date of
this Agreement by any party to this Agreement or any of their advisors, (c)
covered by insurance, (d) resulting from acts or omissions of such Person, (e)
occurring within the ordinary course of business of such Person, (f)
constituting a breach of a representation or warranty of such Person, or (g)
such effect, result, occurrence, event, fact, set of facts or change has, at the
time in question, manifested itself in such Person's historical financial
statements or elsewhere) that, individually or in the aggregate with any other
such effect, result, occurrence, event, fact, set of facts or change during the
period or at the time in question, (1) has been materially adverse to the actual
(or could be reasonably be expected to be materially adverse to the near-term or
long-term projected) business, operations, assets, condition (financial or
otherwise), liabilities (contingent or otherwise), results of operations
(including, but not limited to, revenues, net income, EBITDA or Free Cash Flow),
or prospects of that Person individually or of that Person and its Subsidiaries
taken as a whole, or (2) has been or could reasonably be expected to be
materially adverse to the ability of that Person to perform on a timely basis
any material obligation under this Agreement or any other Transaction Document
or to consummate the transactions contemplated hereby or thereby. "Material
Adverse Change" shall also include any change or proposed change in any law,
rule, regulation or order or new interpretations of any existing law, rule,
regulation or order of any Governmental Authority that adversely affects or
could reasonably be expected to adversely affect the Purchaser's rights under
this Agreement or any Other Transaction Document or the value or marketability
of the Shares. "Material Adverse Change" shall be broadly construed, and no
effect, result, occurrence, event, fact, set of facts or change shall be
excluded from the definition of "Material Adverse Change" unless specifically
identified as being so excluded.
"Material Adverse Effect" means, with respect to a Person, any effect, result or
occurrence (whether or not (a) within or without the control of such Person, (b)
foreseeable or known as of the date of this Agreement by any party to this
Agreement or any of their advisors, (c) covered by insurance, (d) resulting from
acts or omissions of such Person, (e) occurring within the ordinary course of
business of such Person, or (f) such effect, result or occurrence has, at the
time in question, manifested itself in such Person's historical financial
statements or elsewhere) that, individually or in the aggregate with any other
such effect, result or occurrence, (1) is materially adverse to the business,
operations, assets, condition (financial or otherwise), liabilities (contingent
or otherwise), results of operations (including, but not limited to, revenues,
net income, EBITDA or Free Cash Flow), or prospects of that Person individually
or that Person
<PAGE> 26
and its Subsidiaries taken as a whole, or (2) that is materially adverse to the
ability of that Person to perform on a timely basis any material obligation
under this Agreement or any other Transaction Document or to consummate the
transactions contemplated hereby or thereby. "Material Adverse Effect" shall be
broadly construed, and no effect, result or occurrence should be excluded from
the definition of "Material Adverse Effect" unless specifically identified as
being so excluded.
"EBITDA" means gross revenue (other than extraordinary gains or losses from the
sale of assets) less operating expenses (including direct or indirect expenses
and corporate overhead expenses, but excluding depreciation and amortization).
"Free Cash Flow" means EBITDA minus the sum of the following: (a) cash
expenditures that are required to be capitalized in accordance with GAAP, (b)
cash interest expense, net cash interest income, plus cash dividends on
preferred stock, (c) local, state and federal corporate income and other taxes
accrued in accordance with GAAP, and (d) the amount of any increase in working
capital determined in accordance with GAAP (with working capital being comprised
of current assets minus current liabilities, except the current portion of
long-term debt), with any change in working capital being determined based upon
a comparison with the balance sheet at the beginning of the fiscal period being
analyzed. In addition, for purposes of determining Free Cash Flow, EBITDA shall
be increased by the amount of any decrease in working capital determined in
accordance with the preceding clause (d).
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association, or
unincorporated organization, or any other form of business or professional
entity.
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EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
(See Attached)
<PAGE> 28
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made
as of [Closing Date], 2000, by and among Metrocall, Inc., a Delaware
corporation, (the "Company") and HMTF Bridge MC I, LLC a Delaware limited
liability company (the "Purchaser").
WHEREAS, the Company and the Purchaser entered into a Common
Stock Purchase Agreement dated as of February 2, 2000 (the "Purchase
Agreement");
WHEREAS, it is a condition precedent to the closing of the
transactions contemplated in the Purchase Agreement that the parties hereto
execute and deliver this Agreement;
NOW THEREFORE, in consideration of the premises, mutual
promises and covenants contained in this Agreement and intending to be legally
bound, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Terms defined in the Purchase Agreement are used
herein as therein defined. In addition, the following terms, as used herein,
have the following meanings:
"Affiliates" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person, including a "Purchaser Affiliate" (as
defined in the Purchase Agreement). For the purposes of this definition and the
definition of Purchaser Affiliate, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.01 per share, and any other securities issued by the Company as a dividend or
other distribution with respect to, or in exchange for or in replacement of such
common stock.
"Demand Registration" means a registration under the
Securities Act requested in accordance with Section 2.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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<PAGE> 29
"Holder" means a person who owns Registrable Securities and is
either (a) the Purchaser or (b) a direct or an indirect transferee of the
Purchaser.
"Option Agreement" means the Option Agreement dated [Closing
Date], 2000 by and between the Company and the Purchaser.
"Option I" means the option granted at an initial exercise
price of $3.00 per share by the Company to the Purchaser under Section 1 of the
Option Agreement.
"Option II" means the option granted at an initial exercise
price of $4.00 per share by the Company to the Purchaser under Section 2 of the
Option Agreement.
"Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity.
"Piggyback Registration" has the meaning set forth in Section
2.02.
"Registrable Common Stock" means the shares of Common Stock
purchased by the Purchaser pursuant to the Purchase Agreement, the shares of
Common Stock issued or issuable upon the exercise by the Purchaser of Option I
or Option II, any additional securities issued by the Company in respect thereof
in connection with any stock split, stock dividend or similar event with respect
to the Common Stock, plus any other shares of Common Stock or such other
securities held by any Holder.
"Registrable Securities" means (a) the Registrable Common
Stock and (b) any securities of the Company or any successor entity into which
Registrable Common Stock may hereafter be converted or changed. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of under such registration statement, (ii)
such securities shall have been transferred pursuant to Rule 144, or (iii) such
securities shall have ceased to be outstanding.
"Requesting Holders" means the Holders requesting a Demand
Registration, and shall include parties deemed "Requesting Holders" pursuant to
Sections 2.01(a)(v)-(vii).
"Rule 144" means Rule 144 (or any successor rule of similar
effect) promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended
or any similar Federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Selling Holder" means any Holder who is selling Registrable
Securities pursuant to a public offering registered hereunder.
"Shelf Registration" has the meaning set forth in Section
2.03.
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<PAGE> 30
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
SECTION 1.02. Internal References. Unless the context indicates other wise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement.
ARTICLE II
Registration Rights
SECTION 2.01. Demand Registration. (a)(i) Holders ("Requesting Holders") of a
majority of the Registrable Securities held by the Holders may make up to two
written requests for a Demand Registration of all or any part of the Registrable
Securities held by such Holders; provided, that (A) the Holders shall not be
entitled to the second Demand Registration until the Purchaser (or its permitted
successors or assigns) has exercised in full the option granted with an initial
exercise price per share of the Dollars ($3.00) pursuant to Section 1 or Section
2, as applicable, of Option Agreement and (B) the Holders shall not be entitled
to a Demand Registration if, during the 120 days preceding such request, either
the Holders had requested a Demand Registration (unless such Demand Registration
was preempted pursuant to Section 2.01(e)), or the Holders were given the
opportunity to participate in a Piggyback Registration (providing for a "firm
commitment" underwritten offering) in accordance with Section 2.02 and either
(1) failed to notify the Company of a desire to participate in such Piggyback
Registration or (2) notified the Company of a desire to participate in such
Piggyback Registration and were able to sell in such Piggyback Registration at
least 65% of the Registrable Securities requested by the Holders to be included
in such Piggyback Registration.
(ii) Any request for a Demand Registration will specify the
aggregate number of shares of Registrable Securities proposed to be sold by the
Requesting Holders and will also specify the intended method of disposition
thereof. A registration will not count as a Demand Registration until it has
become effective. Should a Demand Registration not become effective due to the
failure of a Holder to perform its obligations under this Agreement or the
inability of the Requesting Holders to reach agreement with the Underwriters for
the proposed pricing or other customary terms for such transaction, or in the
event the Requesting Holders withdraw (after the required form of registration
statement has been initially filed with the Commission) the Demand Registration
(in each of the foregoing cases, provided that at such time the Company is in
compliance in all material respects with its obligations under this Agreement),
then, subject to Section 2.01(b), such Demand Registration shall be deemed to
have been effected (provided that (i) if, the Demand Registration does not
become effective because a material adverse change has occurred, or is
reasonably likely to occur, in the condition (financial or otherwise), business,
assets or results of operations of the Company and its subsidiaries taken as a
whole subsequent to the date of the written request made by the Requesting
Holders or (ii) if, after the Demand Registration has become effective, an
offering of Registrable Securities pursuant to a registration is interfered with
by any stop order, injunction, or other order or requirement of the Commission
or other governmental agency or court then the Demand Registration shall not be
deemed to have been effected and will not count as a Demand Registration).
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<PAGE> 31
(iii) Upon receipt of any request for a Demand Registration,
the Company shall promptly (but in any event within ten (10) days) give written
notice of such proposed Demand Registration to all other Holders entitled to
make a Demand Request hereunder, and all such Holders shall have the right,
exercisable by written notice to the Company within twenty (20) days of their
receipt of the Company's notice, to elect to include in such Demand Registration
such portion of their Registrable Securities as they may request. All such
Holders requesting to have their Registrable Securities included in a Demand
Registration in accordance with the preceding sentence shall be deemed to be
"Requesting Holders" for purposes of this Section 2.01.
(b) In the event that the Requesting Holders withdraw or do
not pursue a request for a Demand Registration and, pursuant to Section 2.01(a)
hereof, such Demand Registration is deemed to have been effected, the Requesting
Holders, may reacquire such Demand Registration (such that the withdrawal or
failure to pursue a request will not count as a Demand Registration hereunder)
if the Requesting Holders reimburse the Company for any and all Registration
Expenses incurred by the Company in connection with such request for a Demand
Registration.
(c) If the Requesting Holders so elect, the offering of such
Registrable Securities pursuant to such Demand Registration (or take down under
a Shelf Registration, as defined below) shall be in the form of a "firm
commitment" underwritten offering. A majority in interest of the Requesting
Holders shall have the right to select the managing Underwriters to be used in
connection with any offering under this Section 2.01 or 2.03, subject to the
Company's approval, which approval shall not be unreasonably withheld.
(d) The Requesting Holders will inform the Company of the time
and manner of any disposition of Registrable Common Stock, and agree to
reasonably cooperate with the Company in effecting the disposition of the
Registrable Common Stock in a manner that does not unreasonably disrupt the
public trading market for the Common Stock.
(e) The Company will have the right to preempt any Demand
Registration with a primary registration by delivering written notice (within
five business days after the Company has received a request for such Demand
Registration) of such intention to the Selling Holder indicating that the
Company has identified a specific business need and use for the proceeds of the
sale of such securities and the Company shall use commercially reasonable
efforts to effect a primary registration within 60 days of such notice. In the
ensuing primary registration, the Holders will have such piggyback registration
rights as are set forth in Section 2.02 hereof. The Company may exercise the
right to preempt only twice in any 360-day period; provided that during any
360-day period there shall be a period of at least 120 consecutive days during
which the Selling Holders may effect a Demand Registration.
(f) No securities to be sold for the account of any Person
(including the Company) other than a Requesting Holder shall be included in a
Demand Registration unless (i) the Requesting Holder consents in writing to such
inclusion or (ii) the managing Underwriter or Underwriters shall advise the
Company and the Requesting Holders in writing that the inclusion of such
securities will not materially and adversely affect the price of the offering (a
"Material Adverse Effect"). Furthermore, in the event the managing Underwriter
or Underwriters shall
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<PAGE> 32
advise the Company or the Requesting Holders that even after exclusion of all
securities of other Persons (including the Company) pursuant to the immediately
preceding sentence, the amount of Registrable Securities proposed to be included
in such Demand Registration by Requesting Holders is sufficiently large to cause
a Material Adverse Effect, the Registrable Securities of the Requesting Holders
to be included in such Demand Registration shall equal the number of shares
which the Company and the Requesting Holders are so advised can be sold in such
offering without such Material Adverse Effect and such shares shall be allocated
pro rata among the Requesting Holders on the basis of the number of Registrable
Securities requested to be included in such registration by each such Requesting
Holder; provided, however, that if any Registrable Securities requested to be
registered pursuant to a Demand Registration under Section 2.01 are excluded
from registration hereunder, then the Holder(s) having shares excluded
("Excluded Holders") shall have the right to withdraw all, or any part, of their
shares from such registration.
SECTION 2.02. Piggyback Registration. (a) If the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock for its own account or for the account of another Person (other
than a registration statement on Form S-4 or S-8, or, except as provided for in
Section 2.03, pursuant to Rule 415 (or any substitute form or rule,
respectively, that may be adopted by the Commission)), the Company shall give
written notice of such proposed filing to the Holders at the address set forth
in the share register of the Company as soon as reasonably practicable (but in
no event less than 15 days before the anticipated filing date), undertaking to
provide each Holder the opportunity to register on the same terms and conditions
such number of shares of Registrable Common Stock as such Holder may request (a
"Piggyback Registration"). Each Holder will have seven business days after
receipt of any such notice to notify the Company as to whether it wishes to
participate in a Piggyback Registration (which notice shall not be deemed to be
a request for a Demand Registration); provided that should a Holder fail to
provide timely notice to the Company, such Holder will forfeit any rights to
participate in the Piggyback Registration with respect to such proposed offering
other than as described in Section 2.01(a). In the event that the registration
statement is filed on behalf of a Person other than the Company, the Company
will use its reasonable best efforts to have the shares of Registrable Common
Stock that the Holders wish to sell included in the registration statement. If
the Company or the Person for whose account such offering is being made shall
determine in its sole discretion not to register or to delay the proposed
offering, the Company may, at its election, provide written notice of such
determination to the Holders and (i) in the case of a determination not to
effect the proposed offering, shall thereupon be relieved of the obligation to
register such Registrable Common Stock in connection therewith, and (ii) in the
case of a determination to delay a proposed offering, shall thereupon be
permitted to delay registering such Registrable Common Stock for the same period
as the delay in respect of the proposed offering. As between the Company and the
Selling Holders, the Company shall be entitled to select the Underwriters in
connection with any Piggyback Registration on the same basis as contemplated in
Section 2.01(c).
(b) Priority on Piggyback Registrations. If the Registrable
Securities requested to be included in the Piggyback Registration by any Holder
differ from the type of securities proposed to be registered by the Company and
the managing Underwriter advises the Company that due to such differences the
inclusion of such Registrable Securities would cause a Material Adverse Effect,
then (i) the number of such Holders' Registrable Securities to be included in
the Piggyback
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Registration shall be reduced to an amount which, in the opinion of the managing
Underwriter, would eliminate such Material Adverse Effect or (ii) if no such
reduction would, in the opinion of the managing Underwriter, eliminate such
Material Adverse Effect, then the Company shall have the right to exclude all
such Registrable Securities from such Piggyback Registration, provided, that no
other securities of such type are included and offered for the account of any
other Person in such Piggyback Registration. Any partial reduction in number of
Registrable Securities of any Holder to be included in the Piggyback
Registration pursuant to clause (i) of the immediately preceding sentence shall
be effected pro rata based on the ratio which such Holder's requested shares
bears to the total number of shares requested to be included in such Piggyback
Registration by all Persons other than the Company who have the contractual
right to request that their shares be included in such registration statement
and who have requested that their shares be included. If the Registrable
Securities requested to be included in the registration statement are of the
same type as the securities being registered by the Company and the managing
Underwriter advises the Company that the inclusion of such Registrable
Securities would cause a Material Adverse Effect, the Company will be obligated
to include in such registration statement, as to each Holder only a portion of
the shares such Holder has requested be registered equal to the ratio which such
Holder's requested shares bears to the total number of shares requested to be
included in such registration statement by all Persons (other than the Person or
Persons initiating such registration request) who have the contractual right to
request that their shares be included in such registration statement and who
have requested their shares be included; Provided, that in the event the Company
registers shares of Common Stock in an underwritten offering pursuant to a
demand request made under Section 2.02 of the Registration Rights Agreement
dated as of ___________, 2000 between the Company and AT&T Wireless Services,
Inc. ("Wireless"), then all shares to be registered on behalf of Wireless
pursuant to such agreement shall be included in such registration statement
before any shares to be sold by the Company for its own account or the account
of any Holder or any other person entitled to request that their shares be
included in such registration statement. If the Company initiated the
registration, then the Company may include all of its securities in such
registration statement before any such Holder's requested shares are included.
If another security holder initiated the registration, then the Company may not
include any of its securities in such registration statement unless all
Registrable Securities requested to be included in the registration statement by
all Holders are included in such registration statement. If as a result of the
provisions of this Section 2.02(b), any Holder shall not be entitled to include
all Registrable Securities in a registration that such Holder has requested to
be so included, such Holder may withdraw such Holder's request to include
Registrable Securities in such registration statement prior to its
effectiveness.
SECTION 2.03. Shelf Registration. In addition to the two Demand Registrations
provided for in Section 2.01, Holders of a majority of the Registrable
Securities shall be entitled to make a request that the Company effect a shelf
registration pursuant to Rule 415; provided that such request is otherwise in
compliance with the provisions of Section 2.01. The Company shall be required to
maintain the effectiveness of the Shelf Registration for as long as there are
Registrable Securities; it being expressly agreed and understood that for
purposes of this Agreement any subsequent underwritten "take down" with respect
to the Shelf Registration shall constitute a Demand Registration to be counted
toward the two total Demand Registrations authorized by Section 2.01 and
otherwise that such Shelf Registrations shall not count as a
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Demand Registration. The Company shall not be required to effect a Demand
Registration pursuant to Section 2.01 if the Company shall at the time have
effective a Shelf Registration pursuant to which the Holders that requested
registration could effect the disposition of such Holder's Registrable
Securities in the manner requested.
ARTICLE III
Registration Procedures
SECTION 3.01. Filings; Information. In connection with the registration of
Registrable Securities pursuant to Section 2.01, Section 2.02 and Section 2.03
hereof, the Company will use its best efforts to effect the registration of such
Registrable Securities as promptly as is reasonably practicable, and in
connection with any such request:
(a) The Company will as soon as practicable prepare and file with the Commission
a registration statement on any form for which the Company then qualifies and
which counsel for the Company shall deem appropriate and available for the sale
of the Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and use its reasonable best efforts to
cause such filed registration statement to become and remain effective (i) with
respect to any Demand Registration or Piggyback Registration, for such period,
not to exceed 120 days, as may be reasonably necessary to effect the sale of
such securities, (ii) with respect to the Shelf Registration, until the sale of
all Registrable Securities thereunder or until such securities cease to be
Registrable Securities provided that if the Company shall furnish to the Selling
Holder a certificate signed by the Company's Chairman, President or any
Vice-President stating that the Company's Board of Directors has determined in
good faith that it would be detrimental or otherwise disadvantageous to the
Company or its shareholders for such a registration statement to be filed as
soon as practicable because the sale of Registrable Securities covered by such
Registration Statement or the disclosure of information in any related
prospectus or prospectus supplement would materially interfere with any
acquisition, financing or other material event or transaction which is then
intended or the public disclosure of which at the time would be materially
prejudicial to the Company, the Company may postpone the filing (but not the
preparation) or effectiveness of a registration statement for a period of not
more than 120 days; provided that during any 360-day period the Company shall
use its reasonable best efforts to permit a period of at least 120 consecutive
days during which the Company will make a registration statement available under
this Agreement; and provided further that if (i) the effective date of any
registration statement filed pursuant to a Demand Registration would otherwise
be at least 45 calendar days, but fewer than 90 calendar days, after the end of
the Company's fiscal year, and (ii) the Securities Act requires the Company to
include audited financials as of the end of such fiscal year, the Company may
delay the effectiveness of such registration statement for such period as is
reasonably necessary to include therein its audited financial statements for
such fiscal year.
(b) The obligations of the Company under this Agreement are subject to the
condition that the Company shall be entitled to require the Holder to suspend
for up to ninety (90) days once in any twelve month period the sale of Shares
pursuant to a registration statement filed pursuant to this Agreement if and for
so long as (i) the Board of Directors of the Company
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<PAGE> 35
determines, in its reasonable judgment, that the sale of Shares pursuant thereto
would materially interfere with any material financing, acquisition, corporate
reorganization or other material transaction by the Company, (ii) the Company
promptly gives the Holder written notice of such determination, and (iii) all
other similarly situated shareholders shall also be subject to the same
suspension. The Company shall have no obligation to maintain the effectiveness
of a registration statement with respect to the shares of Registrable Securities
during periods when the Holder is required to suspend the sale of such Shares as
provided in this paragraph. As soon as possible after the expiration of such
periods, the Company shall amend its registration statements as necessary to
permit the Holder to sell shares of Registrable Securities pursuant to such
registration statements and shall notify the Holder in writing that it may
resume the sale of shares of Registrable Securities pursuant to such
Registration Statement.
(c) The Company will, if requested, prior to filing such registration statement
or any amendment or supplement thereto, furnish to the Selling Holders, and each
applicable managing Underwriter, if any, copies thereof, and thereafter furnish
to the Selling Holders and each such Underwriter, if any, such number of copies
of such registration statement, amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein)
and the prospectus included in such registration statement (including each
preliminary prospectus) as the Selling Holders or each such Underwriter may
reasonably request in order to facilitate the sale of the Registrable Securities
by the Selling Holders.
(d) After the filing of the registration statement, the Company will promptly
notify the Selling Holders of any stop order issued or, to the Company's
knowledge, threatened to be issued by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered.
(e) The Company will use its best efforts to qualify the Registrable Securities
for offer and sale under such other securities or blue sky laws of such
jurisdictions in the United States as the Selling Holders reasonably request;
keep each such registration or qualification (or exemption therefrom) effective
during the period in which such registration statement is required to be kept
effective; and do any and all other acts and things which may be reasonably
necessary or advisable to enable each Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder in such
jurisdictions; provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph 3.01(e), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction.
(f) The Company will as promptly as is practicable notify the Selling Holders,
at any time when a prospectus relating to the sale of the Registrable Securities
is required by law to be delivered in connection with sales by an Underwriter or
dealer, of the occurrence of any event requiring the preparation of a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and promptly
make available to the Selling Holders and to the Underwriters any such
supplement or amendment. Upon receipt of any notice of the
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occurrence of any event of the kind described in the preceding sentence, Selling
Holders will forthwith discontinue the offer and sale of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until receipt by the Selling Holders and the Underwriters of the copies of such
supplemented or amended prospectus and, if so directed by the Company, the
Selling Holders will deliver to the Company all copies, other than permanent
file copies then in the possession of Selling Holders, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective as provided in Section 3.01(a) hereof by the number of days during the
period from and including the date of the giving of such notice to the date when
the Company shall make available to the Selling Holders such supplemented or
amended prospectus.
(g) The Company will enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are required in
order to expedite or facilitate the sale of such Registrable Securities.
(h) At the request of any Underwriter in connection with an underwritten
offering the Company will furnish (i) an opinion of counsel, addressed to the
Underwriters, covering such customary matters as the managing Underwriter may
reasonably request and (ii) a comfort letter or comfort letters from the
Company's independent public accountants covering such customary matters as the
managing Underwriter may reasonably request.
(i) If requested by the managing Underwriter or any Selling Holder, the Company
shall promptly incorporate in a prospectus supplement or post effective
amendment such information as the managing Underwriter or any Selling Holder
reasonably requests to be included therein, including without limitation, with
respect to the Registrable Securities being sold by such Selling Holder, the
purchase price being paid therefor by the Underwriters and with respect to any
other terms of the underwritten offering of the Registrable Securities to be
sold in such offering, and promptly make all required filings of such prospectus
supplement or post effective amendment.
(j) The Company shall promptly make available for inspection by any Selling
Holder or Underwriter participating in any disposition pursuant to any
registration statement, and any attorney, accountant or other agent or
representative retained by any such Selling Holder or Underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information requested by any such Inspector in connection with such
registration statement; provided, however, that unless the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
registration statement or the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, the Company
shall not be required to provide any information under this subparagraph (j) if
(A) the Company believes, after consultation with counsel for the Company, that
to do so would cause the Company to forfeit an attorney-client privilege that
was applicable to such information or (B) if either (1) the Company has
requested and been granted from the Commission confidential treatment of such
information contained in any filing with the
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<PAGE> 37
Commission or documents provided supplementally or otherwise or (2) the Company
reasonably determines in good faith that such Records are confidential and so
notifies the Inspectors in writing unless prior to furnishing any such
information with respect to (A) or (B) such Holder of Registrable Securities
requesting such information agrees to enter into a confidentiality agreement in
customary form and subject to customary exceptions; provided further, however,
that each Holder of Registrable Securities agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its expense, to undertake
appropriate action and to prevent disclosure of the Records deemed confidential.
(k) The Company shall cause the Registrable Securities included in any
registration statement to be (A) listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed, or (B)
authorized to be quoted and/or listed (to the extent applicable) on the Nasdaq
Small Cap or National Market, if the Registrable Securities so qualify.
(l) The Company shall provide a CUSIP number for the Registrable Securities
included in any registration statement not later than the effective date of such
registration statement.
(m) The Company shall cooperate with each Selling Holder and each Underwriter
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.
(n) The Company shall during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
(o) The Company will make generally available to its security holders, as soon
as reasonably practicable, an earnings statement covering a period of 12 months,
beginning within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and the rules and regulations of the Commission
thereunder.
The Company may require Selling Holders promptly to furnish in
writing to the Company such information regarding such Selling Holders, the plan
of distribution of the Registrable Securities and other information as the
Company may from time to time reasonably request or as may be legally required
in connection with such registration.
SECTION 3.02. Registration Expenses. In connection with any Registration
effected hereunder, the Company shall pay the following expenses incurred in
connection with such registration (the "Registration Expenses"): (i)
registration and filing fees with the Commission and the National Association of
Securities Dealers, Inc., (ii) fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) fees and expenses incurred in connection with the
listing or quotation of the
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Registrable Securities, (v) fees and expenses of counsel to the Company and the
reasonable fees and expenses of independent certified public accountants for the
Company (including fees and expenses associated with the special audits or the
delivery of comfort letters), (vi) the reasonable fees and expenses of any
additional experts retained by the Company in connection with such registration,
(vii) all roadshow costs and expenses not paid by the Underwriters and (viii)
the reasonable fees and disbursements of one counsel for the Selling Holders
selected by them with the approval of the Company, which approval shall not be
unreasonably withheld.
ARTICLE IV
Indemnification and Contribution
SECTION 4.01. Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Selling Holder and its Affiliates and their respective
officers, directors, partners, stockholders, members, employees, agents and
representatives and each Person (if any) which controls a Selling Holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys' fees) caused by, arising out
of, resulting from or related to any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by or based upon any information furnished in
writing to the Company by or on behalf of such Selling Holder expressly for use
therein or by the Selling Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished the Selling Holder with copies of the same. The Company
also agrees to indemnify any Underwriters of the Registrable Securities, their
officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Selling
Holders provided in this Section 4.01, except insofar as such losses, claims,
damages or liabilities are caused by or based upon any information furnished in
writing to the Company by or on behalf of such Underwriter expressly for use
therein or by the Underwriter's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished the Underwriter with copies of the same.
SECTION 4.02. Indemnification by Selling Holders. Each Selling Holder agrees to
indemnify and hold harmless the Company, its officers and directors, and each
Person, if any, which controls the Company within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Selling Holder, but only with
reference to information furnished in writing by or on behalf of such Selling
Holder expressly for use in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. Each Selling Holder also agrees to indemnify and hold
harmless any Underwriters of the Registrable Securities, their officers and
directors and each person who
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controls such Underwriters on substantially the same basis as that of the
indemnification of the Company provided in this Section 4.02, but only with
reference to information furnished in writing by or on behalf of such Selling
Holder expressly for use in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. Each such Selling Holder's liability under this Section
4.02 shall be limited to an amount equal to the net proceeds (after deducting
the underwriting discount and expenses) received by such Selling Holder from the
sale of such Registrable Securities by such Selling Holder.
SECTION 4.03. Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to Section 4.01 or
Section 4.02, such Person (the "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party, upon the request of the Indemnified Party,
shall retain counsel reasonably satisfactory to such Indemnified Party to
represent such Indemnified Party and any others the Indemnifying Party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party and, in the written opinion of counsel for the Indemnified
Party, representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent (not to be unreasonably withheld), or if there be a
final judgment for the plaintiff, the Indemnifying Party shall indemnify and
hold harmless such Indemnified Parties from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment.
SECTION 4.04. Contribution. If the indemnification provided for in this Article
IV is unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities in respect of which indemnity is to be provided
hereunder, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall to the fullest extent permitted by law contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of such party in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company, a
Selling Holder and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party
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and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and each Selling Holder agrees that it would not
be just and equitable if contribution pursuant to this Section 4.04 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article IV, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and each Selling
Holder shall not be required to contribute any amount in excess of the amount by
which the net proceeds of the offering (before deducting expenses) received by
such Selling Holder exceeds the amount of any damages which such Selling Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
ARTICLE V
Miscellaneous
SECTION 5.01. Participation in Underwritten Registrations. No Person may
participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements, (b) completes and executes all questionnaires, powers
of attorney, custody arrangements, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement and (c) furnishes in writing to the Company such
information regarding such Person, the plan of distribution of the Registrable
Securities and other information as the Company may from time to time request or
as may be legally required in connection with such registration; provided,
however, that no such Person shall be required to make any representations or
warranties in connection with any such registration other than representations
and warranties as to (i) such Person's ownership of his or its Registrable
Securities to be sold or transferred free and clear of all liens, claims and
encumbrances, (ii) such Person's power and authority to effect such transfer and
(iii) such matters pertaining to compliance with securities laws as may be
reasonably requested; provided further, however, that the obligation of such
Person to indemnify pursuant to any such underwriting agreements shall be
several, not joint and several, among such Persons selling Registrable
Securities, and the liability of each such Person
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will be in proportion to, and provided further that such liability will be
limited to, the net amount received by such Person from the sale of such
Person's Registrable Securities pursuant to such registration.
SECTION 5.02. Rule 144. The Company covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as the Holders may reasonably request to
the extent required from time to time to enable the Holders to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder, the Company will
deliver to such Holder a written statement as to whether it has complied with
such reporting requirements.
SECTION 5.03. Holdback Agreements. Each Holder agrees, in the event of an
underwritten offering for the Company (whether for the account of the Company or
otherwise) not to offer, sell, contract to sell or otherwise dispose of any
Registrable Securities, or any securities convertible into or exchangeable or
exercisable for such securities, including any sale pursuant to Rule 144 under
the Securities Act (except as part of such underwritten offering), during the 14
days prior to, and during the 90-day period (or such lesser period as the lead
or managing underwriters may require) beginning on, the effective date of the
registration statement for such underwritten offering (or, in the case of an
offering pursuant to an effective shelf registration statement pursuant to Rule
415, the pricing date for such underwritten offering).
SECTION 5.04. Termination. The registration rights granted under this Agreement
will terminate on February 30, 2020, or such earlier time as there shall no
longer be any Registrable Securities.
SECTION 5.05. Amendments, Waivers, Etc. This Agreement may not be amended,
waived or otherwise modified or terminated except by an instrument in writing
signed by the Company and Holders of at least 50% of the Registrable Securities.
SECTION 5.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement. Each
party need not sign the same counterpart.
SECTION 5.07. Entire Agreement. This Agreement (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
SECTION 5.08. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
SECTION 5.09. Assignment of Registration Rights. Each Holder of the Registrable
Securities may assign all or any part of its rights under this Agreement to any
person to whom such Holder sells, transfers or assigns such Registrable
Securities. In the event that the Holder shall assign its rights pursuant to
this Agreement in connection with the transfer of less
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than all its Registrable Securities, the Holder shall also retain his rights
with respect to its remaining Registrable Securities.
SECTION 5.10. Granting Other Registration Rights. Without the prior written
consent of Purchaser, the Company shall not grant any contractual rights for any
demand registration under the Securities Act involving an underwritten offering
with respect to the shares of Common Stock purchased by PSINet Inc. and Aether
Systems, Inc. pursuant to those certain Common Stock Purchase Agreements, dated
as of February 2, 2000, between the Company and PSINet Inc. and Aether Systems,
Inc., respectively.
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IN WITNESS WHEREOF, the Company and each Holder has caused this
Agreement to be signed on its behalf by its officer thereunto duly authorized as
of the date first written above.
ADDRESS FOR NOTICE PURPOSES: METROCALL, INC.
If to the Company, to: By:_______________________
Metrocall, Inc. Name:_____________________
6677 Richmond Highway Title:____________________
Alexandria, Virginia 22306
Attn: Vincent D. Kelly, Chief Financial
Officer and Treasurer
Fax Number: (703) 768-9625
with a copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attn: Thomas W. White
Fax Number: (202) 663-6363
ADDRESS FOR NOTICE PURPOSES: HMTF BRIDGE MC I, LLC
HMTF Bridge MC I, LLC By:_______________________
c/o Hicks, Muse, Tate & Name:_____________________
Furst Incorporated Title:____________________
1325 Avenue of the Americas
25th Floor
New York, NY 10019
Attn: Michael Levitt
Telephone: (212) 424-1400
Fax Number: (212) 424-1450
Vinson & Elkins, L.L.P.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Attn: Eric S. Shube
Telephone: (917) 206-8005
Fax Number: (917) 206-8100
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EXHIBIT B
OPTION AGREEMENT
(See Attached)
<PAGE> 45
OPTION AGREEMENT
OPTION AGREEMENT, dated as of [Closing Date], 2000 (this "Agreement"),
by and between Metrocall, Inc., a Delaware corporation ("Company"), and HMTF
Bridge MC I, LLC, a Delaware limited liability company ("Holder").
WHEREAS, the Company and Holder have entered into a Common Stock
Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to
which it is intended that Holder will purchase shares of common stock, $0.01 par
value per share ("Common Stock"), of the Company;
WHEREAS, the Company desires, upon the terms and subject to the
conditions set forth herein, to grant Holder the right to acquire additional
shares of Common Stock.
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth below, the parties hereto agree as follows:
1. Option I.
(a) Grant of Option. Company hereby grants to Holder an irrevocable
option ("Option I") to purchase, in the manner set forth below, 8,333,333 shares
of Common Stock (the "Option I Shares"), at an exercise price per share of Three
Dollars ($3.00) (the "Option I Exercise Price"), subject to adjustment in
accordance with Section 9.
(b) Term of Option. Option I may be exercised by the Holder in
whole but not in part, at any time or from time to time after the date hereof
and on or before 5:00 pm, Eastern time, on ____________, 2001(1) ("the Option I
Expiration Date"). Except as provided in Section 2,Option I will terminate and
be null and void if the Option I Exercise Notice (as defined herein) is not
delivered on or prior to the Option I Expiration Date.
(c) Exercise Procedures.
(i) In the event Holder wishes to exercise Option I, Holder
shall send a written notice to that effect to Company
("Option I Exercise Notice"). Such notice shall be
irrevocable, subject to the satisfaction of the
conditions set forth in Section 4.
(ii) Closing of the purchase of Common Stock pursuant to
Option I (the "Option I Closing") shall occur at a place,
on a date, and at a time designated by Holder in the
Option I Exercise Notice which date shall be at least
three Business Days after the date of the Option I
Exercise Notice.
(iii) At the Option I Closing, the Company shall deliver
certificates representing the Option I Shares to Holder
or its assignee against payment of the Option I Exercise
Price in cash by wire transfer of
____________
(1) [Insert date that is one year after Closing under the Purchase Agreement]
<PAGE> 46
immediately available funds to a bank account designated
by the Company.
2. Option II.
(a) Grant of Option. Company hereby grants to Holder an irrevocable
option ("Option II", together with Option I, the "Options") to purchase, in the
manner set forth below, (i) 12,500,000 shares of Common Stock at an exercise
price per share of Four Dollars ($4.00) plus (ii), if Holder has not exercised
Option I, 8,333,333 shares of Common Stock at an exercise price per share of
Three Dollars ($3.00), in each case subject to adjustment in accordance with
Section 9. (The shares subject to Option II shall be referred to as the "Option
II Shares.)"
(b) Term and Conditions of Option. Option II may be exercised in
whole or in part, only in connection with the issuance of new equity for cash to
finance a business combination or acquisition (by means of merger,
consolidation, exchange, or acquisition of assets, or otherwise) involving the
Company or any subsidiary thereof and an aggregate transactional consideration
to the other entity or its equity and debt holders or to the Company and its
equity and debt holders having a fair value (as determined in good faith by the
Board of Directors of the Company) of at least $50,000,000 (a "Qualified
Transaction"). Except as otherwise provided in Sections 2(c)(i) and 2(d), Option
II shall only be exercisable as to Transaction Notices delivered by the Company
on or prior to 5:00 pm, Eastern time, on _________ ___, 2002(2) (the Termination
Date").
(c) Exercise Procedures.
(i) If, at any time prior to the Termination Date, the
Company proposes to enter into one or more Qualified
Transactions, it shall in each case promptly notify the
Holder in writing of the material terms of the Qualified
Transaction (a "Transaction Notice"). Holder shall have
20 Business Days from the date of a Transaction Notice
("Option II Exercise Period") to notify the Company in
writing ("Option II Election Notice") whether or not it
intends to exercise Option II in connection with the
proposed Qualified Transaction. Except as provided for in
the immediately following sentence, if the Holder
notifies the Company in the Option II Election Notice
that it does not intend to exercise Option II in
connection with the proposed Qualified Transaction, or
does not deliver an Option II Election Notice within the
Option II Exercise Period, then Option II shall terminate
and become null and void upon the consummation of such
Qualified Transaction. If after the delivery of a
Transaction Notice there is any change in the material
terms of the Qualified Transaction, the Company shall
deliver a new Transaction Notice specifying such change
and a new Option II Exercise Period shall commence and
during such new Option II Election Period, Holder shall
have the right to either (x) withdraw
____________
2 [Insert date that is two years after Closing under the Purchase Agreement.]
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<PAGE> 47
any prior Option II Election Notice or (y) elect to
exercise Option II by means of a new Option II Election
Notice. Any portion of Option II that (1) remains
unexercised in the case of a partial exercise as provided
above or (2) represents shares of Common Stock as to
which an affirmative Option II Election Notice has been
given but as to which the related Qualified Transaction
has been abandoned, terminated or otherwise withdrawn,
shall in each case remain in full force and effect
herein.
(ii) Simultaneously with its delivery of the Transaction
Notice to the Holder and continually throughout the
Option Exercise Period, the Company shall promptly
provide the Holder with all material information relating
to the Qualified Transaction and the parties thereto,
including financial and operating data, business plans
and projections and any other material information that
the Holder may reasonably request.
(iii) If the Holder notifies the Company in the Option II
Election Notice that it does intend to exercise Option II
in connection with the proposed Qualified Transaction,
then upon execution by the Company of a binding agreement
for the proposed Qualified Transaction, the Holder shall
be deemed to have irrevocably exercised Option II,
subject to the satisfaction of the conditions set forth
in Section 4 and the provisions of Section 2(c)(i).
(iv) Closing of the purchase of Common Stock pursuant to
Option II (the "Option II Closing") shall occur
contemporaneously with the consummation of the Qualified
Transaction at a place and at a time that shall be
mutually agreed to by the parties hereto. The Option II
Closing shall be subject to the fulfillment of all
conditions to the Company's obligations to consummate the
Qualified Transaction, unless the Holder shall have
consented to the Company's waiver of any such condition.
(v) At the Option II Closing, the Company shall deliver
certificates representing the Option II Shares to the
Holder or its assignee against payment of the applicable
Exercise Price in cash by wire transfer of immediately
available funds to a bank account designated by the
Company.
(vi) In connection with any proposed Qualified Transaction as
to which a Transaction Notice and an affirmative Option
II Election Notice has been given, the Company shall use
reasonable efforts to accommodate Holder's reasonable
requests with respect to the timing, form, and structure
of such Qualified Transaction and the related Option II
Closing in order to achieve Holder's desired tax,
corporate and securities law treatment; provided, that no
action
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shall be required hereunder that in the good faith
judgment of the Company would adversely affect such
Qualified Transaction in any material respect.
(d) Extension of Termination Date. If on the Termination Date, the
Company is then engaged in active discussions with a party regarding a potential
Qualified Transaction, then the Termination Date shall be extended until the
earlier date of (i) the termination of such discussions without any Qualified
Transaction being proposed or (ii) the Company delivering a Transaction Notice.
3. Covenants.
(a) If applicable, the parties will file as soon as practicable all
filings that are required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 ("HSR Act") relating to the issuance of the Option I Shares or the
Option II Shares, respond as soon as practicable to all inquiries received from
the Federal Trade Commission or the Antitrust Division of the Department of
Justice for additional information or documentation, respond as soon as
practicable to all inquiries received from any other government agency in
connection with antitrust matters, and seek early termination of any waiting
period under the HSR Act.
(b) The Company shall use its best efforts to obtain all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any federal administrative agency or commission or other federal
governmental authority or instrumentality, if any, required in connection with
the issuance of the Option I Shares or Option II Shares, as the case may be,
hereunder.
(c) The Company will file with the Nasdaq Small Cap Market a
Notification Form for Listing of Additional Shares for an amount of shares of
Common Stock equal to at least the amount of the Option I Shares and the Option
II Shares and will use its reasonable best efforts to ensure that the Option I
Shares and Option II Shares are encompassed within its listing on the Nasdaq
Small Cap Market or such other exchange or market as the shares of Common Stock
may subsequently be listed.
(d) If necessary to effectuate the transactions contemplated by
this Agreement, Company shall prepare, file and prosecute any required
applications for the consents of the Federal Communications Commission ("FCC")
to the transactions contemplated herein (the "FCC Consents") and in connection
therewith request special temporary authorizations to permit the Closing to
occur prior to obtaining the FCC Consents.
4. Conditions to Closing.
(a) The obligation of Company to issue the Option I Shares or
Option II Shares, as applicable, to Holder hereunder is subject to the
conditions that
(i) all waiting periods, if any, under the HSR Act applicable
to the issuance of the Option I Shares or Option II Shares hereunder shall have
expired or been terminated and all consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any federal administrative
agency or commission or other federal governmental
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<PAGE> 49
authority or instrumentality, if any, required in connection with the issuance
of the Option I Shares or Option II Shares hereunder shall have been obtained or
made, as the case may be;
(ii) No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any U.S. federal or state governmental or regulatory
body, and no statute, rule, regulation or executive order shall have been
promulgated or enacted by any U.S. federal or state governmental authority which
restrains, enjoins or otherwise prohibits in any material respects the issuance
of the Option I Shares or the Option II Shares, as the case may be.
(iii) The representations and warranties of the Holder
contained in this Agreement (A) shall have been true and correct when made and
(B) in the case of representations and warranties that are qualified as to
materiality or material adverse effect, true and correct and (B) in all other
cases, true and correct in all material respects, in the case of clauses (A) and
(B), as of the Option I Closing date or the Option II Closing date, as the case
may be, with the same force and effect as though made on and as of such
applicable closing date.
(iv) If required, the parties shall have obtained all
necessary FCC Consents in a form and substance typical of consents customarily
issued in transactions of this nature; provided however, that if no petitions to
deny the applications for the FCC Consents have been filed with the FCC, and the
time period for doing so has passed, then this condition shall be satisfied if
the Company has obtained special temporary authorizations to permit the Closing
to occur prior to obtaining the FCC Consents.
(b) The obligations of Holder to purchase the Option I Shares or
Option II Shares, as applicable, from the Company hereunder is subject to the
conditions that:
(i) all waiting periods, if any, under the HSR Act applicable
to the issuance of the Option I Shares or the Option II Shares hereunder shall
have expired or been terminated and all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any federal
administrative agency or commission or other federal governmental authority or
instrumentality, if any, required in connection with the issuance of the Option
I Shares or Option II Shares hereunder shall have been obtained or made, as the
case may be;
(ii) No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any U.S. federal or state governmental or regulatory
body, and no statute, rule, regulation or executive order shall have been
promulgated or enacted by any U.S. federal or state governmental authority which
restrains, enjoins or otherwise prohibits in any material respects the issuance
of the Option I Shares or the Option II Shares, as the case may be.
(iii) The representations and warranties of the Company
contained in this Agreement (A) shall have been true and correct when made and
(B) in the case of representations and warranties that are qualified as to
materiality or material adverse effect, true and correct and (B) in all other
cases, true and correct in all material respects, in the case of clauses (A) and
(B), as of the Option I Closing date or the Option II Closing date, as the case
may be, with the same force and effect as though made on and as of such
applicable closing date.
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<PAGE> 50
(iv) If required, the parties shall have obtained all
necessary FCC Consents in a form and substance typical of consents customarily
issued in transactions of this nature; provided however, that if no petitions to
deny the applications for the FCC Consents have been filed with the FCC, and the
time period for doing so has passed, then this condition shall be satisfied if
the Company has obtained special temporary authorizations to permit the Closing
to occur prior to obtaining the FCC Consents.
5. Expenses. At any Closing, Company will pay all expenses that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Agreement.
6. Representations and Warranties of Company. The Company represents
and warrants to Holder as of the date hereof and as of the Option I Closing or
Option II Closing (unless another date or period of time is specifically stated
herein for a representation or warranty), as the case may be, as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company has
all requisite corporate power and authority to own and operate its business as
it currently is being conducted and to own and lease the properties and assets
owned or leased by it. The Company is licensed or qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed has not had and could not
reasonably be expected to have a material adverse effect. The Company has all
requisite corporate power and authority to enter into this Agreement and perform
its obligations hereunder, and has taken all action necessary to authorize the
execution, delivery and performance by it of this Agreement. No other corporate
or stockholder proceeding on the part of the Company is necessary for such
authorization, execution, delivery and performance.
(b) Company has taken all necessary corporate action to authorize
and reserve for issuance and to permit it to issue, upon exercise of the
Options, and at all times from the date hereof through the expiration of the
Options will have reserved, 20,833,333 authorized and unissued shares of Common
Stock, such amount being subject to adjustment as provided in Section 9, (and
the Company will take all necessary corporate action to authorize and reserve
for issuance all additional shares of Common Stock or other securities that may
be issued pursuant to Section 9 upon exercise), all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid, and non-assessable.
(c) Upon delivery of the Option I Shares or Option II Shares to
Holder upon the exercise of the applicable Option, the Option I Shares or Option
II Shares, as the case may be, shall be fully paid and non-assessable and shall
be acquired by Holder free and clear of all claims, liens, charges, encumbrances
and security agreements of any nature whatsoever (including without limitation
preemptive rights).
(d) Neither the execution and delivery of this Agreement, the
consummation by Company of the transactions contemplated hereby, nor the
compliance by Company with any
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of the provisions hereof will (i) conflict with, or result in a breach of, any
provision of its Certificate of Incorporation or By-laws, (ii) require any
permit, authorization, consent or approval of, or filing with, or notification
to (except for permits, authorizations, consents, approvals, filings or
notifications under the Securities Exchange Act of 1934 as amended (the
"Exchange Act"), the Securities Act of 1933, as amended (the "Securities Act"),
the HSR Act, the Communications Act of 1934, as amended (the "Communications
Act"), or state public utility or public service laws (if any)) any Governmental
Authority (as defined in the Purchase Agreement), (iii) conflict with, or result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or loss of any material right or benefit) under any
of the terms, conditions or provisions of any Company Third Party Contracts (as
defined in the Purchase Agreement), (iv) require any consent, authorization,
waiver or approval of any person other than a Governmental Authority, or (vi)
violate any order, writ, injunction, decree or law applicable to Company,
excluding from the foregoing clauses (ii)-(vi) such violations, breaches or
defaults which would not, individually or in the aggregate, have a material
adverse effect on Company and its subsidiaries, taken as a whole, or prevent
Company from consummating the transactions contemplated hereby.
(e) None of Company, any of its affiliates or anyone acting on its
or their behalf, has issued, sold, or offered any security of Company to any
person under circumstances that would cause the issuance and sale of Option I
Shares or Option II Shares, as contemplated by this Agreement, to be subject to
the registration requirements of the Securities Act as in effect on the date
hereof, and, assuming the representations and warranties of Holder contained in
Section 7(c) are true and correct, the issuance, sale and delivery of the Option
I Shares or Option II Shares hereunder would be exempt from the registration and
prospectus delivery requirements of the Securities Act, as in effect on the date
hereof (and Company shall not take any action which would cause the issuance,
sale and delivery of the Option I Shares or Option II Shares not to be exempt
from such requirements).
(7) Representations and Warranties of Holder. Holder represents and
warrants to Company as follows:
(a) Holder is a limited liability company duly organized, validly
existing under the laws of the State of Delaware and has all requisite power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Holder has duly and validly executed this
Agreement and, assuming the due authorization, execution and delivery hereof by
the Company, this Agreement constitutes a legal, valid and binding obligation of
Holder, enforceable against Holder in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) Neither the execution and delivery of this Agreement, the
consummation by Holder of the transactions contemplated hereby, nor the
compliance by Holder with any of the provisions hereof will (i) conflict with,
or result in a breach of, any provision of its
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organizational documents, (ii) require any permit, authorization, consent or
approval of, or filing with, or notification to (except for permits,
authorizations, consents, approvals or filings under the Exchange Act, the
Securities Act, the HSR Act, the Communications Act, or state public utility or
public service laws (if any)) with, or notification to, any Governmental
Authority, (iii) conflict with, or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any material document, material
agreement, or other material instrument to which Holder is a party or by which
Holder is bound, (iv) require any consent, authorization, waiver or approval of
any person other than a Governmental Authority, or (vi) violate any order, writ,
injunction, decree or law applicable to Holder, excluding from the foregoing
clauses (ii)-(vi) such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on Holder and
its subsidiaries, taken as a whole, or prevent Holder from consummating the
transactions contemplated hereby.
(c) Any Common Stock acquired pursuant to this Agreement will be
acquired for Holder's own account (or for accounts over which it exercises
investment authority), for investment purposes only, and will not be acquired
with a view to the public distribution thereof in violation of any applicable
provision of the Securities Act.
8. No Impairment. The Company shall not by any action including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Options, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not, directly or indirectly, increase the par
value of any shares of Common Stock receivable upon the exercise of the Options
above the amount payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this the Options,
and (c) use its commercially reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Options.
9. Adjustments Generally. The Exercise Price and the number of shares
of Common Stock (or other securities or property) issuable upon exercise of each
of the Options shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Section 9.
(a) Common Stock Reorganization. If the Company shall after the
date hereof subdivide its outstanding shares of Common Stock into a greater
number of shares or consolidate its outstanding shares of Common Stock into a
smaller number of shares (any such event being called a "Common Stock
Reorganization"), then (i) the Exercise Price shall be adjusted, effective
immediately after the record date at which the holders of shares of Common Stock
are determined for purposes of such Common Stock Reorganization, to a price
determined by
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multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date before giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (ii) the number of shares of Common Stock subject to
purchase upon exercise of each of the Options respectively shall be adjusted,
effective at such time, to a number determined by multiplying the number of
shares of Common Stock subject to purchase immediately before such Common Stock
Reorganization by a fraction, the numerator of which shall be the number of
shares outstanding after giving effect to such Common Stock Reorganization and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately before such Common Stock Reorganization.
(b) Common Stock Distribution.
(i) Subject to the last sentence of this paragraph, if the
Company shall after the date hereof issue or otherwise sell or distribute any
shares of Common Stock, otherwise than pursuant to a Common Stock Reorganization
(any such event, including any event described in paragraphs (ii) and (iii)
below, being herein called a "Common Stock Distribution"), if such Common Stock
Distribution shall be for a consideration per share less than the Fair Market
Value per share of outstanding Common Stock of the Company on the date of such
Common Stock Distribution, or on the first date of the announcement of such
Common Stock Distribution (whichever is less), then, effective upon such Common
Stock Distribution, the number of shares of Common Stock purchasable upon
exercise of each of the Options respectively shall be adjusted by multiplying
the number of shares of Common Stock subject to purchase upon exercise of each
of the Options by a fraction, the numerator of which shall be the total number
of shares of Common Stock outstanding (and issuable upon exercise or conversion
of outstanding options, warrants and convertible securities) immediately prior
to such Common Stock Distribution plus the number of shares of Common Stock
issued (or deemed to be issued pursuant to paragraphs (ii) and (iii) below) in
such Common Stock Distribution and the denominator of which shall be an amount
equal to the sum of (A) the number of shares of Common Stock outstanding (and
issuable upon exercise or conversion of outstanding options, warrants and
convertible securities) immediately prior to such Common Stock Distribution,
plus (B) the number of shares of Common Stock which the aggregate consideration,
if any, received by the Company (determined as provided below) for such Common
Stock Distribution would buy at the Fair Market Value thereof, as of the date
immediately prior to such Common Stock Distribution or as of the date
immediately prior to the date of announcement of such Common Stock Distribution
(whichever is less). In the event of any such adjustment, the exercise price for
each of the Options shall be adjusted to a number determined by dividing the
exercise price immediately prior to such Common Stock Distribution by the
fraction used for purposes of the aforementioned adjustment. The provisions of
this paragraph (i), including by operation of paragraph (ii) or (iii) below,
shall not operate to increase the Exercise Price or to reduce the number of
shares of Common Stock subject to purchase upon exercise of each of the Options.
(ii) If the Company shall after the date hereof issue, sell,
distribute or otherwise grant in any manner (whether directly or by assumption
in a merger or otherwise) any rights to subscribe for or to purchase, or any
warrants or options for the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such rights,
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warrants or options being herein called "Warrants" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Warrants or the rights to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Warrants or upon
conversion or exchange of such Convertible Securities (determined by dividing
(x) the aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Warrants, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Warrants, plus, in the case of Warrants to acquire Convertible
Securities the minimum aggregate amount of additional consideration, if any,
payable upon the issuance or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (y) the total maximum number of shares of
Common Stock issuable upon the exercise of such Warrants or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Warrants) shall be less than the Fair Market value per share of outstanding
Common Stock of the Company on the date of granting such Warrants or on the
first date of announcement thereof (whichever is less), then for purposes of
paragraph (i) above the total maximum number of shares of Common Stock issuable
upon the exercise of such Warrants or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of such
Warrants shall be deemed to have been issued as of the date of granting of such
Warrants and thereafter shall be deemed to be outstanding and the Company shall
be deemed to have received as consideration such price per share, determined as
provided above, therefor. Except as otherwise provided in paragraph (iv) below,
no additional adjustment to the number of shares of Common Stock purchasable
upon the exercise either of the Options or of the Exercise Price shall be made
upon the actual exercise of such Warrants or upon conversion or exchange of such
Convertible Securities.
(iii) If the Company shall after the date hereof issue, sell
or otherwise distribute or grant (whether directly or by assumption in a merger
or otherwise) any Convertible Securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (x) the aggregate amount received or receivable by the Company as
consideration for the issue, sale or distribution of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Fair Market
Value per share of outstanding Common Stock of the Company on the date of such
issue, sale or distribution or on the first date of announcement thereof
(whichever is less), then, for purposes of paragraph (i) above, the total
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued as of the
date of the issue, sale or distribution of such Convertible Securities and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (iv) below, no
additional adjustment to the number of shares of Common Stock purchasable upon
exercise of either of the Options or of the Exercise Price shall be made upon
the actual conversion or exchange of such Convertible Securities.
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(iv) If the purchase price provided for in any Warrant
referred to in paragraph (ii) above, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in paragraph (ii) or (iii) above, or the rate at which any Convertible
Securities referred to in paragraph (ii) or (iii) above are convertible into or
exchangeable for Common Stock shall change at any time (other than under or by
reason of provisions designed to protect against, and having the effect of
protecting against, dilution upon an event which results in a related adjustment
pursuant to this Section 9), then the number of shares of Common Stock
purchasable upon exercise each of the Options and the Exercise Price then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of each of the Options after such readjustment) to the number of shares
of Common Stock purchasable upon exercise of each of the Options and the
Exercise Price which would then be in effect had the adjustment made upon the
issue, sale, distribution or grant of such Warrants or Convertible Securities
been made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be; provided, however, that such readjustment
shall give effect to such change only with respect to such Warrants and
Convertible Securities as then remain outstanding. If, at any time after any
adjustment of the number of shares of Common Stock purchasable upon exercise of
each of the Options or the Exercise Price shall have been made pursuant to this
Section 9 on the basis of the issuance of any Warrants or Convertible Securities
or after any new adjustments to the number of shares of Common Stock purchasable
upon exercise of each of the Option or the Exercise Price shall have been made
pursuant to this Section 9, the right of conversion, exercise or exchange in
such Convertible Securities shall expire or terminate, and the right of
conversion, exercise or exchange in respect of a portion of such Warrants or
Convertible Securities shall not have been exercised, such previous adjustment
shall be rescinded and annulled. Thereupon, a recomputation shall be made of the
effect of such Warrants or Convertible Securities on the basis of treating the
number of shares of Common Stock, if any, theretofore actually issued or
issuable pursuant to the previous exercise of such right of conversion, exercise
or exchange as having been issued on the date or dates of such conversion,
exercise or exchange and for the consideration actually received and receivable
therefor, and treating any such Warrants or Convertible Securities which then
remain outstanding as having been granted or issued immediately after the time
of any such issuance for the consideration per share for which shares of Common
Stock are issuable under such Warrants or Convertible Securities; and, if and to
the extent called for by the foregoing provisions of this Section 9, on the
basis aforesaid, a new adjustment of the number of shares of Common Stock
purchasable upon exercise of each of the Options and the Exercise Price shall be
made, which new adjustment shall supersede (effective only with respect to any
exercise of each of the Options after such readjustment) the previous adjustment
so rescinded and annulled.
(v) If the Company shall after the date hereof pay a dividend
or make any other distribution upon any capital stock of the Company payable in
Common Stock, Warrants or Convertible Securities, then, for purposes of
paragraph (i) above, such Common Stock, Warrants or Convertible Securities, as
the case may be, shall be deemed to have been issued or sold without
consideration.
(vi) If any shares of Common Stock, Warrants or Convertible
Securities shall be issued, sold or distributed for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, after deduction therefrom of any expenses incurred and any
underwriting commissions or concessions paid or allowed by the
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<PAGE> 56
Company in connection therewith. If any shares of Common Stock, Warrants or
Convertible Securities shall be issued, sold or distributed for property or
assets other than cash, then the amount of such property and assets shall be
deemed to be the Fair Market Value of such property and assets after deduction
of any expenses incurred or allowed by the Company in connection therewith. If
any shares of Common Stock, Warrants or Convertible Securities shall be issued
in connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market Value
of such portion of the assets and business of the nonsurviving corporation as
shall be attributable to such Common Stock, Warrants or Convertible Securities,
as the case may be.
(vii) If the Company shall take a record of the holders of the
Common Stock for the purpose of entitling them to receive a dividend or other
distribution payable in Common Stock, Warrants or Convertible Securities or to
subscribe for or purchase Common Stock, Warrants or Convertible Securities, then
such record date shall be deemed to be the date of the issue, sale, distribution
or grant of the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(viii) For purposes of determining whether any adjustment is
required pursuant to this Section 9, any security of the Company having rights
substantially equivalent to the Common Stock as to dividends or upon
liquidation, dissolution or winding up of the Company shall be treated as if
such security were Common Stock.
(c) Dividends. If the Company shall after the date hereof issue or
distribute to all or substantially all holders of shares of Common Stock
evidences of indebtedness, any other securities of the Company or any cash,
property or other assets, and if such issuance or distribution does not
constitute a Common Stock Reorganization or a Common Stock Distribution (any
such nonexcluded event being herein called a "Dividend"), then (i) the number of
shares of Common Stock subject to purchase upon exercise of each of the Options
shall be increased (but not decreased), effective immediately after the record
date at which the holders of shares of Common Stock are determined for purposes
of such Dividend, to a number determined by multiplying the number of shares of
Common Stock subject to purchase immediately before such Dividend by a fraction,
the numerator of which shall be the Fair Market Value per share of outstanding
Common Stock on such record date and the denominator of which shall be the Fair
Market Value per share of outstanding Common Stock of the Company on such record
date less the then Fair Market Value of the evidences of indebtedness,
securities, cash, or property or other assets issued or distributed in such
Dividend with respect to one share of Common Stock, and (ii) the Exercise Price
shall be decreased (but not increased) to a price determined by multiplying the
Exercise Price then in effect by a fraction, the numerator of which shall be the
number of shares of Common Stock subject to purchase upon exercise of the
applicable Option immediately before such Dividend and the denominator of which
shall be the number of shares of Common Stock subject to purchase upon exercise
of the applicable Option immediately after such Dividend. If after the date
hereof the Company repurchases shares of Common Stock for a per share
consideration which exceeds the Fair Market Value (as calculated immediately
prior to such repurchase), then the number of shares of Common Stock purchasable
upon exercise of the applicable Option and the Exercise Price shall be adjusted
in accordance with the foregoing provisions, as if, in lieu of such repurchases,
the Company had (x) distributed a Dividend having
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<PAGE> 57
a Fair Market Value equal to the Fair Market Value of all property and cash
expended in the repurchases, and (y) effected a reverse split of the Common
Stock in the proportion required to reduce the number of shares of Common Stock
outstanding from (1) the number of such shares outstanding immediately before
such first repurchase to (2) the number of such shares outstanding immediately
following all the repurchases.
(d) Capital Reorganization. If after the date hereof there shall be
any consolidation or merger to which the Company is a party, other than a
consolidation or a merger in which the Company is the continuing corporation and
which does not result in any reclassification of, or change (other than a Common
Stock Reorganization or a change in par value), in, outstanding shares of Common
Stock, or any sale or conveyance of the property of the Company as an entirety
or substantially as an entirety (any such event being called a "Capital
Reorganization"), then, effective upon the effective date of such Capital
Reorganization, the Holder shall have the right to purchase, upon exercise of
each of the Options, the kind and amount of shares of stock and other securities
and property (including cash) which the Holder would have owned or have been
entitled to receive after such Capital Reorganization if each of the Options had
been exercised immediately prior to such Capital Reorganization.
(e) Certain Other Events. If any event occurs after the date hereof
as to which the foregoing provisions of this Section 9 are not strictly
applicable or, if strictly applicable, would not, in the good faith judgment of
the Board of Directors of the Company, fairly protect the rights of the Holder
in accordance with the essential intent and principles of this Agreement, then
such Board shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board, to protect such purchase
rights as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Exercise Price or decreasing the number of shares of Common
Stock subject to purchase upon exercise of each of the Options, or otherwise
adversely affect the rights of the Holder hereunder.
(f) Adjustment Rules.
(i) Any adjustments pursuant to this Section 9 shall be made
successively whenever an event referred to herein shall occur.
(ii) If the Company shall set a record date to determine the
holders of shares of Common Stock for purposes of a Common Stock Reorganization,
Common Stock Distribution, Dividend or Capital Reorganization, and shall legally
abandon such action prior to effecting such action, then no adjustment shall be
made pursuant to this Section 9 in respect of such action.
(iii) No adjustment in the amount of the Exercise Price shall
be made hereunder unless such adjustment increases or decreases such amount or
price by one cent or more, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall serve to
adjust such Exercise Price by one cent or more.
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<PAGE> 58
(iv) No adjustment in the Exercise Price shall be made
hereunder if such adjustment would reduce the exercise price to an amount below
par value of the Common Stock, which par value shall initially be $.01 per share
of Common Stock.
(v) In computing adjustments under this Section 9 or the number
of shares that may be purchased upon exercise of either of the Options,
fractional interests in Common Stock shall be taken into account to the nearest
1/10th of a share, and adjustments in the Exercise Price shall be made to the
nearest $.01.
(vi) No adjustment shall be made under this Section 9, (A) upon
the exercise of any warrants, options or convertible securities (other than the
Series C Preferred Stock) issued and outstanding on the date hereof in
accordance with the terms of such securities as of such date; (B) upon the grant
or exercise of any stock or options which may hereafter be granted or exercised
under any employee or director benefit plan of the Company now existing or to be
implemented in the future, so long as the issuance of such stock or options is
approved by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for the purpose; (C) upon the issuance of the Common Stock
or Options in accordance with terms of the Purchase Agreement; (D) upon the
exercise of the Options; (E) the issuance of up to 13,250,000 shares of Common
Stock (or common-stock equivalent preferred stock that is convertible into
common stock) in connection with the exchange or conversion of the Series C
Preferred Stock; (F) the issuance contemporaneously with the closing under the
Purchase Agreement of up to an amount of shares of Common Stock equal to the
product of (1) two multiplied by (2) the number of shares of Common Stock
purchased by Holder pursuant to the Purchase Agreement, at a purchase price of
$2.19 per share; or (g) the issuance of the shares of Common Stock purchased by
Holder pursuant to the Purchase Agreement.
(g) Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Section 9, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the Holder is entitled to
receive upon exercise of the Options.
(h) Notice of Adjustment. Not less than 10 nor more than 30 days
prior to the record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment pursuant to this
Section 9, the Company shall give notice to the Holder of such event, describing
such event in reasonable detail and specifying the record date or effective
date, as the case may be, and, if determinable, the required adjustment and the
computation thereof. If the required adjustment is not determinable at the time
of such notice, the Company shall give notice to the Holder of such adjustment
and computation promptly after such adjustment becomes determinable.
(10) Contest Rights. Upon each determination of Fair Market Value
hereunder (other than a determination relating solely to setting the value of
fractional shares), the Company shall promptly give notice thereof to the
Holder, setting forth in reasonable detail the calculation of
14
<PAGE> 59
such Fair Market Value and the method and basis of determination
thereof, as the case may be. If the Holder shall disagree with such
determination and shall, by notice to the Company given within 15 days
after the Company's notice of such determination, elect to dispute such
determination, such dispute shall be resolved in accordance with the
Appraisal Procedure.
11. Legends.
Upon issuance to Holder of any Option I Shares or Option II Shares upon
purchase thereof pursuant to this Agreement, such Option I Shares or Option II
Share shall be endorsed with a restrictive legend which shall read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR
BLUE SKY LAWS, AND MAY BE REOFFERED, SOLD, OR
TRANSFERRED ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
12. Definitions.
The following terms, as used in this Agreement, have the following
respective meanings:
"Appraisal Procedure" means a procedure whereby two independent
appraisers, one chosen by the Company and one by the Holder, shall mutually
agree upon the determinations then the subject of appraisal. Each party shall
deliver a notice to the other appointing its appraiser within 15 days after the
Appraisal Procedure is invoked. If within 30 days after appointment of the two
appraisers they are unable to agree upon the amount in question, a third
independent appraiser shall be chosen within 10 days thereafter by the mutual
consent of such first two appraisers or, if such first two appraisers fail to
agree upon the appointment of a third appraiser, such appointment shall be made
by the American Arbitration Association, or any organization successor thereto,
from a panel of arbitrators having experience in the appraisal of the subject
matter to be appraised. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. The determination of the appraisers or appraiser appointed hereunder
shall be binding and conclusive on the Company and the Holder. The costs of
conducting any Appraisal Procedure shall be borne by the Holder; provided
however, the fees and expenses of the Company of the Holder, of the appraisers
appointed hereunder and of the Appraisal Procedure shall be borne by the Company
if such Appraisal Procedure shall result in a determination that is disparate by
2% or more to the benefit of Holder from the Company's initial determination.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Closing Price" with respect to any security on any day means (a) if
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price
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<PAGE> 60
regular way or, if no such reported sale occurs on such day, the average of the
closing bid and asked prices regular way on such day, in each case as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such
class of security is listed or admitted to trading, or (b) if such security is
not listed or admitted to trading on any national securities exchange, the last
quoted sales price, or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market on such day as reported by NASDAQ or
any comparable system then in use or, if not so reported, as reported by any New
York Stock Exchange member firm reasonably selected by the Company for such
purpose.
"Exercise Price" means respectively as to each of the Options, the
exercise price respectively specified herein for each of the Options as such
exercise price may be adjusted from time to time as provided herein.
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board of Directors of
the Company, provided, however, that the Fair Market Value of any security for
which a Closing Price is available shall be the Market Price of such security.
"Market Price", with respect to any security on any day means the
average of the daily Closing-Prices of a share or unit of such security for the
10 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of (A) a dividend or distribution of Common
Stock, or (B) any subdivision, combination or reclassification of Common Stock
and prior to the expiration of 10 Business Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
13. No Rights or Liabilities as Stockholder. Nothing contained in this
Agreement shall be construed as conferring upon the Holder hereof any rights as
a stockholder of the Company or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
14. Specific Enforcement. The parties hereto agree that the remedy at
law for any breach of this Agreement may be inadequate, and that as between the
Company and the Holder, any party by whom this Agreement is enforceable shall be
entitled to specific performance in addition to any other appropriate relief or
remedy. Such party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement as between the
Company and the Holder, or prevent any violation hereof, and, to the extent
permitted by
16
<PAGE> 61
applicable law as between the Company and the Holder, each party waives any
objection to the imposition of such relief.
15. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
16. Amendment. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
17. Notices. All notices which are permitted or required under this
Agreement shall be in writing and shall be deemed given (a) when delivered
personally, (b) if by fax upon transmission with confirmation of receipt by the
receiving party's facsimile terminal, (c) if sent by documented overnight
delivery service on the date delivered or (d) if sent by mail, five (5) business
days after being mailed by registered or certified mail, postage prepaid,
addressed as follows, or to such other person as may be designated by notice to
the other party:
If to Holder:
HMTF Bridge MC I, LLC
c/o Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, NY 10019
Attn: Michael Levitt
Telephone: (212) 424-1400
Fax: (212) 424-1450
with a copy (which shall not constitute notice) to:
Vinson & Elkins L.L.P.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Attn: Eric S. Shube
Telephone: (917) 206-8005
Fax: (917) 206-8100
If to the Company:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, VA 22306
Attention: Vincent D. Kelly, Chief Financial Officer and Treasurer
Fax: (703) 768-9625
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<PAGE> 62
with copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Thomas W. White
Fax: (202) 663-6363
18. Entire Agreement. This Agreement (together with the Purchase
Agreement and any other documents and instruments referred to herein)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, between the parties, with respect to the
subject matter hereof.
19. Successors and Assigns. This Agreement shall not be assigned, by
operation of law or otherwise, without the prior written consent of the other
party hereto, except that the Holder may assign its rights hereunder, in whole
or in part, to an affiliate. This Agreement will be binding upon, inure to the
benefit of and be enforceable by each party and such party's respective heirs,
beneficiaries, executors, representatives and permitted assigns.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
21. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to conflicts
of law).
22. Capitalized Terms. Capitalized Terms used herein but not defined
shall have the meanings set forth in the Purchase Agreement.
[Signature Page Follows]
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<PAGE> 63
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto on the day and year first written above.
METROCALL, INC.
By:_____________________________________
Name: ___________________________
Title: ___________________________
HMTF BRIDGE MC I, LLC
By:_____________________________________
Name: ___________________________
Title: ___________________________
<PAGE> 1
Exhibit 10.4
COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
AETHER SYSTEMS, INC.
AND
METROCALL, INC.
DATED AS OF FEBRUARY 2, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
COMMON STOCK PURCHASE AGREEMENT...................................................................................1
ARTICLE 1 ISSUANCE AND SALE OF COMMON STOCK; THE CLOSING..........................................................1
1.1 ISSUANCE AND SALE OF COMMON STOCK...............................................................1
1.2 THE CLOSING.....................................................................................1
1.3 TIME AND PLACE OF CLOSING.......................................................................1
1.4 TRANSACTIONS AT THE CLOSING.....................................................................1
ARTICLE 2 REPRESENTATION AND WARRANTIES...........................................................................2
2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................................................2
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................3
ARTICLE 3 COVENANTS...............................................................................................7
3.1 ANTITRUST LAWS..................................................................................7
3.2 LISTING OF ADDITIONAL SHARES....................................................................7
3.3 LIMITATIONS ON TRANSFER.........................................................................7
3.4 OTHER LIMITATIONS ON PURCHASER..................................................................8
3.5 Access to Books and Records.....................................................................9
3.6 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS...............................................9
3.7 COMPLIANCE WITH CONDITIONS; REASONABLE BEST EFFORTS.............................................9
3.8 LEGENDS........................................................................................10
3.9 BOARD REPRESENTATIVE...........................................................................10
3.10 INCISCENT, INC.................................................................................10
3.11 FCC APPLICATIONS...............................................................................10
ARTICLE 4 CONDITIONS PRECEDENT...................................................................................10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES.................................................10
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.............................................11
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER...........................................11
4.4 WAIVER OF CONDITIONS...........................................................................13
ARTICLE 5........................................................................................................13
5.1 SURVIVAL OF REPRESENTATIONS, ETC...............................................................13
5.2 INDEMNIFICATION BY COMPANY.....................................................................13
5.3 INDEMNIFICATION BY PURCHASER...................................................................13
5.4 LIMITATIONS ON LIABILITY.......................................................................14
5.5 CLAIMS FOR INDEMNIFICATION.....................................................................14
5.6 DEFENSE BY INDEMNIFYING PARTY..................................................................14
ARTICLE 6 TERMINATION AND DEFAULT................................................................................15
6.1 GENERAL........................................................................................15
6.2 PROCEDURE UPON TERMINATION.....................................................................15
6.3 EFFECT OF TERMINATION..........................................................................15
ARTICLE 7 MISCELLANEOUS..........................................................................................15
7.1 BROKERS........................................................................................15
7.2 NOTICES........................................................................................16
7.3 FEES AND EXPENSES..............................................................................16
7.4 ASSIGNMENT.....................................................................................17
7.5 COUNTERPARTS...................................................................................17
7.6 ENTIRE AGREEMENT...............................................................................17
7.7 PUBLIC ANNOUNCEMENTS...........................................................................17
7.8 GOVERNING LAW..................................................................................17
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.9 HEADINGS.......................................................................................18
7.10 SEVERABILITY...................................................................................18
7.11 MODIFICATION AND AMENDMENT.....................................................................18
7.12 WAIVER.........................................................................................18
7.13 PARTIES OBLIGATED AND BENEFITED................................................................18
7.14 ACTIONS........................................................................................18
7.15 TERMS..........................................................................................18
</TABLE>
EXHIBIT
EXHIBIT A.........REGISTRATION RIGHTS AGREEMENT
SCHEDULES
SCHEDULE 2.2.4....CAPITALIZATION
SCHEDULE 2.2.5....UNDISCLOSED MATERIAL LIABILITIES
SCHEDULE 2.2.6....LITIGATION
SCHEDULE 2.2.13...BROKERS
SCHEDULE 3.10.....INCISCENT SUMMARY OF TERMS, DATED FEBRUARY 2, 2000
iii
<PAGE> 5
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 2, 2000, is entered into by and between AETHER SYSTEMS, INC., a
Delaware corporation ("Purchaser") and METROCALL, INC., a Delaware corporation
(the "Company").
RECITALS
Purchaser desires to purchase, and the Company desires to issue and
sell, shares of common stock, $0.01 par value per share, of the Company (the
"Common Stock"), upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, and intending
to be legally bound, Purchaser and the Company hereby agree as follows:
ARTICLE 1
ISSUANCE AND SALE OF COMMON STOCK; THE CLOSING
1.1 ISSUANCE AND SALE OF COMMON STOCK. Upon the terms and subject to the
conditions set forth in this Agreement, the Purchaser agrees to purchase shares
of Common Stock (the "Shares") equal to the lesser of (a) 7,766,769 and (b) 9.9%
of the issued and outstanding shares of Common Stock of the Company, after
giving effect to any sales or other issuances of Common Stock on or before the
Closing Date. The purchase price for the Shares will be $2.19 per share in cash.
1.2 THE CLOSING. Subject to the satisfaction or waiver of the conditions set
forth in Article 4, unless the parties otherwise agree, the closing (the
"Closing") shall occur on the fourth business day after (i) the expiration of
the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (ii) the Federal Communications
Commission ("FCC") has (x) granted any required consent to the transactions
contemplated by this Agreement (the "FCC Consents") or (y) issued special
temporary authorizations to permit the Closing to occur prior to obtaining the
FCC Consents. The "Closing Date" shall be the date the Closing occurs.
1.3 TIME AND PLACE OF CLOSING. The Closing shall take place at the offices of
Wilmer, Cutler & Pickering, 2445 M Street, N.W., Washington, D.C. 20037 at 10:00
a.m., Washington, D.C. time, on the Closing Date or at such other place agreed
to by the parties.
1.4 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the terms and
conditions of this Agreement
(a) the Company shall deliver to the Purchaser a certificate representing the
Shares being purchased thereby against payment of the purchase price therefor by
wire transfer to the Company's bank account.
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<PAGE> 6
(b) The Purchaser shall deliver to the Company an irrevocable proxy, which shall
be coupled with an interest, pursuant to which all Shares shall be voted for the
nominees of the Company's Board of Directors for election to the Board for a
period of 12 months after the Closing Date. The irrevocable proxy shall be
binding on any transferee of the Shares.
ARTICLE 2
REPRESENTATION AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser represents and
warrants to the Company, as of the date hereof and as of the Closing Date
(unless another date or period of time is specifically stated herein for a
representation or warranty), as follows:
2.1.1 Authorization. The Purchaser has full power and authority to enter into
this Agreement and the other agreements contemplated hereby or referred to
herein (the "Other Transaction Documents"). This Agreement constitutes the valid
and legally binding obligation of the Purchaser, enforceable in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors' rights generally, and as limited
by laws relating to the availability of a specific performance, injunctive
relief, or other equitable remedies.
2.1.2 Purchase Entirely for Own Account. The Shares to be acquired by the
Purchaser will be acquired for investment for the Purchaser's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and the Purchaser has no present intention of selling, granting
any participation in, or otherwise distributing the same. The Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Shares. The Purchaser has not been formed for
the specific purpose of acquiring the Shares.
2.1.3 Restricted Securities. The Purchaser understands that the Shares have not
been, and will not be, registered under the Securities Act of 1993, as amended
(the "Securities Act"), by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein. The Purchaser understands that the Shares
are "restricted securities" under applicable U.S. federal and state securities
laws and that, pursuant to these laws, the Purchaser must hold the Shares
indefinitely unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. The Purchaser
acknowledges that the Company has no obligation to register or qualify the
Shares for resale except as set forth in the Registration Rights Agreement. The
Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Shares, and on requirements relating to the Company which are outside of
the Purchaser's control, and which the Company is under no obligation and may
not be able to satisfy.
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2.1.4 Legends. The Purchaser understands that the certificates representing the
Shares may bear one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) Any legend required by the Blue Sky laws of
any state to the extent such laws are applicable to the shares represented by
the certificate so legended.
2.1.5 Accredited Investor. The Purchaser is (i) an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act or
(ii) is a sophisticated investor, experienced in investing in securities of
emerging growth companies and acknowledges that the Purchaser is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Shares.
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to Purchaser, as of the date hereof and as of the Closing Date (unless
another date or period of time is specifically stated herein for a
representation or warranty), as follows:
2.2.1 Corporate Organization. The Company and its subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of their
respective jurisdiction of organization. Each of the Company and its
subsidiaries has all requisite corporate power and authority to own and operate
its respective business as it is currently is being conducted and to own and
lease the properties and assets owned or leased by it. Each of the Company and
its subsidiaries is licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of its respective business makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed has not had and could not
reasonably be expected to have a material adverse effect on the business,
results of operations, properties, financial condition, assets and liabilities
of the Company and its subsidiaries, taken as a whole ("Material Adverse
Effect"). The Company has all requisite corporate power and authority to enter
into this Agreement and the other Transaction Documents and perform its
obligations hereunder and thereunder.
2.2.2 Authorization and Validity of Agreement. The execution, delivery and
performance by the Company of this Agreement, the Other Transaction Documents
and any other certificates, documents and instruments contemplated hereby or
referred to herein, and the consummation by it of the transactions contemplated
hereby have been duly authorized by all
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necessary corporate action of the Company. The Purchase and Sale of the Shares
as contemplated herein has been approved by the Company's Board of Directors.
This Agreement has been duly executed and delivered by the Company and, assuming
the due authorization, execution, and delivery hereof by Purchaser, is a legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as and to the extent such enforceability may
be subject to bankruptcy or similar laws affecting creditors rights and general
equitable principles.
2.2.3 No Conflicts. The execution, delivery and performance by the Company of
this Agreement, the consummation by the Company of the transactions contemplated
hereby, and the fulfillment by the Company of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, the provisions of the
certificate of incorporation or bylaws of the Company;
(b) conflict with, or result in a default (or would constitute a default but for
any requirement of notice or lapse of time or both) under, or require notice
under, any material document, material agreement or other material instrument to
which the Company is a party or by which the Company is bound (the "Company
Third Party Contracts") or, require any third party consent, waiver or approval
in order that any Company Third Party Contract remain in effect without material
modification after the Closing Date and without giving rise to any right to
termination, cancellation, acceleration or loss of any material right or
benefit;
(c) result in the creation or imposition of any charge, claim, judgment, lease,
liability, mortgage, lien, pledge, restriction, security interest, tax lien, or
encumbrance on the Company's assets or properties pursuant to all laws, rules
regulations, writs, injunctions, decrees, and orders (including any award,
decision, judgment, injunction, ruling, subpoena, or verdict entered, issued,
made or tendered by any court, administrative agency, or other Governmental
Authority or by an arbitrator) applicable to the Company, as applicable, or to
the ownership or operation of its respective business, assets or property
("Applicable Law"); or
(d) violate any law, order, judgment, rule, regulation, decree or ordinance to
which the Company is subject or bound.
2.2.4 Capital Stock of the Company. The authorized capital stock of the Company
consists solely of 200,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock, par value $.01 per share ("Preferred Stock"). As of January 26,
2000, 42,103,017 shares of Common Stock were issued and outstanding. As of
January 26, 2000, 249,895 shares of Preferred Stock were issued and outstanding,
of which 239,517 shares were issued and outstanding shares of Series A
Convertible Preferred Stock ("Series A Preferred"), par value $.01 per share,
and of which 10,378 shares were issued and outstanding shares of Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred").
All of the issued and outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and nonassessable. Except as set
forth in Schedule 2.2.4, there are (i) no outstanding options, warrants or other
rights (whether or not contingent) to subscribe for or purchase or otherwise
acquire any issued or unissued shares of capital stock (or securities directly
or indirectly convertible into or exchangeable or exercisable for shares of
capital stock)
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of the Company, (ii) no restrictions upon, or agreements or understandings of
the Company or any subsidiary, or to the knowledge of the Company, or
understandings of any other person, with respect to, the voting or transfer of
any shares of capital stock of the Company or any subsidiary and (iii) no
outstanding contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries. Company is the sole beneficial owner of all
the issued and outstanding capital stock of its subsidiaries.
2.2.5 Financial Statements and Reports. Since January 1, 1997, the Company has
filed all reports, registration statements and other filings, together with any
amendments or supplements required to be made with respect thereto, that it has
been required to file with the SEC under the Securities Act and the Exchange Act
(the "SEC Filings"). The SEC Filings were prepared and filed in accordance with
the rules and regulations of the SEC. As of their respective dates, the SEC
Filings did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company (including any related
notes or schedules) included in the SEC Filings were prepared in accordance with
generally accepted accounting principles in the United States, as in effect from
time to time applied on a consistent basis ("GAAP") (except as otherwise noted
in such financial statements) and present fairly in all material respects the
consolidated financial condition, results of operations and cash flows of the
Company as of the dates thereof and for the periods indicated, subject, in the
case of interim financial statements, to normal year end audit adjustments.
Except as set forth or reflected in the SEC Filings filed subsequent to July 1,
1999 or in Schedule 2.2.5, the Company does not have any liabilities or
obligations of any nature whatsoever (whether accrued, absolute, contingent, or
otherwise) that individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
2.2.6 Litigation. Schedule 2.2.6 sets forth, as of November 3, 1999, each claim,
action, suit, proceeding or investigation pending against the Company or any of
its subsidiaries by or before any Governmental Authority and each outstanding
order, writ, injunction or decree to which the Company or any subsidiary is
subject. There is no claim, action, suit, proceeding or investigation pending
or, to the Company's knowledge, currently threatened against or affecting the
Company, its properties, assets or business, that questions the validity of this
Agreement or the right of the Company to enter into it, or to consummate the
transactions contemplated hereby or thereby, or that could reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect or that seeks to materially alter or materially delay the transactions
contemplated hereby.
2.2.7 Validity of Securities. At Closing, the Shares to be issued to Purchaser
will be duly and validly authorized and issued, fully paid and nonassessable,
free and clear of any preemptive rights or Liens. Based in part on the
representations of the Purchaser in Section 2.1, the issuance and sale of the
Shares pursuant to this agreement is exempt from registration under the
Securities Act and does not otherwise violate Applicable Law
2.2.8 Absence of Material Adverse Change. Since September 30, 1999 to February
2, 2000, there has not been any material adverse change in the consolidated
financial
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condition or consolidated results of operations ("Material Adverse
Change") with respect to the Company.
2.2.9 Government Approvals. Except for (i) the filings by the Company or
Purchaser, if any, required by the HSR Act; (ii) the filings by the Company, if
any, required by the FCC and (iii) applicable filings, if any, required by
applicable federal and state securities laws, in each case, which shall be made
(or are not required to be made) on or prior to the Closing Date, no consent,
authorization or order of, or filing or registration with, any Governmental
Authority or other Person is required to be obtained or made by the Company for
the execution, delivery and performance of this Agreement, or for the execution,
delivery and performance by the Company of the Other Transaction Documents,
except where the failure to obtain such consents, authorizations or orders, or
make such filings or registrations, would not individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of the
Company to consummate the transactions contemplated hereby. "Governmental
Authority" means (i) any foreign, federal, state or local court or governmental
or regulatory agency or authority, (ii) any arbitration board, tribunal or
mediator and (iii) any national stock exchange or SEC recognized trading market
on which securities issued by the Company or any of the subsidiaries are listed
or quoted.
2.2.10 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in any document, certificate or
schedule delivered or to be delivered by or on behalf of the Company pursuant to
this Agreement or in connection with the consummation of the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it as or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
2.2.11 Permit and Licenses. The Company and its subsidiaries have obtained all
governmental permits, licenses, franchises and authorizations required for the
Company and its subsidiaries to conduct their respective businesses as currently
conducted, except for those of which the failure to obtain would not have a
Material Adverse Effect with respect to the Company.
2.2.12 Intellectual Property, etc. The Company owns or is licensed or otherwise
has the right to use, without payment to any other Person all patents, patent
applications, trademarks, mask works, service marks and copyrights
("Intellectual Property") used in or necessary for the Company's business, as
presently conducted and as proposed to be conducted. The Company's ownership
and/or use of Intellectual Property in its business, as presently conducted,
does not conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or result in any
loss of a material benefit under or the creation of any Lien in or upon any of
the properties or assets of the Company under, any contract between the Company
and any Person or any other intellectual property rights of any other Person,
except for any such conflict, violation, default, right of termination,
cancellation, acceleration, loss of material benefit or creation of any Lien
which would not have a Material Advise Effect with respect to the Company. The
Company has not received any communications alleging that the Company
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has violated or, by conducting its business, would infringe upon the
intellectual property rights of any other Person. The Company is not aware of
any infringements or misappropriation by others of any of its Intellectual
Property.
2.2.13 Brokers. Except as set forth in Schedule 2.2.13, no broker, finder, agent
or similar intermediary has acted on behalf of the Company in connection with
this Agreement or the transactions contemplated hereby, and there are no
brokerage commissions, finder's fees or similar fees or commissions payable by
the Company in connection with this Agreement or the transactions contemplated
hereby.
ARTICLE 3
COVENANTS
3.1 ANTITRUST LAWS. Purchaser will, or will cause its "ultimate parent" to file
as soon as practicable all filings that are required under the HSR Act, to
respond as soon as practicable to all inquiries received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for additional
information or documentation, to respond as soon as practicable to all inquiries
received from any other government agency in connection with antitrust matters,
and to seek early termination of any waiting period under the HSR Act.
3.2 LISTING OF ADDITIONAL SHARES. The Company will file with the Nasdaq Small
Cap Market a Notification Form for Listing of Additional Shares for an amount of
shares of Common Stock equal to at least the amount of the Shares.
3.3 LIMITATIONS ON TRANSFER. Notwithstanding any other provision of this
Agreement, for a period of 12 months after the Closing Date, Purchaser will not
directly or indirectly sell, transfer or otherwise dispose of any of the Shares,
other than to an affiliate of the Purchaser or pursuant to a pledge to an
unaffiliated third-party lender in connection with a bona fide lending
transaction or a foreclosure or similar sale in connection therewith, unless the
Purchaser shall have first delivered to the Company a written offer to resell
such Shares (the "Offered Shares") for cash at the current market price.
"Current market price" for this purpose shall mean the average closing trading
price per share of the Common Stock on the Nasdaq Small Cap Market (or such
other exchange or quotation service on which the Common Stock shall then be
traded or quoted) for the 10 trading days immediately prior to the written
offer. Upon receipt of the written offer, the Company will have five business
days within which to accept the offer, and shall be required to make settlement
of the purchase within five business days after the date on which it accepts the
offer. If the right given to the Company in this section shall not have been
exercised as to the Offered Shares as set forth above, the Purchaser shall have
the right, at any time within three months after the expiration of such five
business day period, to dispose of any or all of the Offered Shares. If by the
end of such three-month period, provided such three-month period ends prior to
the expiration of the 12-month period referred to in the first sentence of this
section, the Purchaser has not sold or otherwise disposed of all of the Offered
Shares, the remaining Offered Shares shall not be sold by the Purchaser except
after compliance again with the provisions of this Section 3.5. Nothing in this
section shall prevent the Purchaser from selling any Shares pursuant to a tender
offer, merger, sale of all or substantially all the Company's assets or any
similar transaction that offers each holder of
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Common Stock (other than, if applicable, the person proposing such transaction)
the opportunity to dispose of Common Stock for the same consideration or
otherwise contemplates the acquisition of Common Stock beneficially owned by
each such holder for the same consideration.
3.4 OTHER LIMITATIONS ON PURCHASER. For a period of 24 months after the Closing
Date, the Purchaser agrees that, unless it is specifically invited or otherwise
permitted in writing to do so by the Company, it will not, and will cause each
of its affiliates not to, directly or indirectly:
(a) in any way acquire or agree to acquire beneficial ownership of any
securities or any direct or indirect rights or options to acquire beneficial
ownership of any securities of the Company, except by way of stock dividends,
stock splits or distributions by the Company made available to holders of Common
Stock generally, including, without limitation, pursuant to a preferred stock
purchase rights plan of the Company or pursuant to any similar plan or
distribution, if a result thereof Purchaser or its affiliates would become the
beneficial owner of more than 15% of the issued and outstanding Common Stock of
the Company;
(b) form, join or in any way participate in a "group" (within the meaning of
Section 13(d) (3) of the Exchange Act, for the purpose of making any proposal
for the acquisition of securities of the Company or for or with respect to any
merger, consolidation or business combination involving the Company or its
affiliates or for or with respect to any purchase of a substantial portion of
the assets of the Company or its affiliates, whether or not any parties other
than such Purchaser and its affiliates are involved and whether or not such
proposal might require the making of a public announcement by the Company;
provided, however, that the Purchaser shall be permitted to approach the Board
of Directors of the Company, directly or indirectly through its executive
officers or investment bankers, for purposes of obtaining a waiver of its
obligations and commitments under this clause (b);
(c) make, or in any way participate in, any "solicitation" of "proxies" to vote
any voting securities of the Company or become a "participant" in any "election
contest" (as such terms are defined or used in Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such
Regulation is currently in effect), provided that nothing herein restricts the
ability of the Purchaser to vote the Shares pursuant to proxies distributed by
the Company;
(d) propose any matter for submission to a vote of shareholders of the Company;
(e) grant any proxy with respect to any voting securities of the Company to any
person not approved by the Company;
(f) deposit any voting securities of the Company in a voting trust or subject
any such securities to any arrangement or agreement with respect to the voting
of such securities or other agreement having similar effect;
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(g) take any action which would be reasonably likely to require the Company to
make a public announcement regarding any of the matters specified in clauses
(a)-(g) of this Section 3.4;
(h) enter into any negotiations, arrangements or understandings with any third
party with respect to any of the foregoing, or any discussions designed to
advise, assist or encourage any third party in connection with any of the
foregoing;
(i) seek to influence or influence (except as a customer or supplier of the
Company in the ordinary course of business) the management or policies of the
Company; provided, however, that this clause (i) shall not prohibit the designee
of the Purchaser on the Company's Board of Directors under Section 3.9 from
taking action and serving in his capacity as a director of the Company in a
manner consistent with the proper exercise of his fiduciary and other duties as
a director of the Company; or
(j) disclose publicly any intention, plan or arrangement inconsistent with the
foregoing.
3.5 ACCESS TO BOOKS AND RECORDS. The Company shall afford to the Purchaser and
the Purchaser's accountants, counsel and representatives full access during
normal business hours throughout the period prior to the Closing Date (or the
earlier termination of this Agreement pursuant to Section 6.1) to all its
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) and, during such period, shall, upon request, furnish
promptly to the Purchaser (i) a copy of each report, schedule and other document
filed or received by any of them pursuant to the requirements of federal or
state securities laws and (ii) all other information concerning its business,
properties and personnel as the Purchaser may reasonably request, provided that
no investigation or receipt of information pursuant to this Section 3.5 shall
affect any representation or warranty of the Company or the conditions to the
obligations of the Purchaser.
3.6 AGREEMENT TO TAKE NECESSARY AND DESIRABLE ACTIONS. The Company and Purchaser
shall (a) subject to the satisfaction of the conditions set forth in Section
4.1, Section 4.2 and Section 4.3, execute and deliver the Other Transaction
Documents and such other documents, certificates, agreements and other writings
and (b) take such other actions, in each case, as may be necessary or reasonably
requested by any of the other party in order to consummate or implement the
issuance of the Shares in accordance with the terms of this Agreement.
3.7 COMPLIANCE WITH CONDITIONS; REASONABLE BEST EFFORTS. The Company and
Purchaser shall use reasonable best efforts to cause all conditions precedent to
the obligations of the Company and the Purchaser to be satisfied. Upon the terms
and subject to the conditions of this Agreement, the Company and Purchaser will
use reasonable best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable consistent
with Applicable Law to consummate the transaction contemplated herein and make
effective in the most expeditious manner practicable the issuance of the Shares
in accordance with the terms of this Agreement.
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3.8 LEGENDS. After the requirement for the restrictive legend described in
Section 2.1.4 hereof is no longer applicable because the Shares are freely
transferable under the Securities Act, the Company shall remove such legend upon
request from the holder of such Shares, if outside counsel for such holder
reasonably determines that the transfer of such Shares is no longer restricted
by the Securities Act and outside counsel for the Company reasonably concurs in
such determination.
3.9 BOARD REPRESENTATIVE. On the Closing Date, the Company's Chief Executive
Officer shall recommend to the Company's Nominating and Governance Committee
that the Company's Board of Directors elect George P. Stamas to the Company's
Board of Directors effective as of the Closing Date to serve in a class of
directors to be determined and if, at the end of the term of this class,
Purchaser beneficially owns at least 7,766,769 shares of Common Stock (as such
number may be adjusted as a result of stock dividends, stock splits or similar
transactions) and such shares represent at least 5% of the issued and
outstanding shares of Common Stock, George P. Stamas or another senior executive
of Purchaser reasonably acceptable to the Company will be nominated for another
three-year term.
3.10 INCISCENT, INC. In connection with the proposed transaction involving the
formation of a new corporation ("Inciscent") and the investment therein by the
Company, the Purchaser or an affiliate thereof and other third parties, as such
is contemplated by that certain "Summary of Terms" dated February 2000, and
attached hereto as Schedule 3.10, the Company shall (a) afford the Purchaser or
an affiliate thereof an opportunity to purchase shares of a proposed convertible
"Series A Preferred Stock" of Inciscent for $9,900,000 in the form of a
promissory note, with such Series A Preferred Stock representing not less than
27.50% of the outstanding common stock of Inciscent (including founders shares
and assuming conversion of the Series A Preferred Stock); (b) shall assign its
virtual internet service provider agreement with PSINet Inc. to Inciscent; and
(c) shall not permit the transaction to result in Inciscent having less than a
$30,000,000 equity capitalization in the form of contributed cash, note or
services.
3.11 FCC APPLICATIONS. If necessary to effectuate the transactions contemplated
by this Agreement, Company shall prepare, file and prosecute any required
applications for the FCC's consent to the transactions contemplated herein.
Purchaser shall cooperate with Company in the preparation, filing, and
prosecution of any such applications.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. The respective obligations
of Purchaser, on the one hand, and the Company, on the other, to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing Date, of each of the following conditions:
4.1.1 No Injunction, Etc. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any Governmental Authority, and no statute, rule,
regulation or executive order shall have
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been promulgated or enacted by any Governmental Authority which restrains,
enjoins or otherwise prohibits in any material respects the transactions
contemplated hereby.
4.1.2 HSR Act. Any waiting period under the HSR Act applicable to the
consummation of the transactions contemplated hereby shall have expired.
4.1.3 Registration Rights Agreement. The other party shall have tendered its
execution and delivery of a Registration Rights Agreement substantially in the
form set forth in Exhibit A.
4.1.4 FCC Approval. If required, the parties shall have obtained the prior
approval of the FCC to the transactions contemplated by this Agreement; provided
that this condition shall be satisfied if the Company obtains special temporary
authority from the FCC to permit the Closing to occur prior to the obtaining of
the FCC Consents.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. In addition to the
conditions set forth in Section 4.1, the obligations of the Company to
consummate the transactions to be consummated at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of each of the additional
conditions set forth below:
4.2.1 Accuracy of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement (i) shall have been true
and correct when made and (ii) shall be (A) in the case of representations and
warranties that are qualified as to materiality or material adverse effect, true
and correct and (B) in all other cases, true and correct in all material
respects, in the case of the clauses (A) and (B), as of the Closing Date with
the same force and effect as though made on and as of the Closing Date.
4.2.2 Performance of Agreements. Purchaser shall have performed in all material
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions contained in this Agreement, to be performed
or complied with by it prior to or at the Closing Date.
4.2.3 Certificates. The Company shall have received a certificate from
Purchaser, dated the Closing Date, signed by the President or any authorized
Vice President of Purchaser, in his capacity as an officer of Purchaser, to the
effect that, to the best of his knowledge, information and belief, the
conditions specified in Section 4.2.1 and Section 4.2.2 have been satisfied.
4.2.4 Inciscent, Inc. The Purchaser's investment in Inciscent as described in
Section 3.10(a) shall have been consummated.
4.2.5 FCC Approval. If required, the parties shall have obtained the prior
approval of the FCC to the transactions contemplated by this Agreement; provided
that this condition shall be satisfied if the Company obtains special temporary
authority from the FCC to permit the Closing to occur prior to the obtaining of
the FCC Consents.
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. In addition to the
conditions set forth in Section 4.1, the obligations of Purchaser to consummate
the transactions
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to be consummated at the Closing are subject to the satisfaction, at or prior to
the Closing Date, of each of the additional conditions set forth below:
4.3.1 Accuracy of Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (i) shall have been true
and correct when made and (ii) shall be (A) in the case of representations and
warranties that are qualified as to materiality or material adverse effect, true
and correct and (B)in all other cases, true and correct in all material
respects, in the case of the clauses (A) and (B), as of the Closing Date with
the same force and effect as though made on and as of the Closing Date.
4.3.2 Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions contained in this Agreement, to be
performed or complied with by it prior to or at the Closing Date.
4.3.3 Certificates. Purchaser shall have received a certificate from the
Company, dated the Closing Date, signed by the President or any authorized Vice
President of the Company, in his capacity as an officer of the Company, to the
effect that, to the best of his knowledge, information and belief, the
conditions specified in Section 4.3.1 and Section 4.3.2 have been satisfied.
4.3.4 Opinion of Counsel for the Company. Purchaser shall have received an
opinion of the Company's counsel dated the Closing Date in a form agreed to by
the parties.
4.3.5 Other Deliveries. The Company shall have delivered to Purchaser at the
Closing the following:
(a) a certificate of incumbency for the officers executing the documents on
behalf of the Company;
(b) a certified copy of the resolutions duly adopted by the directors of the
Company and signed by the Secretary or Assistant Secretary authorizing the
transactions contemplated by this Agreement;
(c) a certificate of the Secretary or Assistant Secretary certifying that the
resolutions referred to in Section 4.3.5(b) have not been rescinded, modified or
withdrawn and that such resolutions are in full force and effect as of the
Closing Date; and
(d) such further certificates and documents evidencing the consummation by the
Company of the transactions contemplated hereby as Purchaser shall reasonably
request.
4.3.6 Inciscent, Inc. The formation and capitalization of Inciscent shall have
been consummated on terms including those set forth in Sections 3.10(a), (b),
and (c) and PSINet, Inc. shall have invested at least $1,500,000 in the form of
cash and services in Inciscent.
4.3.7 Other Equity Investments. Contemporaneously with the Closing, the Company
shall have issued and sold at least 7,822,422 shares of Common Stock to each of
PSINet Inc. and HMTF Bridge MC I, LLC at a purchase price of at least $2.19 per
share and
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otherwise in accordance with the terms of the Common Stock Purchase
Agreements of even date hereof respectively between the Company and PSINet Inc.
and the Company and HMTF Bridge MC I, LLC.
4.4 WAIVER OF CONDITIONS. Each of the parties, in its discretion, may waive, in
whole or in part, at or prior to the Closing Date, the failure of satisfaction
of any of the conditions precedent to its obligations set forth herein. No such
waiver by either of the parties shall be effective unless made in writing.
ARTICLE 5
INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in any schedule
or in any certificate delivered by or on behalf of a party pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by such party hereunder. The
representations and warranties of the parties contained herein shall survive the
Closing Date for a period of one year from the Closing Date. Each covenant and
agreement contained in this Agreement shall survive in accordance with the
specific terms thereof.
5.2 INDEMNIFICATION BY COMPANY. Subject to Section 5.4, Company shall indemnify
Purchaser and its Affiliates and their respective officers, directors, managers,
partners, employees, financial advisors, attorneys, accountants, agents and
affiliates ("Representatives") (Purchaser, its Affiliates, and its
Representatives collectively, the "Purchaser Indemnified Parties") against, and
hold each Purchaser Indemnified Party harmless from, any damage, claim, loss,
cost, liability or expense, including interest, penalties, reasonable attorneys'
fees and said party's expenses of investigation, response action or remedial
action (collectively "Damages"), incident to, arising out of, in connection with
or related to, whether directly or indirectly, any of the following:
5.2.1 The breach of any representation or warranty of Company that is identified
by Purchaser with reasonable specificity in writing provided to Company prior to
termination of the representation and warranty pursuant to Section 5.1.
5.2.2 Any breach by Company of any of its covenants or agreements set forth in
this Agreement that is identified by Purchaser with reasonable specificity in
written notice provided to Company (i) in the case of a covenant or agreement
required to be performed prior to the Closing, within six months after the
Closing Date, and (ii) in the case of any other covenant or agreement, within
six months following the time when such covenant or agreement was required to be
performed.
5.3 INDEMNIFICATION BY PURCHASER. Subject to Section 5.4, Purchaser shall
indemnify Company and its Affiliates and their respective Representatives (the
"Company Indemnified Parties") against, and hold the Company Indemnified Party
harmless from, any Damages incident to, arising out of, in connection with or
related to, whether directly or indirectly, any of the following:
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5.3.1 The breach of any representation or warranty of Purchaser that is
identified by Seller with reasonable specificity in a written notice provided to
Seller prior to termination of the representation and warranty pursuant to
Section 5.1.
5.3.2 Any breach by Purchaser of any of its covenants or agreements set forth in
this Agreement that is identified by Seller with reasonable specificity in a
written notice provided to Purchaser (i) in the case of a covenant or agreement
required to be performed prior to the Closing, within six months after the
Closing Date, and (ii) in the case of any other covenant or agreement, within
six months following the time when such covenant or agreement was required to be
performed.
5.4 LIMITATIONS ON LIABILITY. The total amount of Company's and Purchaser's
indemnification liability to the Purchaser Indemnified Parties under Section 5.2
and Purchaser's indemnification liability to the Company Indemnified Parties
under Section 5.3 respectively for all breaches of a party's representations,
warranties, covenants and agreements contained in this Agreement shall in each
case be limited to an amount equal to the sum of (a) purchase price for the
Shares hereunder plus (b) the reasonable attorneys' fees and other expenses of
the prevailing party.
5.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification under Article 5, the party entitled to indemnification (the
"indemnified party") shall promptly notify the other party (the "indemnifying
party") of the claim and, when known, the facts constituting the basis for such
claim. In the event of any claim for indemnification hereunder resulting from or
in connection with any claim or legal proceedings by a third party, the notice
to the indemnifying party shall specify, if known, the amount of the liability
arising therefrom. The indemnified party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the indemnifying party.
5.6 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim giving rise to a
right of indemnification under Article 5 resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement, the
indemnifying party at its sole cost and expense may, upon written notice to the
indemnified party, assume the defense of any such claim or legal proceeding. The
indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
indemnifying party does not timely assume the defense of any such claim or
litigation resulting therefrom, (a) the indemnified party may defend against
such claim or litigation, in such manner as it may deem appropriate, including,
but not limited to, settling such claim or litigation with the written consent
of the indemnifying party, and (b) the indemnifying party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense.
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ARTICLE 6
TERMINATION AND DEFAULT
6.1 GENERAL. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date, as set forth
below:
6.1.1 Mutual Consent. This Agreement may be terminated by the mutual consent of
the parties.
6.1.2 Order or Decree. This Agreement may be terminated by Purchaser or the
Company if any court of competent jurisdiction in the United States or other
U.S. governmental body shall have issued an order, decree, ruling or taken any
other action restraining, enjoining or otherwise prohibiting in any material
respects the transactions contemplated hereby and such order, decree, ruling or
other action shall have become final and nonappealable.
6.1.3 Outside Date. This Agreement may be terminated by either party (a) if the
Closing shall not have occurred by July 1, 2000 (the "Outside Date") or (b) if
one or more conditions to such party's obligation to consummate the transactions
contemplated hereby cannot be satisfied by the Outside Date; provided, however,
that no party may exercise its rights under this Section 6.1.3 if such party is
in material breach or default under this Agreement.
6.1.4 Breach. This Agreement may be terminated by either party if the other
party shall have breached any of its material representations or warranties or
obligations under this Agreement and shall have failed to cure such breach
within ten (10) days after notice of such breach from the other party.
6.2 PROCEDURE UPON TERMINATION. In the event of the termination of this
Agreement, written notice thereof shall promptly be given to the other party
hereto and this Agreement shall terminate, all further obligations of the
parties hereunder to satisfy the conditions precedent to the Closing shall
terminate, and the transactions contemplated hereby shall be abandoned without
further action by any of the parties hereto.
6.3 EFFECT OF TERMINATION. Nothing in this Article 6 shall relieve any party
hereto of any liability for intentional or willful breach of this Agreement. The
parties shall have no liability for termination of this Agreement for any reason
other than an intentional or willful breach of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 BROKERS. The transactions contemplated hereby have been and shall be carried
on by parties in such manner as not to give rise to any valid claims against the
parties for a brokerage commission, finder's fee or other like payment. Each
party agrees to indemnify and hold the other harmless from and against any
claims for brokerage commissions or finder's fees
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insofar as such claims shall be alleged to be based upon arrangements or
agreements made by the indemnifying party or on its behalf. Such indemnity shall
include the cost of reasonable counsel fees in connection with the defense of
any such claims.
7.2 NOTICES. Except as otherwise provided, all notices which are permitted or
required under this Agreement shall be in writing and shall be deemed given (a)
when delivered personally, (b) if by fax upon transmission with confirmation of
receipt by the receiving party's facsimile terminal, (c) if sent by documented
overnight delivery service on the date delivered or (d) if sent by mail, five
(5) business days after being mailed by registered or certified mail, postage
prepaid, addressed as follows, or to such other person or address as may be
designated by notice to the other party:
If to the Company, to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly, Chief Financial Officer and Treasurer
Fax Number: (703) 768-9625
with a copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attn: Thomas W. White
Fax Number: (202) 663-6363
If to Purchaser, to:
Aether Systems, Inc.
11460 Cronridge Drive
Owings Mills, Maryland 21117
Attention: Brian W. Keane
Phone: (410) 654-6400
Facsimile: (410) 654-6554
Jones, Day, Reavis & Pogue
901 Lakeside Ave.
Cleveland, Ohio 44114
Attention: Christopher M. Kelly
Phone: (216) 586-3939
Facsimile: (216) 579-0212
7.3 FEES AND EXPENSES. Each party shall pay the filing fee relating to any
filing required by it, if any, in accordance with the HSR Act. If applications
to obtain the FCC's
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consent to the transactions contemplated by this Agreement are required, Company
shall pay any required filing fees in connection with such applications. All
other expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement shall be paid by the party incurring
such expenses.
7.4 ASSIGNMENT. This Agreement and the transactions contemplated hereby may not
be assigned or otherwise transferred, in whole or in part, by operation of law
or otherwise, without the prior written consent of the other party; provided,
however, that notwithstanding the foregoing, (i) each party shall have the right
to pledge, assign or otherwise transfer this Agreement and any other Transaction
Document and its rights hereunder and thereunder, in whole or in part, as
collateral security to any lender, and (ii) each party shall have the right to
assign or transfer this Agreement and any other Transaction Document and its
rights hereunder and thereunder, in whole or in part, to its parent or any
direct or indirect wholly-owned subsidiary or that party or to any person into
which that party may be merged or consolidated or which purchases all or
substantially all of the assets of that party; provided, however, that (a) such
parent, subsidiary or person agrees to be bound by the terms of this Agreement
or other Transaction Document (including, without limitation, all provisions
binding upon the assigning or transferring party), and (b) any such assignment
or transfer shall not relieve that party from any liability or obligation under
this Agreement or other Transaction Document.
7.5 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which when so executed and delivered, shall be an original instrument,
but such counterparts together shall constitute a single agreement.
7.6 ENTIRE AGREEMENT. This Agreement, including all Exhibits hereto, and all
certificates and documents executed and delivered in connection with this
Agreement, when executed and delivered, shall constitute the entire agreement of
the parties, superseding and extinguishing all prior agreements and
understandings, representations and warranties, relating to the subject matter
hereof.
7.7 PUBLIC ANNOUNCEMENTS. Each party shall have the right to review, comment
upon and approve any publicity materials, press releases or other public
statements by the other party that name or otherwise identify such party or any
of its affiliates or refer to, or describe any aspect of, this Agreement or
other Transaction Document or the transactions contemplated hereby and thereby;
provided, however, that with respect to disclosure documents to be filed by
either party under the Exchange Act or the Securities Act, subject to the last
sentence of this Section 7.7, each party shall only have the right to prior
review and to comment upon the other party's documents. Each party agrees that
it will not issue any such publicity materials, press releases or public
statements without the prior written approval of the other party, which approval
shall not be unreasonably withheld, conditioned or delayed. The Company and the
Purchaser shall cooperate with each other to request confidential treatment as
may be mutually agreed by them with respect to certain terms of this Agreement,
the other Transaction Documents and the transactions contemplated hereby and
thereby in any filing with the SEC, any other governmental authority or any
securities exchange or stock market.
7.8 GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereunder shall be governed by the substantive laws of the State of Delaware
applicable to
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contracts made and to be performed therein, without reference to the principles
of conflicts of laws.
7.9 HEADINGS. The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
7.10 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, provided that such invalidity or unenforceability does not
deny any party the material benefits of the transactions for which it has
bargained, such invalidity or unenforceability shall not affect in any way the
remaining provisions hereof.
7.11 MODIFICATION AND AMENDMENT. This Agreement may not be modified or amended
except by written agreement specifically referring to this Agreement and signed
by the parties hereto.
7.12 WAIVER. No waiver of a breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature.
7.13 PARTIES OBLIGATED AND BENEFITED. Subject to the limitations set forth
below, this Agreement will be binding upon the parties hereto and their
respective assignees and successors in interest and will inure solely to the
benefit of such parties and their respective assigns and successors in interest,
and no other person will be entitled to any of the benefits conferred by this
Agreement.
7.14 ACTIONS. Each party will execute and deliver to the other, from time to
time at or after the Closing, for no additional consideration and at no
additional cost to the requesting party, (without incurring any obligation to
pay money) such further assignments, certificates, instruments, records or other
documents, assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy and exercise the
rights accorded and acquired by it under this Agreement.
7.15 TERMS. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. The words "include" and "exclude" and derivatives of those words
are used in this Agreement in an illustrative sense rather than limiting sense.
[Execution Page Following]
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<PAGE> 23
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives, officers or agents
on the date first written above.
AETHER SYSTEMS, INC.
By: ________________________________
Its: _______________________________
METROCALL, INC.
By: ________________________________
Its: _______________________________
<PAGE> 24
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
(See Attached)
<PAGE> 25
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of ________ ___, 2000, by and between METROCALL, INC., a Delaware corporation
(the "Company"), and AETHER SYSTEMS, INC., a Delaware corporation ("Purchaser").
RECITALS
WHEREAS, the Company and Purchaser are parties to that certain Common
Stock Purchase Agreement, dated as of February 2, 2000 (the "Stock Purchase
Agreement"), pursuant to which Purchaser will purchase from the Company (the
"Purchase") shares of Common Stock (the "Shares") equal to the lesser of (a)
7,766,769 and (b) 9.9% of the issued and outstanding shares of Common Stock of
the Company, after giving effect to any sales or other issuances of Common Stock
on or before the Closing Date (the "Common Shares") of common stock, $.01 par
value, of the Company (the "Common Stock"); and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Stock Purchase Agreement that the Company and
Purchaser enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 "Closing" means the closing of the Purchase pursuant to which the Company
will have issued the Common Shares to Purchaser in accordance with the terms and
conditions of the Stock Purchase Agreement.
1.02 "Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
1.03 "Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
1.04 "Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any court, panel, judge, board, bureau,
commission, agency or other entity, body or other Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
<PAGE> 26
1.05 "Holder" means Purchaser and/or its permitted successors and assigns
pursuant to Section 6.05.
1.06 "Person" means an individual or corporation, partnership, trust,
unincorporated organization, association or other entity and includes any
Governmental Authority.
1.07 "Registrable Securities" means the Common Shares received by Purchaser from
the Company pursuant to the Stock Purchase Agreement and any additional shares
of Common Stock issued by the Company in respect thereof in connection with any
stock dividend, stock split, recapitalization or similar event; provided,
however, that any Registrable Security will cease to be a Registrable Security
when (i) such Registrable Security has been transferred pursuant to an effective
registration statement under the Securities Act covering such Registrable
Security (but not including any transfer exempt from registration under the
Securities Act), (ii) such Registrable Security is no longer held of record by
Holder, or (iii) the Holder of such Registrable Security is then able to use
Rule 144(k) under the Securities Act (or any successor provision) to transfer
such Registrable Security.
1.08 "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
1.09 "Shares" means shares of the Registrable Securities.
ARTICLE II
REGISTRATION RIGHTS
2.01 Required Registrations. At any time or times after the date hereof (so long
as Holder shall own Registrable Securities), Holder may notify the Company in
writing that it (i) intends to offer or cause to be offered for public sale all
or any portion of its Registrable Securities (such requests shall be in writing
and shall state the number of shares of Registrable Securities intended to be
disposed of) and (ii) request that the Company cause such Registrable Securities
to be registered under the Securities Act; provided, that any such request shall
cover at least 2,000,000 shares and shall not be made more frequently than every
12 months. The Company shall prepare and file with the Commission registration
statements under the Securities Act with respect to the Registrable Securities
requested to be so registered and shall use its reasonable best efforts to cause
such registration statements to become effective promptly after filing. The
registration statement with respect to such Registrable Securities shall be
filed with the Commission within thirty (30) days after receipt of Holder's
notification relating thereto.
Except as provided in the next succeeding paragraph of this Section
2.01, the Company shall use its reasonable best efforts to maintain the
effectiveness of each registration statement filed pursuant to this Section 2.01
until such time as all Shares registered pursuant to the registration statement
either have been transferred pursuant to the registration statement or are
eligible to be sold by Holder pursuant to Rule 144(k) under the Securities Act.
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The obligations of the Company under this Section 2.01 are subject to
the condition that the Company shall be entitled to require the Holder to
suspend for up to ninety (90) days once in any twelve month period the sale of
Shares pursuant to a registration statement filed pursuant to this Section 2.01
if and for so long as (i) the Board of Directors of the Company determines, in
its reasonable judgment, that the sale of Shares pursuant thereto would
materially interfere with any material financing, acquisition, corporate
reorganization or other material transaction by the Company, provided, however,
that this clause (i) will not apply to sales of securities by the Company for
the account of any Person other than the Company; (ii) the Company promptly
gives the Holder written notice of such determination, and (iii) all other
similarly situated shareholders shall also be subject to the same suspension.
The Company shall have no obligation to maintain the effectiveness of a
registration statement with respect to the Shares during periods when the Holder
is required to suspend the sale of such Shares as provided in this paragraph. As
soon as possible after the expiration of such periods, the Company shall amend
its registration statements as necessary to permit the Holder to sell Shares
pursuant to such registration statements and shall notify the Holder in writing
that it may resume the sale of Shares pursuant to such Registration Statement.
Any registration made pursuant to this Section 2.01 shall not include a plan of
distribution involving an underwritten offering.
2.02. Piggyback Registration. (a) If the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock for its own account or for the account of another Person (other
than a registration statement on Form S-4 or S-8, or pursuant to Rule 415 (or
any substitute form or rule, respectively, that may be adopted by the
Commission)), the Company shall give written notice of such proposed filing to
the Holder at the address set forth in the share register of the Company as soon
as reasonably practicable (but in no event less than 15 days before the
anticipated filing date), undertaking to provide the Holder the opportunity to
register on the same terms and conditions such number of Registrable Securities
as the Holder may request (a "Piggyback Registration"). The Holder will have
seven business days after receipt of any such notice to notify the Company as to
whether it wishes to participate in a Piggyback Registration (which notice shall
not be deemed to be a request pursuant to Section 2.01); provided that should
the Holder fail to provide timely notice to the Company, the Holder will forfeit
any rights to participate in the Piggyback Registration with respect to such
proposed offering. In the event that the registration statement is filed on
behalf of a Person other than the Company, the Company will use its reasonable
best efforts to have the Registrable Securities that the Holder wishes to sell
included in the registration statement. If the Company or the Person for whose
account such offering is being made shall determine in its sole discretion not
to register or to delay the proposed offering, the Company may, at its election,
provide written notice of such determination to the Holder and (i) in the case
of a determination not to effect the proposed offering, shall thereupon be
relieved of the obligation to register such Registrable Securities in connection
therewith, and (ii) in the case of a determination to delay a proposed offering,
shall thereupon be permitted to delay registering such Registrable Securities
for the same period as the delay in respect of the proposed offering. As between
the Company and the Holder, the Company shall be entitled to select the
underwriters in connection with any Piggyback Registration.
(b) Priority on Piggyback Registrations. If the Registrable Securities
requested to be included in the Piggyback Registration by the Holder differ from
the type of securities proposed to be registered by the Company and the managing
underwriter advises the Company that due to
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<PAGE> 28
such differences the inclusion of such Registrable Securities would cause a
material adverse effect on the business, results of operations, properties,
financial condition, assets and liabilities of the Company and its subsidiaries,
taken as a whole (a "Material Adverse Effect"), then (i) the number of Holder's
Registrable Securities to be included in the Piggyback Registration shall be
reduced to an amount which, in the opinion of the managing underwriter, would
eliminate such Material Adverse Effect or (ii) if no such reduction would, in
the opinion of the managing underwriter, eliminate such Material Adverse Effect,
then the Company shall have the right to exclude all such Registrable Securities
from such Piggyback Registration, provided, that no other securities of such
type are included and offered for the account of any other Person in such
Piggyback Registration. Any partial reduction in number of Registrable
Securities of the Holder to be included in the Piggyback Registration pursuant
to clause (i) of the immediately preceding sentence shall be effected pro rata
based on the ratio which the Holder's requested shares bears to the total number
of shares requested to be included in such Piggyback Registration by all Persons
other than the Company who have the contractual right to request that their
shares be included in such registration statement and who have requested that
their shares be included. If the Registrable Securities requested to be included
in the registration statement are of the same type as the securities being
registered by the Company and the managing underwriter advises the Company that
the inclusion of such Registrable Securities would cause a Material Adverse
Effect, the Company will be obligated to include in such registration statement,
as to the Holder, only a portion of the shares Holder has requested be
registered equal to the ratio which the Holder's requested shares bears to the
total number of shares requested to be included in such registration statement
by all Persons (other than the Person or Persons initiating such registration
request) who have the contractual right to request that their shares be included
in such registration statement and who have requested their shares be included;
provided, that in the event the Company registers shares of Common Stock in an
underwritten offering pursuant to Section 2.02 of the Registration Rights
Agreement dated as of __________, 2000 between the Company and AT&T Wireless
Services, Inc. ("Wireless"), then all shares to be registered on behalf of
Wireless pursuant to such agreement shall be included in such registration
statement before any shares of Common Stock to be sold by the Company for its
own account or the account of the Holder or any other Person entitled to request
that their shares be included in such registration statement. If the Company
initiated the registration, for its own account or for the account of any other
Person other than the Holder, then the Company may include all of those
securities in such registration statement before any of Holder's requested
shares are included. If another security holder initiated the registration, then
the Company may not include any of its securities in such registration statement
unless all Registrable Securities requested to be included in the registration
statement by the Holder are included in such registration statement. If as a
result of the provisions of this Section 2.02(b) the Holder shall not be
entitled to include all Registrable Securities in a registration that the Holder
has requested to be so included, the Holder may withdraw its request to include
Registrable Securities in such registration statement prior to its
effectiveness.
ARTICLE III
REGISTRATION PROCEDURES
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<PAGE> 29
3.01 Company Obligations. Whenever the Company is required under Article II to
register any Registrable Securities, it agrees that it shall also do the
following:
(a) furnish to the Holder, prior to the filing of a registration statement
pertaining to any Shares (each a "Registration Statement") or any prospectus,
amendment or supplement thereto, copies of each such Registration Statement as
proposed to be filed, which documents will be subject to the reasonable review
and comments of the Holder (and its legal counsel), and the Company will not
file any such Registration Statement, any prospectus or any amendment or
supplement thereto (or any such documents incorporated by reference) to which
the Holder shall reasonably object in writing; and thereafter furnish to the
Holder such number of copies of such Registration Statement, each amendment and
supplement thereto (including any exhibits thereto), the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as the Holder may reasonably request in writing in order to
facilitate the disposition of the Shares registered pursuant to such
Registration Statement; provided, however, that the obligation of the Company to
deliver copies of prospectuses or preliminary prospectuses to the Holder shall
be subject to the receipt by the Company of reasonable assurances from the
Holder that the Holder will comply with the applicable provisions of the
Securities Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such prospectuses or preliminary
prospectuses;
(b) use its reasonable best efforts to register or qualify the Shares
registered pursuant to such Registration Statement under such other securities
or blue sky laws of such jurisdictions as the Holder may reasonably request and
do any and all other acts and things which may be reasonably necessary to enable
the Holder to consummate the disposition in such jurisdictions of such Shares;
provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection, (ii) subject itself to taxation in
any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;
(c) apply, prior to or concurrently with the filing of the Registration
Statement, to the Nasdaq National Market System or the Nasdaq SmallCap Market
System (or, if the Company is not listed on the Nasdaq National Market System or
the Nasdaq SmallCap Market System, any other exchange or automated quotation
system on which the Company's Common Stock is then listed) for the listing of
the Shares and use its best effort to obtain the listing of such Shares;
(d) notify the Holder in writing at any time when a prospectus relating to
the Shares registered pursuant to such Registration Statement is required to be
delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus or filing of a
report incorporated in the prospectus by reference so that, as thereafter
delivered to the purchasers of such Shares, such prospectus (including documents
incorporated therein by reference) will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly
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<PAGE> 30
prepare, file with the Commission and make available to the Holder any such
supplement, amendment or report incorporated in the prospectus by reference,
including, without limitation, after any period referred to in Section 2.01;
(e) make available for inspection by the Holder of Shares to be registered
pursuant to a Registration Statement and any attorney, accountant or other
professional retained thereby (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Inspectors in connection with such Registration Statement; provided, that
the Company shall not be required to make such information available to more
than one law firm on behalf of the Holder of Shares to be registered pursuant to
a Registration Statement. Records that the Company determines, in good faith, to
be confidential and which it notifies the Inspectors in writing are confidential
shall not be disclosed by the Inspectors unless (i) in the judgment of counsel
to the Company the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, or (iii) the information in such Records is generally
available to the public. As a condition of receiving access to such confidential
information described in clause (i) or (ii) of the preceding sentence, the
Holder of such Shares shall agree that such confidential information obtained by
it as a result of such inspections shall be deemed confidential and shall not be
used by them as the basis for any market transactions in the securities of the
Company unless and until such information is made generally available to the
public, it being understood that nothing in this sentence shall reduce the
Company's obligations hereunder, including under Section 3.01(d). The Holder
further shall agree that it will, upon learning that disclosure of such Records
from the Holder is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential;
(f) obtain consents from its independent public accountants in customary form
as required to obtain and maintain effectiveness of a Registration Statement;
(g) obtain an opinion or opinions from its counsel in customary form and
reasonably satisfactory to the Holder and its legal counsel;
(h) make generally available to the Holder earnings statements, which need
not be audited, satisfying the provisions of Section 11(a) of the Securities Act
no later than 45 days after the end of the twelve-month period beginning with
the first month of the first fiscal quarter commencing after the effective date
of a Registration Statement, which earnings statements shall cover said
twelve-month period;
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<PAGE> 31
(i) promptly notify the Holder of the issuance or threatened issuance of any
stop order or other order suspending the effectiveness of a Registration
Statement or preventing or suspending the use of any preliminary prospectus,
prospectus or prospectus supplement, use reasonable best efforts to prevent the
issuance of any such threatened stop order or other order, and, if any such
order is issued, use all its reasonable best efforts to obtain the lifting or
withdrawal of such order at the earliest possible moment and promptly notify the
Holder of any such lifting or withdrawal;
(j) if requested by the Holder, the Company will promptly incorporate in a
prospectus supplement or post-effective amendment to a Registration Statement
such information concerning Holder and Holder's intended method of distribution
as Holder requests to be included therein (and which is not violative of an
applicable law, rule or regulation, in the reasonable judgment of the Company,
after consultation with its outside legal counsel), including, without
limitation, with respect to any change in the intended method of distribution or
the amount of Shares being offered by Holder, the offering price for such Shares
or any other terms of the offering or distribution of the Shares, and the
Company will make all required filings of such prospectus supplement or post-
effective amendment as soon as possible after being notified of the matters to
be incorporated in such prospectus supplement or post-effective amendment;
(k) as promptly as practicable after the filing with the Commission of any
document which is incorporated by reference into a Registration Statement,
notify the Holder of such filing and deliver a copy of such document to the
Holder;
(l) cooperate with the Holder to facilitate the timely preparation and
delivery of certificates, not bearing any restrictive legends, unless otherwise
required by the Holder, representing the Shares to be sold under a Registration
Statement, and enable such Shares to be in such denominations and registered in
such name as such Holder may request;
(m) cooperate with the Holder, its legal counsel and any other interested
party (including any interested broker-dealer) in making any filings or
submissions required to be made, and the furnishing of all appropriate
information in connection therewith, with the National Association of Securities
Dealers, Inc. (the "NASD");
(n) during the period when the prospectus is required to be delivered under
the Securities Act, promptly file all documents required to be filed with the
Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act.
(o) cause its subsidiaries to take all action necessary to effect the
registration of the Shares contemplated hereby, including preparing and filing
any required financial or other information;
(p) make available to the transfer agent for each class or series of Shares
a supply of certificates or other instruments evidencing or constituting such
Shares
7
<PAGE> 32
which shall be in a form complying with the requirements of such transfer agent,
promptly after a registration thereof; and
(q) use its reasonable best efforts to keep each such registration or
qualification effective, including through new filings, amendments or renewals,
during the period the Registration Statement is required to be kept effective
and do any and all other acts or things reasonably necessary or advisable in
connection with such registration or qualifications in all jurisdictions in
which qualification or registration is necessary.
3.02 Information from Holder. The Company may require the Holder to promptly
furnish in writing to the Company such information regarding the distribution of
the Shares as it may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
3.03 Suspension of Sales. The Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
subsection 3.01(d) hereof, it will immediately discontinue disposition of Shares
pursuant to a Registration Statement until it receives copies of the
supplemented or amended prospectus contemplated by subsection 3.01(d) hereof,
and, if so directed by the Company, the Holder will deliver to the Company all
copies, other than permanent file copies then in their possession, of the most
recent prospectus (including any prospectus supplement) covering such Shares at
the time of receipt of such notice or destroy all such copies.
ARTICLE IV
REGISTRATION EXPENSES
4.01 Except as provided in Section 4.02, all fees and expenses incident to the
Company's performance of or compliance with this Agreement shall be borne by the
Company, including, without limitation, the following fees and expenses: (a) all
Commission, NASD, stock exchange, automated quotation system or other
registration and filing fees and listing fees; (b) the fees and expenses of the
Company's compliance with securities or blue sky laws (including reasonable fees
and disbursements of counsel in connection with blue sky qualifications of the
Shares); (c) printing expenses; (d) the fees and disbursements of counsel for
the Company and of one counsel for the Holder for each registration, and the
fees and expenses for independent certified public accountants and other persons
retained by the Company in connection with such registration; (e) fees of
transfer agents and registrars; and (f) messenger and delivery expenses. In
addition, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Company, and the
expenses and fees for listing or authorizing for quotation the securities to be
registered on each securities exchange or automated quotation system on which
any shares of the Common Stock are then listed or quoted.
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<PAGE> 33
4.02 The Holder shall pay all its internal expenses incurred in connection with
the registration (including, without limitation, all salaries and expenses of
Holder's officers and employees performing legal or accounting duties).
ARTICLE V
INDEMNIFICATION; CONTRIBUTION
5.01 Indemnification by the Company. The Company agrees to indemnify and hold
harmless the Holder, each of the Holder's officers, directors, partners and
members, and the Holder's legal counsel and independent accountants, if any, and
each person controlling any such persons within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation, any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action, and
any of the foregoing incurred in settlement of any litigation, commenced or
threatened) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement or prospectus
contained therein or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act or any
state securities laws applicable to the Company and relating to action or
inaction by the Company in connection with any registration, qualification or
compliance required hereunder or arising out of or based upon the Company's
breach of any representation, warranty, covenant or agreement contained in this
Agreement; provided, however, that the Company shall not be liable in any such
case to the extent any of such losses, claims, damages, liabilities or expenses
arise out of, or are based upon, any such untrue statement or omission or
allegation thereof based upon information furnished in writing to the Company by
the Holder expressly for use therein.
5.02 Indemnification by Holder. Holder agrees to indemnify and hold harmless the
Company, its directors and officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company set forth above in Section 5.01, but only with respect to
information furnished in writing by the Holder, or on its behalf, expressly for
use in the Registration Statement or prospectus relating to the Shares, any
amendment or supplement thereto or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its directors or
officers, any such controlling person, or any such underwriter or controlling
person of an underwriter in respect of which indemnity may be sought against the
Holder, the Holder shall have the rights and duties given to the Company, and
the Company or its directors or officers or such controlling person or any such
underwriter or controlling person of an underwriter shall have the rights and
duties given to the Holder, by the preceding Section
9
<PAGE> 34
5.01 hereof. Each Holder's liability under this Section 5.02 shall be limited to
an amount equal to the net proceeds received by such Holder from the sale of
such Registrable Securities by such Holder.
5.03 Conduct of Indemnification Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted against
any Person entitled to indemnification under Section 5.01 or 5.02 above (an
"Indemnified Party") in respect of which indemnity may be sought from any party
who has agreed to provide such indemnification (an "Indemnifying Party"), the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
payment of all expenses. Such Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (a) the Indemnifying Party has agreed to pay such fees
and expenses, or (b) such Indemnified Party shall have been advised by counsel
that there is an actual or potential conflict of interest on the part of counsel
employed by the Indemnifying Party to represent such Indemnified Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
Indemnified Party elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party; it
being understood, however, that the Indemnifying Party shall not, in connection
with any one cause of action or proceeding or separate but substantially similar
or related actions or proceedings in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties unless there shall be
conflicts of interest among such Indemnified Parties, in which case the
Indemnifying Party shall be liable for the fees and expenses of additional
counsel). The Indemnifying Party shall not be liable for any settlement of any
such action or proceeding or any threatened action or proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with its written consent or if there be a final judgment of the
plaintiff in any such action or proceedings, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. The failure of any Indemnified Party to give prompt notice of a claim
for indemnification hereunder shall not limit the Indemnifying Party's
obligations to indemnify under this Agreement, except to the extent such failure
is prejudicial to the ability of the Indemnifying Party to defend the action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement unless (x) there is no finding or
admission of any violation of any rights of any Person and no effect on any
other claims that be made against any Indemnified Party, (y) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party and
(z) such judgment or settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
5.04 Contribution. If the indemnification provided for in this Article V is
unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or
10
<PAGE> 35
judgment referred to herein, then such Indemnifying Party, in lieu of
Indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
liabilities and judgments in the following manner: as between the Company on the
one hand and any Indemnified Party entitled to indemnification under Section
5.01 on the other, in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and any Indemnified Party entitled to
indemnification under Section 5.01 on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of any
Indemnified Party entitled to indemnification under Section 5.01 on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party, and the
party's relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of subsection 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.05 Survival. The indemnity and contribution agreements contained in this
Article V shall remain operative and in full force and effect with respect to
any sales of Shares made pursuant to a Registration Statement filed pursuant to
this Agreement regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company, and (c) the consummation of the sale or successive resale of the
Shares.
ARTICLE VI
MISCELLANEOUS
6.01 Rules 144 and 144A. The Company covenants that following the registration
of shares it will file any reports required to be filed by it under the
Securities Act and the Exchange Act and will take such further action as the
Holder may reasonably request from time to time so as to enable the Holder
holding registered Shares to sell such Shares without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rules 144
and 144A under the Securities Act, as each such Rule may be amended from time to
time, or (b) any similar rule or rules hereafter adopted by the Commission. Upon
the request of the Holder, the Company will forthwith deliver to the Holder a
written statement as to whether it has complied with such requirements.
6.02 Granting Other Registration Rights. On and after the date hereof, except
(i) as set forth in that certain Registration Rights Agreement dated as of
_________, 2000 by and between Metrocall, Inc. and HMTF Bridge MC I, LLC, and
(ii) in connection with issuances of equity and/or debt securities by the
Company resulting in proceeds to the Company of at least $25,000,000 (each, a
"Significant Financing"), the Company shall not grant any registration rights in
respect of any shares of capital stock of the Company or other securities of the
Company if such rights would be superior to the registration rights granted to
Purchaser under this Agreement; provided, however, that Purchaser hereby
consents and agrees that the Company may grant in other agreements to other
holders of securities of the Company registration rights
11
<PAGE> 36
which (a) rank ratably with the registration rights granted hereunder to
Purchaser and (b) in the case of a Significant Financing, are superior to the
registration rights granted hereunder to Purchaser.
6.03 Amendments and Waivers. The provision of this Agreement may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given other than as mutually agreed upon in writing
by the Company and the Holder.
6.04 Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, regular mail, registered
first-class mail, confirmed facsimile or recognized express courier service by
next business day delivery;
(i) if to the Company:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Chief Financial Officer
Fax Number: (703) 768-9625
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Thomas W. White, Esq.
Fax Number: (202) 663-6363
(ii) if to the Holder, to its address appearing on the
stock records of the Company.
Notices shall be deemed given on the day on which delivered by hand or
facsimile, if delivered by 5:00 p.m. Eastern time; on the fifth business day
after mailing if delivered by mail; or the business day after delivery to an
overnight air courier if next-day delivery is specified.
6.05 Assignment of Registration Rights. Each Holder of the Registrable
Securities may assign all or any part of its rights under this Agreement to any
person to whom such Holder sells, transfers, or assigns such Registrable
Securities. In the event that the Holder shall assign its rights pursuant to
this Agreement in connection with the transfer of less than all of its
Registrable Securities, the Holder shall also retain its rights with respect to
its remaining Registrable Securities.
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6.06 Counterparts. This Agreement may be executed in a number of identical
counterparts and it shall not be necessary for the Company and Purchaser to
execute each of such counterparts, but when each has executed and delivered one
or more of such counterparts, the several parts, when taken together, shall be
deemed to constitute one and the same instrument, enforceable against each in
accordance with its terms. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart executed by
the party against whom enforcement of this Agreement is sought.
6.07 Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
6.08 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OR CHOICE OF LAW.
6.09 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
of this Agreement, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
6.10 Entire Agreement. This Agreement and the Stock Purchase Agreement
(including schedules and exhibits thereto) are intended by the Company and
Purchaser as the final expression of their agreement and are intended to be a
complete and exclusive statement of their agreement and understanding in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the Company, on the one hand, and
Purchaser, on the other, with respect to such subject matter.
6.11 Third Party Beneficiaries. Other than Indemnified Parties not a party
hereto, this Agreement is intended for the benefit of the Company, Purchaser and
their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other person or entity.
6.12 Nonwaiver. No course of dealing or any delay or failure to exercise any
right, power or remedy hereunder on the part of the Holder shall operate as a
waiver of or otherwise prejudice such Holder's rights, powers or remedies.
6.13 Remedies. The Company acknowledges that the remedies at law of the Holder
in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Agreement are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of
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<PAGE> 38
any of the terms hereof or otherwise without requiring such Holder to post any
bond or other security, unless otherwise required by applicable law (which
cannot be waived by the Company).
[Execution page following]
14
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
METROCALL, INC.
By: _________________________________
Name:
Title:
AETHER SYSTEMS, INC.
By: _________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
PSINET INC.
AND
METROCALL, INC.
DATED AS OF FEBRUARY 2, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK PURCHASE AGREEMENT...................................................................................1
ARTICLE 1 ISSUANCE AND SALE OF COMMON STOCK; THE CLOSING..........................................................1
1.1 Issuance and Sale of Common Stock....................................................................1
1.2 The Closing..........................................................................................1
1.3 Time and Place of Closing............................................................................1
1.4 Transactions at the Closing..........................................................................1
ARTICLE 2 REPRESENTATION AND WARRANTIES...........................................................................2
2.1 Representations and Warranties of Purchaser..........................................................2
2.2 Representations and Warranties of the Company........................................................3
ARTICLE 3 COVENANTS...............................................................................................6
3.1 Antitrust Laws.......................................................................................6
3.2 Other Actions........................................................................................6
3.3 Board Nominations....................................................................................6
3.4 Listing of Additional Shares.........................................................................7
3.5 Limitations on Transfer..............................................................................7
3.6 Other Limitations on Purchaser.......................................................................7
3.7 FCC Applications.....................................................................................8
ARTICLE 4 CONDITIONS PRECEDENT....................................................................................9
4.1 Conditions Precedent to Obligations of Parties.......................................................9
4.2 Conditions Precedent to Obligations of the Company...................................................9
4.3 Conditions Precedent to the Obligations of Purchaser................................................10
4.4 Waiver of Conditions................................................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 5 TERMINATION AND DEFAULT................................................................................11
5.1 General.............................................................................................11
5.2 Procedure Upon Termination..........................................................................11
5.3 Effect of Termination...............................................................................12
ARTICLE 6 MISCELLANEOUS..........................................................................................12
6.1 Brokers.............................................................................................12
6.2 Survival of Representations and Warranties..........................................................12
6.3 Notices.............................................................................................12
6.4 Fees and Expenses...................................................................................13
6.5 Assignment..........................................................................................13
6.6 Counterparts........................................................................................14
6.7 Entire Agreement....................................................................................14
6.8 Public Announcements................................................................................14
6.9 Governing Law.......................................................................................14
6.10 Headings...........................................................................................14
6.11 Severability.......................................................................................14
6.12 Modification and Amendment.........................................................................15
6.13 Waiver.............................................................................................15
6.14 Parties Obligated and Benefited....................................................................15
6.15 Actions............................................................................................15
6.16 Terms..............................................................................................15
</TABLE>
EXHIBITS
EXHIBIT A REGISTRATION RIGHTS AGREEMENT
EXHIBIT B VIRTUAL ISP AGREEMENT
ii
<PAGE> 4
SCHEDULES
SCHEDULE 2.2.4 CAPITALIZATION
SCHEDULE 2.2.8 BROKERS
iii
<PAGE> 5
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 2, 2000, is entered into by and between PSINET INC., a New York
corporation ("Purchaser"), and METROCALL, INC., a Delaware corporation (the
"Company").
RECITALS
Purchaser desires to purchase, and the Company desires to issue and
sell, shares of common stock, $0.01 par value per share, of the Company (the
"Common Stock"), upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, and intending
to be legally bound, Purchaser and the Company hereby agree as follows:
ARTICLE 1
ISSUANCE AND SALE OF COMMON STOCK; THE CLOSING
1.1 ISSUANCE AND SALE OF COMMON STOCK. Upon the terms and subject
to the conditions set forth in this Agreement, the Purchaser agrees to purchase,
and the Company agrees to issue and sell, on the Closing Date (as defined below)
7,822,442 shares of Common Stock (the "Shares"). The purchase price for the
Shares will be $2.19 per share in cash.
1.2 THE CLOSING. Subject to the satisfaction or waiver of the
conditions set forth in Article 4, unless the parties otherwise agree, the
closing of the issuance and sale of the Shares (the "Closing") shall occur on
the fourth business day after both (a) the expiration of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (b) the Federal Communications Commission ("FCC")
has (i) granted any required consent to the transactions contemplated by this
Agreement (the "FCC Consents") or (ii) issued special temporary authorizations
to permit the Closing to occur prior to obtaining the FCC Consents. The "Closing
Date" shall be the date the Closing occurs.
1.3 TIME AND PLACE OF CLOSING. The Closing shall take place at the
offices of Wilmer, Cutler & Pickering, 2445 M Street, N.W., Washington, D.C.
20037 at 10:00 a.m., Washington, D.C. time, on the Closing Date or at such other
place agreed to by the parties.
1.4 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the
terms and conditions of this Agreement
(a) The Company shall deliver to the Purchaser a certificate
registered in the Purchaser's name representing the Shares being purchased
thereby against payment of the purchase price therefor by wire transfer to the
Company's bank account previously designated in writing by the Company.
<PAGE> 6
(b) The Purchaser shall deliver to the Company an irrevocable
proxy, which shall be coupled with an interest, pursuant to which all Shares
shall be voted for the nominees of the Company's Board of Directors for election
to the Board for a period of 12 months after the Closing Date. The irrevocable
proxy shall be binding on any transferee of the Shares.
(c) The Company and the Purchaser shall have delivered to one
another the agreements, certificates, instruments and other documents specified
in Article 4.
ARTICLE 2
REPRESENTATION AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
represents and warrants to the Company, as of the date hereof and as of the
Closing Date (unless another date or period of time is specifically stated
herein for a representation or warranty), as follows:
2.1.1 Authorization. The Purchaser has full power and authority to
enter into this Agreement. This Agreement constitutes the valid and legally
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and any other laws of general application
affecting enforcement of creditors' rights generally, and as limited by laws
relating to the availability of a specific performance, injunctive relief, or
other equitable remedies.
2.1.2 Purchase Entirely for Own Account. The Shares to be acquired
by the Purchaser will be acquired for investment for the Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the same in
any transaction which would be in violation of U. S. federal or state securities
laws or which would require the issuance and sale of the Shares to the Purchaser
hereunder to be registered under the Securities Act of 1933, as amended (the
"Securities Act"), subject, however, to the disposition of the Purchaser's
property being at all times within its control. The Purchaser does not presently
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Shares. The Purchaser has not been formed for the
specific purpose of acquiring the Shares.
2.1.3 Restricted Securities. The Purchaser understands that the
Shares have not been, and will not be, registered under the Securities Act, by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Shares indefinitely unless
they are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale except as set forth in
the Registration Rights Agreement. The Purchaser further acknowledges that if an
exemption from registration or
2
<PAGE> 7
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Shares, and on requirements relating to the Company which are outside of
the Purchaser's control, and which the Company may not be able to satisfy.
2.1.4 Legends. The Purchaser understands that the certificates
representing the Shares may bear one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933."
(b) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
2.1.5 Accredited Investor. The Purchaser is (i) an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act or (ii) is a sophisticated investor, experienced in investing in
securities of emerging growth companies and acknowledges that the Purchaser is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares.
2.1.6 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of the Purchaser in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finder's fees or similar fees or commissions payable by the Purchaser in
connection with this Agreement or the transactions contemplated hereby.
2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Purchaser, as of the date hereof and as of the
Closing Date (unless another date or period of time is specifically stated
herein for a representation or warranty), as follows:
2.2.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own and
operate its business as it currently is being conducted and to own and lease the
properties and assets owned or leased by it. The Company is licensed or
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
would not have a material adverse effect on the business, results of
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operations, properties, financial condition, assets and liabilities of the
Company and its subsidiaries, taken as a whole (a "Material Adverse Effect").
The Company has all requisite corporate power and authority to enter into this
Agreement, the Registration Rights Agreement and the Virtual ISP Agreement and
perform its obligations hereunder and thereunder. The Company has delivered to
the Purchaser true, correct and complete copies of its certificate of
incorporation and bylaws.
2.2.2 Authorization and Validity of Agreement. The execution,
delivery and performance by the Company of this Agreement, the Registration
Rights Agreement and the Virtual ISP Agreement and the other agreements,
certificates, documents and instruments contemplated hereby or referred to
herein to which it is or will be a party (collectively, the "Transaction
Documents"), and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action of the
Company. Each of this Agreement, the Registration Rights Agreement and the
Virtual ISP Agreement has been or at the Closing will have been duly executed
and delivered by the Company and, assuming the due authorization, execution, and
delivery hereof by Purchaser, is or at the Closing will be a legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as and to the extent such enforceability may be subject to
bankruptcy or similar laws affecting creditors rights and general equitable
principles.
2.2.3 No Conflicts. The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents, the consummation
by the Company of the transactions contemplated hereby and thereby, and the
fulfillment by the Company of the terms hereof and thereof will not:
(a) conflict with, or result in a breach or violation of, the
provisions of the certificate of incorporation or bylaws of the Company;
(b) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or both) under or
require notice under any material document, material agreement or other material
instrument to which the Company is a party or by which the Company is bound (the
"Company Third Party Contracts") or, require any third party consent, waiver or
approval in order that any Company Third Party Contract remain in effect without
material modification after the Closing Date and without giving rise to any
right to termination, cancellation, acceleration or loss of any material right
or benefit;
(c) result in the creation or imposition of any Lien on the
Company's properties pursuant to (i) any law or regulation to which the Company
or any of its property is subject, or (ii) any judgment, order or decree to
which the Company is bound or any its property is subject; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company is subject or bound.
2.2.4 Capital Stock of the Company. The authorized capital stock of
the Company consists of 200,000,000 shares of Common Stock and 1,000,000 shares
of preferred stock, par value $.01 per share ("Preferred Stock"). As of January
31, 2000, 42,103,017 shares
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of Common Stock were issued and outstanding. As of January 31, 2000, 249,895
shares of Preferred Stock were issued and outstanding, of which 239,517 shares
were issued and outstanding shares of Series A Convertible Preferred Stock
("Series A Preferred"), par value $.01 per share, and of which 10,378 shares
were issued and outstanding shares of Series C Convertible Preferred Stock
("Series C Preferred"), par value $.01 per share ("Series C Preferred"). All of
the issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in Schedule 2.2.4 or as disclosed in the SEC Filings (as defined
below), there are no outstanding options, warrants or other rights, agreements
or commitments to subscribe for or purchase or otherwise acquire any shares of
capital stock (or securities directly or indirectly convertible into or
exchangeable or exercisable for shares of capital stock) of the Company. "SEC
Filings" mean the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and all other reports, statements and registration statements
filed by the Company with the Securities and Exchange Commission ("SEC") since
January 1, 1999 (collectively, the "SEC Filings"). The Company does not have
outstanding any bonds, debentures, notes or other obligations, under the terms
of which the holders of which have the right to vote with the shareholders of
the Company.
2.2.5 Financial Statements and Reports. The SEC Filings were
prepared and filed in accordance with the rules and regulations of the SEC. As
of their respective dates, the SEC Filings did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Filings were prepared in
accordance with GAAP as in effect from time to time applied on a consistent
basis (except as otherwise noted in such financial statements) and present
fairly in all material respects the consolidated financial condition, results of
operations and cash flows of the Company as of the dates and for the periods
indicated, subject, in the case of interim financial statements, to normal year
end audit adjustments. Since September 30, 1999, there has not been any event,
change or development which, individually or in the aggregate, would have a
Material Adverse Effect.
2.2.6 Litigation. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company, its properties, assets or business, that questions the
validity of this Agreement or the other Transaction Documents or the right of
the Company to enter into this Agreement or the other Transaction Documents, or
to consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any Material Adverse Effect.
2.2.7 Validity of Securities. At Closing, the Shares to be issued
to Purchaser will be duly and validly authorized and issued, fully paid and
nonassessable, free and clear of any preemptive rights or liens. Based in part
on the representations of the Purchaser in Section 2.1, the issuance and sale of
the Shares pursuant to this Agreement is exempt from registration under the
Securities Act.
2.2.8 Brokers. Except as set forth in Schedule 2.2.8, no broker,
finder, agent or similar intermediary has acted on behalf of the Company in
connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finder's fees or
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<PAGE> 10
similar fees or commissions payable by the Company in connection with this
Agreement or the transactions contemplated hereby.
2.2.9 Full Disclosure. No representation, warranty or other
statement of the Company contained in this Agreement or any other Transaction
Document or, to the Company's knowledge, other written statement furnished to
the Purchaser in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein
relating to this Agreement and the transactions contemplated hereby or to the
business, results of operations or financial condition of the Company not
misleading when taken as a whole in the light of the circumstances under which
they were made. There is no fact known to the Company which could reasonably be
expected to have, in light of the circumstances in which it is made, a Material
Adverse Effect that has not been disclosed herein or in such other documents,
certificates, instruments and statements furnished to the Purchaser for use in
connection with the transactions contemplated hereby.
ARTICLE 3
COVENANTS
3.1 ANTITRUST LAWS. Each of the Company and the Purchaser will, or
will cause its "ultimate parent" to prepare and file as soon as practicable all
filings that are required under the HSR Act, to respond as soon as practicable
to all inquiries received from the Federal Trade Commission or the Antitrust
Division of the Department of Justice for additional information or
documentation, to respond as soon as practicable to all inquiries received from
any other government agency in connection with antitrust matters, and to seek
early termination of any waiting period under the HSR Act.
3.2 OTHER ACTIONS. Each of the Company and the Purchaser shall use
its reasonable best efforts to (i) take all actions necessary or appropriate to
consummate the transactions contemplated by this Agreement and (ii) cause the
fulfillment at the earliest practicable date of all of the conditions to their
respective obligations to consummate the transactions contemplated by this
Agreement.
3.3 BOARD NOMINATIONS. On the Closing Date, the Company's Chief
Executive Officer shall recommend to the Company's Nominating and Governance
Committee that (i) the Company's Board of Directors elect a senior executive of
Purchaser reasonably acceptable to the Company to be designated by the Purchaser
prior to the Closing Date to the Company's Board of Directors effective as of
the Closing Date, and (ii) such person be nominated to stand for election for a
three-year term with the other nominated Board members at the next annual
meeting of stockholders of the Company presently scheduled to be held in May,
2000. If, at the end of the three-year term, Purchaser and/or its affiliates
owns at least 7.5% of the issued and outstanding shares of Common Stock, such
person or another senior executive of Purchaser reasonably acceptable to the
Company will be nominated for another three-year term.
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3.4 LISTING OF ADDITIONAL SHARES. The Company will file with the
Nasdaq National Market a Notification Form for Listing of Additional Shares for
an amount of shares of Common Stock equal to at least the amount of the Shares.
3.5 LIMITATIONS ON TRANSFER. Notwithstanding any other provision of
this Agreement, for a period of 12 months after the Closing Date, Purchaser will
not directly or indirectly sell, transfer or otherwise dispose of any of the
Shares, other than to an affiliate of the Purchaser or pursuant to a pledge to
an unaffiliated third-party lender in connection with a bona fide lending
transaction or a foreclosure or similar sale in connection therewith, unless the
Purchaser shall have first delivered to the Company a written offer to resell
such Shares (the "Offered Shares") for cash at the current market price.
"Current market price" for this purpose shall mean the average closing trading
price per share of the Common Stock on the Nasdaq Small Cap Market (or such
other exchange or quotation service on which the Common Stock shall then be
traded or quoted) for the 10 trading days immediately prior to the written
offer. Upon receipt of the written offer, the Company will have five business
days within which to accept the offer, and shall be required to make settlement
of the purchase within three business days after the date on which it accepts
the offer. If the right given to the Company in this section shall not have been
exercised as to the Offered Shares as set forth above, the Purchaser shall have
the right, at any time within three months after the expiration of such five
business day period, to dispose of any or all of the Offered Shares. If by the
end of such three-month period, provided such three-month period ends prior to
the expiration of the 12-month period referred to in the first sentence of this
section, the Purchaser has not sold or otherwise disposed of all of the Offered
Shares, the remaining Offered Shares shall not be sold by the Purchaser except
after compliance again with the provisions of this Section 3.5. Nothing in this
section shall prevent the Purchaser from selling any Shares pursuant to a tender
offer, merger, sale of all or substantially all the Company's assets or any
similar transaction that offers each holder of Common Stock (other than, if
applicable, the person proposing such transaction) the opportunity to dispose of
Common Stock for the same consideration or otherwise contemplates the
acquisition of Common Stock beneficially owned by each such holder for the same
consideration.
3.6 OTHER LIMITATIONS ON PURCHASER. For a period of 24 months after
the Closing Date, the Purchaser agrees that, unless it is specifically invited
or otherwise permitted in writing to do so by the Company, it will not, and will
cause each of its affiliates not to, directly or indirectly:
(a) in any way acquire or agree to acquire beneficial ownership of
any securities or any direct or indirect rights or options to acquire beneficial
ownership of any securities of the Company, except by way of stock dividends,
stock splits or distributions by the Company made available to holders of Common
Stock generally, including, without limitation, pursuant to a preferred stock
purchase rights plan of the Company or pursuant to any similar plan or
distribution;
(b) make any public announcement with respect to, or submit to the
Company or any of its directors, officers, representatives, employees,
attorneys, advisers, agents or affiliates (whether publicly or otherwise) any
proposal for, the acquisition of securities of the Company or for or with
respect to any merger, consolidation or business combination involving the
Company or its affiliates or for or with respect to any purchase of a
substantial portion of the assets of the Company or its affiliates, whether or
not any parties other than the Purchaser and its
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<PAGE> 12
affiliates are involved and whether or not such proposal might require the
making of a public announcement by the Company; provided, however, that the
Purchaser shall be permitted to approach the Board of Directors of the Company,
directly or indirectly through its executive officers or investment bankers, for
purposes of obtaining a waiver of its obligations and commitments under this
clause (b);
(c) make, or in any way participate in, any "solicitation" of
"proxies" to vote any voting securities of the Company or become a "participant"
in any "election contest" (as such terms are defined or used in Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
such Regulation is currently in effect), provided that nothing herein restricts
the ability of the Purchaser to vote the Shares pursuant to proxies distributed
by the Company;
(d) propose any matter for submission to a vote of shareholders of
the Company;
(e) form, join or in any way participate in a "group" (within the
meaning of Section 13(d) (3) of the Exchange Act) with respect to any voting
securities of the Company other than as specifically contemplated by this
Agreement;
(f) grant any proxy with respect to any voting securities of the
Company to any person not approved by the Company;
(g) deposit any voting securities of the Company in a voting trust
or subject any such securities to any arrangement or agreement with respect to
the voting of such securities or other agreement having similar effect;
(h) take any action which would be reasonably likely to require the
Company to make a public announcement regarding any of the matters specified in
clauses (a)-(g) of this Section 3.6;
(i) enter into any negotiations, arrangements or understandings
with any third party with respect to any of the foregoing, or any discussions
designed to advise, assist or encourage any third party in connection with any
of the foregoing;
(j) seek to influence or influence (except as a customer or
supplier of the Company in the ordinary course of business) the management or
policies of the Company; provided, however, that this clause (j) shall not
prohibit the designee of the Purchaser on the Company's Board of Directors under
Section 3.3 from taking action and serving in his capacity as a director of the
Company in a manner consistent with the proper exercise of his fiduciary and
other duties as a director of the Company; or
(k) disclose publicly any intention, plan or arrangement
inconsistent with the foregoing.
3.7 FCC APPLICATIONS. If necessary to effectuate the transactions
contemplated by this Agreement, the Company shall prepare and file as soon as
practicable all required applications for the FCC Consents and shall use its
reasonable best efforts to obtain such consents at the
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earliest practicable date. Purchaser shall reasonably cooperate with the Company
in the Company's preparation, filing and prosecution of any such applications.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. The respective
obligations of Purchaser, on the one hand, and the Company, on the other, to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
4.1.1 No Injunction, Etc. No preliminary or permanent injunction or
other order shall have been issued by any federal or state court of competent
jurisdiction in the United States or by any U.S. federal or state governmental
or regulatory body, and no statute, rule, regulation or executive order shall
have been promulgated or enacted by any U.S. federal or state governmental
authority which restrains, enjoins or otherwise prohibits in any material
respects the transactions contemplated hereby.
4.1.2 HSR Act. Any waiting period under the HSR Act applicable to
the consummation of the transactions contemplated hereby shall have expired.
4.1.3 Registration Rights Agreement. The parties shall have entered
into a Registration Rights Agreement in substantially the form attached hereto
as Exhibit A.
4.1.4 Virtual ISP Agreement. The parties shall have entered into
the Virtual ISP Agreement in substantially the form attached hereto as Exhibit
B.
4.1.5 Conversion of Series C Preferred. All of the issued and
outstanding shares of Series C Preferred shall have been exchanged for shares of
Common Stock.
4.1.6 FCC Approval. If required, the Company shall have obtained
the prior approval of the FCC to the transactions contemplated by this
Agreement; provided, that this condition shall be satisfied if the Company
obtains special temporary authority from the FCC to permit the Closing to occur
prior to obtaining the FCC Consents.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. In addition
to the conditions set forth in Section 4.1, the obligations of the Company to
consummate the transactions to be consummated at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of each of the additional
conditions set forth below:
4.2.1 Accuracy of Representations and Warranties. The
representations and warranties of Purchaser contained herein or in any
certificate delivered pursuant to this Agreement shall be true and correct in
all material respects on the date when made and shall be repeated at and as of
the Closing Date and shall be true and correct in all material respects on the
Closing Date as so made again (unless a representation is made as of a specific
date, and in such event it shall be true and correct in all material respects as
of such date).
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4.2.2 Performance of Agreements. Purchaser shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this Agreement,
to be performed or complied with by it prior to or at the Closing Date.
4.2.3 Certificates. The Company shall have received a certificate
from Purchaser, dated the Closing Date, signed by the President or any
authorized Vice President of Purchaser, in his capacity as an officer of
Purchaser, to the effect that, to the best of his knowledge, information and
belief, the conditions specified in Section 4.2.1 and Section 4.2.2 have been
satisfied.
4.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. In
addition to the conditions set forth in Section 4.1, the obligations of
Purchaser to consummate the transactions to be consummated at the Closing are
subject to the satisfaction, at or prior to the Closing Date, of each of the
additional conditions set forth below:
4.3.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company contained herein or in any
certificate delivered pursuant to this Agreement shall be true and correct in
all material aspects on the date when made and shall be repeated at and as of
the Closing Date and shall be true and correct in all material respects on the
Closing Date as so made again (unless a representation is made as of a specific
date, and in such event it shall be true and correct in all material respects as
of such date).
4.3.2 Performance of Agreements. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions contained in this Agreement,
to be performed or complied with by it prior to or at the Closing Date.
4.3.3 Certificates. Purchaser shall have received a certificate
from the Company, dated the Closing Date, signed by the President or any
authorized Vice President of the Company, in his capacity as an officer of the
Company, to the effect that, to the best of his knowledge, information and
belief, the conditions specified in Section 4.3.1 and Section 4.3.2 have been
satisfied.
4.3.4 Opinion of Counsel for the Company. Purchaser shall have
received an opinion of the Company's counsel dated the Closing Date in a form
agreed to by the parties.
4.3.5 Other Deliveries. The Company shall have delivered to
Purchaser at the Closing the following:
(a) a certificate of incumbency for the officers executing the
documents on behalf of the Company;
(b) a certified copy of the resolutions duly adopted by the
directors of the Company and signed by the Secretary or Assistant Secretary
authorizing the transactions contemplated by this Agreement;
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(c) a certificate of the Secretary or Assistant Secretary
certifying that the resolutions referred to in Section 4.3.5(b) have not been
rescinded, modified or withdrawn and that such resolutions are in full force and
effect as of the Closing Date; and
(d) such further certificates and documents evidencing the
consummation by the Company of the transactions contemplated hereby as Purchaser
shall reasonably request.
4.3.6 Other Stock Purchase Agreements. Contemporaneously with the
Closing, the Company shall have issued and sold at least 7,822,442 shares of
Common Stock to HMTF Bridge MC I, LLC and at least 7,766,769 shares of Common
Stock to Aether Systems, Inc. at a purchase price of at least $2.19 per share
and otherwise in accordance with the terms of the Common Stock Purchase
Agreements of even date hereof, respectively, between the Company and HMTF
Bridge MC I, LLC and the Company and Aether Systems, Inc.
4.4 WAIVER OF CONDITIONS. Each of the parties, in its discretion,
may waive, in whole or in part, at or prior to the Closing Date, the failure of
satisfaction of any of the conditions precedent to its obligations set forth
herein. No such waiver by either of the parties shall be effective unless made
in writing.
ARTICLE 5
TERMINATION AND DEFAULT
5.1 GENERAL. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
set forth below:
5.1.1 Mutual Consent. This Agreement may be terminated by the
mutual consent of the parties.
5.1.2 Order or Decree. This Agreement may be terminated by
Purchaser or the Company if any court of competent jurisdiction in the United
States or other U.S. governmental body shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
in any material respects the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and nonappealable.
5.1.3 Outside Date. This Agreement may be terminated by either
party (a) if the Closing shall not have occurred by July 1, 2000 (the "Outside
Date") or (b) if one or more conditions to such party's obligation to consummate
the transactions contemplated hereby cannot be satisfied by the Outside Date;
provided, however, that no party may exercise its rights under this Section
5.1.3 if such party is in material breach or default under this Agreement.
5.2 PROCEDURE UPON TERMINATION. In the event of the termination of
this Agreement, written notice thereof shall promptly be given to the other
party hereto and this Agreement shall terminate, all further obligations of the
parties hereunder to satisfy the conditions precedent to the Closing shall
terminate, and the transactions contemplated hereby shall be abandoned without
further action by any of the parties hereto.
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5.3 EFFECT OF TERMINATION. Nothing in this Article 5 shall relieve
any party hereto of any liability for intentional or willful breach of this
Agreement, including, without limitation, a breach relating to the intentional
or willful failure to use reasonable efforts to satisfy the conditions set forth
in Article 4. The parties shall have no liability for termination of this
Agreement for any reason other than an intentional or willful breach of this
Agreement, including, without limitation, no liability for any termination by
reason of the failure to have satisfied any of the conditions set forth in
Article 4 which is not attributable to an intentional or willful failure to have
used reasonable efforts in connection therewith.
ARTICLE 6
MISCELLANEOUS
6.1 BROKERS. The transactions contemplated hereby have been and
shall be carried on by parties in such manner as not to give rise to any valid
claims against the parties for a brokerage commission, finder's fee or other
like payment, other than as disclosed in Section 2.1.6 or Section 2.2.8. Each
party agrees to indemnify and hold the other harmless from and against any
claims for brokerage commissions or finder's fees insofar as such claims shall
be alleged to be based upon arrangements or agreements made by the indemnifying
party or on its behalf. Such indemnity shall include the cost of reasonable
counsel fees in connection with the defense of any such claims.
6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of any
investigation at any time made by or on behalf of any party, or of any
information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of
eighteen months from the Closing; provided, however, that each party hereby
represents and warrants to the other party that it has no actual knowledge as of
the date hereof or as of the Closing of any breach of any representation or
warranty by such other party (as contrasted with knowledge solely of a fact
which may give rise to any such breach).
6.3 NOTICES. Except as otherwise provided, all notices which are
permitted or required under this Agreement shall be in writing and shall be
deemed given (a) when delivered personally, (b) if by fax upon transmission with
confirmation of receipt by the receiving party's facsimile terminal, (c) if sent
by documented overnight delivery service on the date delivered or (d) if sent by
mail, five (5) business days after being mailed by registered or certified mail,
postage prepaid, addressed as follows, or to such other person or address as may
be designated by notice to the other party:
If to the Company, to:
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Vincent D. Kelly, Chief Financial Officer and Treasurer
Fax Number: (703) 768-9625
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with a copy (which shall not constitute notice) to:
Wilmer, Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attn: Thomas W. White
Fax Number: (202) 663-6363
If to Purchaser, to:
PSINet Inc.
510 Huntmar Park Drive
Herndon, Virginia 20170
Attn: John Walpuck, Vice President, Corporate Development
Fax Number: (703) 476-2983
With a copy (which shall not constitute notice) to:
PSINet Inc.
510 Huntmar Park Drive
Herndon, Virginia 20170
Attn: Kathleen B. Horne, Senior Vice President and
General Counsel
Fax Number: (703) 904-9527
and to:
Nixon Peabody LLP
437 Madison Avenue
New York, New York 10022
Attn: Bruce E. Rosenthal
Fax Number: (212) 940-3111
6.4 FEES AND EXPENSES. Each party shall pay the filing fee relating
to any filing required by it, if any, in accordance with the HSR Act. If
applications to obtain the FCC's consent to the transactions contemplated by
this Agreement are required, the Company shall pay any required filing or other
fees and expenses in connection with the preparation, filing, and prosecution of
such applications. All other expenses incurred in connection with the
negotiation, preparation, execution and performance of this Agreement shall be
paid by the party incurring such expenses.
6.5 ASSIGNMENT. This Agreement and the transactions contemplated
hereby may not be assigned or otherwise transferred, in whole or in part, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that notwithstanding the foregoing, (i) each party
shall have the right to pledge, assign or otherwise transfer this Agreement and
any other Transaction Document and its rights hereunder and thereunder, in whole
or in part, as collateral security to any lender, and (ii) each party shall have
the right to assign or transfer this Agreement and any other Transaction
Document and its rights hereunder
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and thereunder, in whole or in part, to its parent or to any direct or indirect
wholly-owned subsidiary of that party or to any person into which that party may
be merged or consolidated or which purchases all or substantially all of the
assets of that party; provided, however, that (a) such parent, subsidiary or
person agrees to be bound by the terms of this Agreement or other Transaction
Document (including, without limitation, all provisions binding upon the
assigning or transferring party) and (b) any such assignment or transfer shall
not relieve that party from any liability or obligation under this Agreement or
other Transaction Document.
6.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered, shall be an original
instrument, but such counterparts together shall constitute a single agreement.
6.7 ENTIRE AGREEMENT. This Agreement, including all Exhibits
hereto, and all certificates and documents executed and delivered in connection
with this Agreement, when executed and delivered, shall constitute the entire
agreement of the parties, superseding and extinguishing all prior agreements and
understandings, representations and warranties, relating to the subject matter
hereof.
6.8 PUBLIC ANNOUNCEMENTS. Each party shall have the right to
review, comment upon and approve any publicity materials, press releases or
other public statements by the other party that name or otherwise identify such
party or any of its affiliates or refer to, or describe any aspect of, this
Agreement or other Transaction Document or the transactions contemplated hereby
and thereby; provided, however, that with respect to disclosure documents to be
filed by either party under the Exchange Act or the Securities Act, subject to
the last sentence of this Section 6.8, each party shall only have the right to
prior review and to comment upon the other party's documents. Each party agrees
that it will not issue any such publicity materials, press releases or public
statements without the prior written approval of the other party, which approval
shall not be unreasonably withheld, conditioned or delayed. The Company and the
Purchaser shall cooperate with each other to request confidential treatment as
may be mutually agreed by them with respect to certain terms of this Agreement,
the other Transaction Documents and the transactions contemplated hereby and
thereby in any filing with the SEC, any other governmental authority or any
securities exchange or stock market.
6.9 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the substantive laws of the State of
Delaware applicable to contracts made and to be performed therein, without
reference to the principles of conflicts of laws.
6.10 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
6.11 SEVERABILITY. Any provision of this Agreement which is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, provided that such invalidity or unenforceability does not
deny any party the material benefits of the transactions for which it has
bargained, such invalidity or unenforceability shall not affect in any way the
remaining provisions hereof.
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6.12 MODIFICATION AND AMENDMENT. This Agreement may not be modified
or amended except by written agreement specifically referring to this Agreement
and signed by the parties hereto.
6.13 WAIVER. No waiver of a breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
6.14 PARTIES OBLIGATED AND BENEFITED. Subject to the limitations
set forth below, this Agreement will be binding upon the parties hereto and
their respective assignees and successors in interest and will inure solely to
the benefit of such parties and their respective assigns and successors in
interest, and no other person will be entitled to any of the benefits conferred
by this Agreement.
6.15 ACTIONS. Each party will execute and deliver to the other,
from time to time at or after the Closing, for no additional consideration and
at no additional cost to the requesting party (without incurring any obligation
to pay money), such further assignments, certificates, instruments, records or
other documents, assurances or things as may be reasonably necessary to give
full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
6.16 TERMS. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The words "include" and "exclude" and derivatives of
those words are used in this Agreement in an illustrative sense rather than
limiting sense.
[Execution Page Following]
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<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives, officers or agents
on the date first written above.
PSINET INC.
By: ________________________________
Its: _______________________________
METROCALL, INC.
By: ________________________________
Its: _______________________________
<PAGE> 21
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
(See Attached)
<PAGE> 22
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered
into as of ________ ___, 2000, by and between METROCALL, INC., a Delaware
corporation (the "Company"), and PSINET INC., a New York corporation
("Purchaser").
RECITALS
WHEREAS, the Company and Purchaser are parties to that certain Common
Stock Purchase Agreement, dated as of February 2, 2000 (the "Stock Purchase
Agreement"), pursuant to which Purchaser will purchase from the Company (the
"Purchase") 7,822,442 shares (the "Common Shares") of common stock, $.01 par
value, of the Company (the "Common Stock"); and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Stock Purchase Agreement that the Company and
Purchaser enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 "Closing" means the closing of the Purchase pursuant to which the
Company will have issued the Common Shares to Purchaser in accordance with the
terms and conditions of the Stock Purchase Agreement.
1.02 "Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.03 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
1.04 "Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any court, panel, judge, board,
bureau, commission, agency or other entity, body or other Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.05 "Holder" means Purchaser and/or its permitted successors and
assigns pursuant to Section 6.05.
<PAGE> 23
1.06 "Person" means an individual or corporation, partnership, trust,
unincorporated organization, association or other entity and includes any
Governmental Authority.
1.07 "Registrable Securities" means the Common Shares received by
Purchaser from the Company pursuant to the Stock Purchase Agreement and any
additional shares of Common Stock issued by the Company in respect thereof in
connection with any stock dividend, stock split, recapitalization or similar
event; provided, however, that any Registrable Security will cease to be a
Registrable Security when (i) such Registrable Security has been transferred
pursuant to an effective registration statement under the Securities Act
covering such Registrable Security (but not including any transfer exempt from
registration under the Securities Act), (ii) such Registrable Security is no
longer held of record by Holder, or (iii) the Holder of such Registrable
Security is then able to use Rule 144(k) under the Securities Act (or any
successor provision) to transfer such Registrable Security.
1.08 "Securities Act" means the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
1.09 "Shares" means shares of the Registrable Securities.
ARTICLE II
REGISTRATION RIGHTS
2.01 Required Registrations. At any time or times after the date hereof
(so long as Holder shall own Registrable Securities), Holder may notify the
Company in writing that it (i) intends to offer or cause to be offered for
public sale all or any portion of its Registrable Securities (such requests
shall be in writing and shall state the number of shares of Registrable
Securities intended to be disposed of) and (ii) request that the Company cause
such Registrable Securities to be registered under the Securities Act; provided,
that any such request shall cover at least 2,000,000 shares and shall not be
made more frequently than every 12 months. The Company shall prepare and file
with the Commission registration statements under the Securities Act with
respect to the Registrable Securities requested to be so registered and shall
use its reasonable best efforts to cause such registration statements to become
effective promptly after filing. The registration statement with respect to such
Registrable Securities shall be filed with the Commission within ninety (90)
days after receipt of Holder's notification relating thereto.
Except as provided in the next succeeding paragraph of this Section
2.01, the Company shall use its reasonable best efforts to maintain the
effectiveness of each registration statement filed pursuant to this Section 2.01
until such time as all Shares registered pursuant to the registration statement
either have been transferred pursuant to the registration statement or are
eligible to be sold by Holder pursuant to Rule 144(k) under the Securities Act.
The obligations of the Company under this Section 2.01 are subject to
the condition that the Company shall be entitled to require the Holder to
suspend for up to ninety (90) days once in any twelve month period the sale of
Shares pursuant to a registration statement filed pursuant to
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this Section 2.01 if and for so long as (i) the Board of Directors of the
Company determines, in its reasonable judgment, that the sale of Shares pursuant
thereto would materially interfere with any material financing, acquisition,
corporate reorganization or other material transaction by the Company, (ii) the
Company promptly gives the Holder written notice of such determination, and
(iii) all other similarly situated shareholders shall also be subject to the
same suspension. The Company shall have no obligation to maintain the
effectiveness of a registration statement with respect to the Shares during
periods when the Holder is required to suspend the sale of such Shares as
provided in this paragraph. As soon as possible after the expiration of such
periods, the Company shall amend its registration statements as necessary to
permit the Holder to sell Shares pursuant to such registration statements and
shall notify the Holder in writing that it may resume the sale of Shares
pursuant to such Registration Statement. Any registration made pursuant to this
Section 2.01 shall not include a plan of distribution involving an underwritten
offering.
2.02. Piggyback Registration. (a) If the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock for its own account or for the account of another Person (other
than a registration statement on Form S-4 or S-8, or pursuant to Rule 415 (or
any substitute form or rule, respectively, that may be adopted by the
Commission)), the Company shall give written notice of such proposed filing to
the Holder at the address set forth in the share register of the Company as soon
as reasonably practicable (but in no event less than 15 days before the
anticipated filing date), undertaking to provide the Holder the opportunity to
register on the same terms and conditions such number of Registrable Securities
as the Holder may request (a "Piggyback Registration"). The Holder will have
seven business days after receipt of any such notice to notify the Company as to
whether it wishes to participate in a Piggyback Registration (which notice shall
not be deemed to be a request pursuant to Section 2.01); provided that should
the Holder fail to provide timely notice to the Company, the Holder will forfeit
any rights to participate in the Piggyback Registration with respect to such
proposed offering. In the event that the registration statement is filed on
behalf of a Person other than the Company, the Company will use its reasonable
best efforts to have the Registrable Securities that the Holder wishes to sell
included in the registration statement. If the Company or the Person for whose
account such offering is being made shall determine in its sole discretion not
to register or to delay the proposed offering, the Company may, at its election,
provide written notice of such determination to the Holder and (i) in the case
of a determination not to effect the proposed offering, shall thereupon be
relieved of the obligation to register such Registrable Securities in connection
therewith, and (ii) in the case of a determination to delay a proposed offering,
shall thereupon be permitted to delay registering such Registrable Securities
for the same period as the delay in respect of the proposed offering. As between
the Company and the Holder, the Company shall be entitled to select the
underwriters in connection with any Piggyback Registration.
(b) Priority on Piggyback Registrations. If the Registrable Securities
requested to be included in the Piggyback Registration by the Holder differ from
the type of securities proposed to be registered by the Company and the managing
underwriter advises the Company that due to such differences the inclusion of
such Registrable Securities would cause a material adverse effect on the
business, results of operations, properties, financial condition, assets and
liabilities of the Company and its subsidiaries, taken as a whole (a "Material
Adverse Effect"), then (i) the number of Holder's Registrable Securities to be
included in the Piggyback Registration shall be
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reduced to an amount which, in the opinion of the managing underwriter, would
eliminate such Material Adverse Effect or (ii) if no such reduction would, in
the opinion of the managing underwriter, eliminate such Material Adverse Effect,
then the Company shall have the right to exclude all such Registrable Securities
from such Piggyback Registration, provided, that no other securities of such
type are included and offered for the account of any other Person in such
Piggyback Registration. Any partial reduction in number of Registrable
Securities of the Holder to be included in the Piggyback Registration pursuant
to clause (i) of the immediately preceding sentence shall be effected pro rata
based on the ratio which the Holder's requested shares bears to the total number
of shares requested to be included in such Piggyback Registration by all Persons
other than the Company who have the contractual right to request that their
shares be included in such registration statement and who have requested that
their shares be included. If the Registrable Securities requested to be included
in the registration statement are of the same type as the securities being
registered by the Company and the managing underwriter advises the Company that
the inclusion of such Registrable Securities would cause a Material Adverse
Effect, the Company will be obligated to include in such registration statement,
as to the Holder, only a portion of the shares Holder has requested be
registered equal to the ratio which the Holder's requested shares bears to the
total number of shares requested to be included in such registration statement
by all Persons (other than the Person or Persons initiating such registration
request) who have the contractual right to request that their shares be included
in such registration statement and who have requested their shares be included;
provided, that in the event the Company registers shares of Common Stock in an
underwritten offering pursuant to Section 2.02 of the Registration Rights
Agreement dated as of __________, 2000 between the Company and AT&T Wireless
Services, Inc. ("Wireless"), then all shares to be registered on behalf of
Wireless pursuant to such agreement shall be included in such registration
statement before any shares of Common Stock to be sold by the Company for its
own account or the account of the Holder or any other Person entitled to request
that their shares be included in such registration statement. If the Company
initiated the registration, for its own account or for the account of any other
Person other than the Holder, then the Company may include all of those
securities in such registration statement before any of Holder's requested
shares are included. If another security holder initiated the registration, then
the Company may not include any of its securities in such registration statement
unless all Registrable Securities requested to be included in the registration
statement by the Holder are included in such registration statement. If as a
result of the provisions of this Section 2.02(b) the Holder shall not be
entitled to include all Registrable Securities in a registration that the Holder
has requested to be so included, the Holder may withdraw its request to include
Registrable Securities in such registration statement prior to its
effectiveness.
ARTICLE III
REGISTRATION PROCEDURES
3.01 Company Obligations. Whenever the Company is required under
Article II to register any Registrable Securities, it agrees that it shall also
do the following:
(a) furnish to the Holder, prior to the filing of a
registration statement pertaining to any Shares (each a "Registration
Statement") or any prospectus, amendment
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or supplement thereto, copies of each such Registration Statement as
proposed to be filed, which documents will be subject to the reasonable
review and comments of the Holder (and its legal counsel), and the
Company will not file any such Registration Statement, any prospectus
or any amendment or supplement thereto (or any such documents
incorporated by reference) to which the Holder shall reasonably object
in writing; and thereafter furnish to the Holder such number of copies
of such Registration Statement, each amendment and supplement thereto
(including any exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus) and such
other documents as the Holder may reasonably request in writing in
order to facilitate the disposition of the Shares registered pursuant
to such Registration Statement; provided, however, that the obligation
of the Company to deliver copies of prospectuses or preliminary
prospectuses to the Holder shall be subject to the receipt by the
Company of reasonable assurances from the Holder that the Holder will
comply with the applicable provisions of the Securities Act and of such
other securities or blue sky laws as may be applicable in connection
with any use of such prospectuses or preliminary prospectuses;
(b) use its reasonable best efforts to register or qualify the
Shares registered pursuant to such Registration Statement under such
other securities or blue sky laws of such jurisdictions as the Holder
may reasonably request and do any and all other acts and things which
may be reasonably necessary to enable the Holder to consummate the
disposition in such jurisdictions of such Shares; provided, however,
that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required
to qualify but for this subsection, (ii) subject itself to taxation in
any such jurisdiction, or (iii) consent to general service of process
in any such jurisdiction;
(c) apply, prior to or concurrently with the filing of the
Registration Statement, to the Nasdaq National Market System or the
Nasdaq SmallCap Market System (or, if the Company is not listed on the
Nasdaq National Market System or the Nasdaq SmallCap Market System, any
other exchange or automated quotation system on which the Company's
Common Stock is then listed) for the listing of the Shares and use its
best effort to obtain the listing of such Shares;
(d) notify the Holder in writing at any time when a prospectus
relating to the Shares registered pursuant to such Registration
Statement is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus or filing of a report incorporated in the
prospectus by reference so that, as thereafter delivered to the
purchasers of such Shares, such prospectus (including documents
incorporated therein by reference) will not contain an untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading and promptly prepare, file with the Commission and make
available to the Holder any such supplement, amendment or report
incorporated in the prospectus by reference, including, without
limitation, after any period referred to in Section 2.01;
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(e) make available for inspection by the Holder of Shares to
be registered pursuant to a Registration Statement and any attorney,
accountant or other professional retained thereby (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspectors in connection with such Registration Statement;
provided, that the Company shall not be required to make such
information available to more than one law firm on behalf of the Holder
of Shares to be registered pursuant to a Registration Statement.
Records that the Company determines, in good faith, to be confidential
and which it notifies the Inspectors in writing are confidential shall
not be disclosed by the Inspectors unless (i) in the judgment of
counsel to the Company the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in such Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, or
(iii) the information in such Records is generally available to the
public. As a condition of receiving access to such confidential
information described in clause (i) or (ii) of the preceding sentence,
the Holder of such Shares shall agree that such confidential
information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by them as the basis for any
market transactions in the securities of the Company unless and until
such information is made generally available to the public, it being
understood that nothing in this sentence shall reduce the Company's
obligations hereunder, including under Section 3.01(d). The Holder
further shall agree that it will, upon learning that disclosure of such
Records from the Holder is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(f) obtain consents from its independent public accountants in
customary form as required to obtain and maintain effectiveness of a
Registration Statement;
(g) obtain an opinion or opinions from its counsel in
customary form and reasonably satisfactory to the Holder and its legal
counsel;
(h) make generally available to the Holder earnings
statements, which need not be audited, satisfying the provisions of
Section 11(a) of the Securities Act no later than 45 days after the end
of the twelve-month period beginning with the first month of the first
fiscal quarter commencing after the effective date of a Registration
Statement, which earnings statements shall cover said twelve-month
period;
(i) promptly notify the Holder of the issuance or threatened
issuance of any stop order or other order suspending the effectiveness
of a Registration Statement or preventing or suspending the use of any
preliminary prospectus, prospectus or prospectus supplement, use
reasonable best efforts to prevent the issuance of any such threatened
stop order or other order, and, if any such order is issued, use all
its reasonable
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best efforts to obtain the lifting or withdrawal of such order at the
earliest possible moment and promptly notify the Holder of any such
lifting or withdrawal;
(j) if requested by the Holder, the Company will promptly
incorporate in a prospectus supplement or post-effective amendment to a
Registration Statement such information concerning Holder and Holder's
intended method of distribution as Holder requests to be included
therein (and which is not violative of an applicable law, rule or
regulation, in the reasonable judgment of the Company, after
consultation with its outside legal counsel), including, without
limitation, with respect to any change in the intended method of
distribution or the amount of Shares being offered by Holder, the
offering price for such Shares or any other terms of the offering or
distribution of the Shares, and the Company will make all required
filings of such prospectus supplement or post- effective amendment as
soon as possible after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment;
(k) as promptly as practicable after the filing with the
Commission of any document which is incorporated by reference into a
Registration Statement, notify the Holder of such filing and deliver a
copy of such document to the Holder;
(l) cooperate with the Holder to facilitate the timely
preparation and delivery of certificates, not bearing any restrictive
legends, unless otherwise required by the Holder, representing the
Shares to be sold under a Registration Statement, and enable such
Shares to be in such denominations and registered in such name as such
Holder may request;
(m) cooperate with the Holder, its legal counsel and any other
interested party (including any interested broker-dealer) in making any
filings or submissions required to be made, and the furnishing of all
appropriate information in connection therewith, with the National
Association of Securities Dealers, Inc. (the "NASD");
(n) cause its subsidiaries to take all action necessary to
effect the registration of the Shares contemplated hereby, including
preparing and filing any required financial or other information;
(o) make available to the transfer agent for each class or
series of Shares a supply of certificates or other instruments
evidencing or constituting such Shares which shall be in a form
complying with the requirements of such transfer agent, promptly after
a registration thereof; and
(p) use its reasonable best efforts to keep each such
registration or qualification effective, including through new filings,
amendments or renewals, during the period the Registration Statement is
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable in connection with such registration
or qualifications in all jurisdictions in which qualification or
registration is necessary.
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3.02 Information from Holder. The Company may require the Holder to
promptly furnish in writing to the Company such information regarding the
distribution of the Shares as it may from time to time reasonably request and
such other information as may be legally required in connection with such
registration.
3.03 Suspension of Sales. The Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
subsection 3.01(d) hereof, it will immediately discontinue disposition of Shares
pursuant to a Registration Statement until it receives copies of the
supplemented or amended prospectus contemplated by subsection 3.01(d) hereof,
and, if so directed by the Company, the Holder will deliver to the Company all
copies, other than permanent file copies then in their possession, of the most
recent prospectus (including any prospectus supplement) covering such Shares at
the time of receipt of such notice or destroy all such copies.
ARTICLE IV
REGISTRATION EXPENSES
4.01 Except as provided in Section 4.02, all fees and expenses incident
to the Company's performance of or compliance with this Agreement shall be borne
by the Company, including, without limitation, the following fees and expenses:
(a) all Commission, NASD, stock exchange, automated quotation system or other
registration and filing fees and listing fees; (b) the fees and expenses of the
Company's compliance with securities or blue sky laws (including reasonable fees
and disbursements of counsel in connection with blue sky qualifications of the
Shares); (c) printing expenses; (d) the fees and disbursements of counsel for
the Company and of one counsel for the Holder for each registration, and the
fees and expenses for independent certified public accountants and other persons
retained by the Company in connection with such registration; (e) fees of
transfer agents and registrars; and (f) messenger and delivery expenses. In
addition, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance obtained by the Company, and the
expenses and fees for listing or authorizing for quotation the securities to be
registered on each securities exchange or automated quotation system on which
any shares of the Common Stock are then listed or quoted.
4.02 The Holder shall pay all its internal expenses incurred in
connection with the registration (including, without limitation, all salaries
and expenses of Holder's officers and employees performing legal or accounting
duties).
ARTICLE V
INDEMNIFICATION; CONTRIBUTION
5.01 Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Holder, each of the Holder's officers, directors, partners
and members, and the Holder's legal counsel and independent accountants, if any,
and each person controlling any such persons within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange
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Act, with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation, any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, and any of the foregoing incurred in settlement of
any litigation, commenced or threatened) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus contained therein or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction by the Company in connection with any
registration, qualification or compliance required hereunder or arising out of
or based upon the Company's breach of any representation, warranty, covenant or
agreement contained in this Agreement; provided, however, that the Company shall
not be liable in any such case to the extent any of such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon information
furnished in writing to the Company by the Holder expressly for use therein.
5.02 Indemnification by Holder. Holder agrees to indemnify and hold
harmless the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company set forth above in Section 5.01, but only
with respect to information furnished in writing by the Holder, or on its
behalf, expressly for use in the Registration Statement or prospectus relating
to the Shares, any amendment or supplement thereto or any preliminary
prospectus. In case any action or proceeding shall be brought against the
Company or its directors or officers, any such controlling person, or any such
underwriter or controlling person of an underwriter in respect of which
indemnity may be sought against the Holder, the Holder shall have the rights and
duties given to the Company, and the Company or its directors or officers or
such controlling person or any such underwriter or controlling person of an
underwriter shall have the rights and duties given to the Holder, by the
preceding Section 5.01 hereof.
5.03 Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Person entitled to indemnification under Section 5.01 or
5.02 above (an "Indemnified Party") in respect of which indemnity may be sought
from any party who has agreed to provide such indemnification (an "Indemnifying
Party"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all expenses. Such Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (a) the
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Indemnifying Party has agreed to pay such fees and expenses, or (b) such
Indemnified Party shall have been advised by counsel that there is an actual or
potential conflict of interest on the part of counsel employed by the
Indemnifying Party to represent such Indemnified Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that Indemnified
Party elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Party; it being
understood, however, that the Indemnifying Party shall not, in connection with
any one cause of action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties unless there shall be
conflicts of interest among such Indemnified Parties, in which case the
Indemnifying Party shall be liable for the fees and expenses of additional
counsel). The Indemnifying Party shall not be liable for any settlement of any
such action or proceeding or any threatened action or proceeding effected
without its written consent, which consent shall not be unreasonably withheld,
but if settled with its written consent or if there be a final judgment of the
plaintiff in any such action or proceedings, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. The failure of any Indemnified Party to give prompt notice of a claim
for indemnification hereunder shall not limit the Indemnifying Party's
obligations to indemnify under this Agreement, except to the extent such failure
is prejudicial to the ability of the Indemnifying Party to defend the action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement unless (x) there is no finding or
admission of any violation of any rights of any Person and no effect on any
other claims that be made against any Indemnified Party, (y) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party and
(z) such judgment or settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
5.04 Contribution. If the indemnification provided for in this Article
V is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or judgment referred to herein, then such Indemnifying
Party, in lieu of Indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities and judgments in the following manner: as between
the Company on the one hand and any Indemnified Party entitled to
indemnification under Section 5.01 on the other, in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and any
Indemnified Party entitled to indemnification under Section 5.01 on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of any Indemnified Party entitled to indemnification under Section 5.01 on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the party's relative intent, knowledge, access to information and
opportunity to correct
10
<PAGE> 32
or prevent such statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of subsection 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.05 Survival. The indemnity and contribution agreements contained in
this Article V shall remain operative and in full force and effect with respect
to any sales of Shares made pursuant to a Registration Statement filed pursuant
to this Agreement regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company, and (c) the consummation of the sale or successive resale of the
Shares.
ARTICLE VI
MISCELLANEOUS
6.01 Rules 144 and 144A. The Company covenants that following the
registration of Shares it will file any reports required to be filed by it under
the Securities Act and the Exchange Act so as to enable the Holder holding
registered Shares to sell such Shares without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rules 144 and 144A
under the Securities Act, as each such Rule may be amended from time to time, or
(b) any similar rule or rules hereafter adopted by the Commission. Upon the
request of the Holder, the Company will forthwith deliver to the Holder a
written statement as to whether it has complied with such requirements.
6.02 Granting Other Registration Rights. On and after the date hereof,
except (i) as set forth in that certain Registration Rights Agreement dated as
of _________, 2000 by and between Metrocall, Inc. and HMTF Bridge MC I, LLC, and
(ii) in connection with issuances of equity and/or debt securities by the
Company resulting in proceeds to the Company of at least $25,000,000 (each, a
"Significant Financing"), the Company shall not grant any registration rights in
respect of any shares of capital stock of the Company or other securities of the
Company if such rights would be superior to the registration rights granted to
Purchaser under this Agreement; provided, however, that Purchaser hereby
consents and agrees that the Company may grant in other agreements to other
holders of securities of the Company registration rights which (a) rank ratably
with the registration rights granted hereunder to Purchaser and (b) in the case
of a Significant Financing, are superior to the registration rights granted
hereunder to Purchaser.
6.03 Amendments and Waivers. The provision of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given other than as mutually agreed upon in
writing by the Company and the Holder.
6.04 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, regular mail,
registered first-class mail, confirmed facsimile or recognized express courier
service by next business day delivery;
(i) if to the Company:
11
<PAGE> 33
Metrocall, Inc.
6677 Richmond Highway
Alexandria, Virginia 22306
Attn: Chief Financial Officer
Fax Number: (703) 768-9625
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attn: Thomas W. White, Esq.
Fax Number: (202) 663-6363
(ii) if to the Holder, to its address appearing on the
stock records of the Company.
Notices shall be deemed given on the day on which delivered by hand or
facsimile, if delivered by 5:00 p.m. Eastern time; on the fifth business day
after mailing if delivered by mail; or the business day after delivery to an
overnight air courier if next-day delivery is specified.
6.05 Successors and Assigns. Purchaser shall not assign any rights or
benefits under this Agreement except with the prior written consent of the
Company, provided, however, that without the consent of the Company, Purchaser
shall have the right to assign its rights and benefits under this Agreement, in
whole or in part, (i) as collateral security to any unaffiliated third-party
lender pursuant to a pledge of Registrable Securities to such lender in
connection with a bona fide lending transaction, and (ii) to its parent or to
any direct or indirect wholly-owned subsidiary of Purchaser or to any Person
Purchaser is merged with or consolidated into or to any Person whom Purchaser
sells all or substantially all of its assets. The Company shall not assign any
rights, benefits or obligations under this Agreement without the prior written
consent of the Holder; provided, however, that without the consent of Holder,
the Company shall have the right to assign its rights, benefits and obligations
to any Person the Company is merged with or consolidated into or to any Person
to whom the Company sells all or substantially all of its assets. This Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of the Company and the Holder.
6.06 Counterparts. This Agreement may be executed in a number of
identical counterparts and it shall not be necessary for the Company and
Purchaser to execute each of such counterparts, but when each has executed and
delivered one or more of such counterparts, the several parts, when taken
together, shall be deemed to constitute one and the same instrument, enforceable
against each in accordance with its terms. In making proof of this Agreement, it
shall not be necessary to produce or account for more than one such counterpart
executed by the party against whom enforcement of this Agreement is sought.
12
<PAGE> 34
6.07 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.08 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.
6.09 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
6.10 Entire Agreement. This Agreement and the Stock Purchase Agreement
(including schedules and exhibits thereto) are intended by the Company and
Purchaser as the final expression of their agreement and are intended to be a
complete and exclusive statement of their agreement and understanding in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the Company, on the one hand, and
Purchaser, on the other, with respect to such subject matter.
6.11 Third Party Beneficiaries. Other than Indemnified Parties not a
party hereto, this Agreement is intended for the benefit of the Company,
Purchaser and their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other person or
entity.
6.12 Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the Holder shall
operate as a waiver of or otherwise prejudice such Holder's rights, powers or
remedies.
6.13 Remedies. The Company acknowledges that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Agreement are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise without requiring such Holder to post any bond or
other security, unless otherwise required by applicable law (which cannot be
waived by the Company).
[Execution page following]
13
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
METROCALL, INC.
By: __________________________________
Name:
Title:
PSINET INC.
By: __________________________________
Name:
Title:
<PAGE> 36
EXHIBIT B
VIRTUAL ISP AGREEMENT
(See Attached)
<PAGE> 1
EXHIBIT 10.32
CONSULTING, NO CONFLICT AND NONDISCLOSURE
AGREEMENT
This Consulting, No Conflict and Nondisclosure Agreement (this
"Agreement") is entered into effective as of May 16, 1996, by and between
Metrocall, Inc., a Delaware corporation (the "Company"), and ELLIOTT H. SINGER
("Singer"). The parties intend this Agreement to be an amendment and restatement
of the provisions of the "Nondisclosure/No Conflict Agreement" executed by the
Company and Singer on May 16, 1996, and that the provisions of such document are
superseded hereby.
STATEMENT OF PURPOSE
Singer has been Chairman of the Board of Directors of A+
Communications, Inc., now A+ Network, Inc. ("A+ Network") since 1985, and served
as its Chief Executive Officer from 1995 to January 15, 1996. His most recent
service has been pursuant to an employment agreement dated as of and effective
as of November 1, 1995 between Singer and A+ Network (the "Employment
Agreement"). Singer will terminate the Employment Agreement and his employment
with A+ Network as of the Effective Time ("Effective Time") of the Agreement and
Plan of Merger of even date herewith ("Merger Agreement") by and between A+
Network and the Company. This Agreement is an important aspect of the
transactions contemplated in the Merger Agreement, and the Company would not
have entered into the Merger Agreement absent Singer's agreeing to be bound by
the covenants contained in this Agreement.
Singer has substantial financial resources, experience in the
industry of A+ Network and the Company, and the ability to operate a business or
businesses that could compete with the Company. The Company would suffer
damages, including the loss of profits, if Singer engaged in a competing
business, so Singer will agree not to compete with the Company (which will be
the successor, through merger, of A+ Network) for the term described herein.
Moreover, in view of Singer's significant experience in the industry and
knowledge, the Company desires to maintain an ongoing relationship with Singer
and to retain him as an advisor to the Company with respect to the matters
identified herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the Company and Singer hereby agree
as follows:
1. ACKNOWLEDGMENTS. Singer acknowledges that A+ Network's and the
Company's business and services are highly specialized, that
the identity and particular needs of their customers and
suppliers are not generally known, and that the documents and
information regarding their customers, suppliers, services,
methods of operation, sales, pricing, and costs are highly
confidential and constitute trade secrets. Singer further
acknowledges that the services he has rendered to A+ Network
have been of a special and unusual character that have a
unique value to A+ Network and the Company, and that Singer
has had access to trade secrets and confidential information
belonging to A+ Network and the Company, the loss of
<PAGE> 2
which cannot adequately be compensated by damages in an action
at law. The Company acknowledges that Singer's knowledge and
experience in such businesses are unique and valuable to the
ongoing strategic operations of the Company.
2. DATE AND NATURE OF TERMINATION. Singer's employment with A+
Network and its subsidiaries is hereby terminated as of
Effective Time (the "Termination Date"), and Singer hereby
tenders his resignation from any positions he now has with A+
Network, including as an officer, director, or member of any
advisory boards or committees all such resignations to be
effective as of the Termination Date. Singer acknowledges and
agrees that his termination of employment with A+ Network
shall be treated as a "voluntary resignation" as described in
paragraph 4(b) of the Employment Agreement and with the effect
set forth in the Employment Agreement as of November 1, 1995.
As provided in paragraph 6 hereof, Singer and the Company
acknowledge that Singer shall continue as an independent
advisor in a nonemployee relationship with the Company
following such termination of employment.
3. ACCRUED BONUSES. Singer acknowledges that he is not entitled
to any accrued but unpaid bonuses as of the date hereof.
4. PAYMENT FOR CONSULTING, NONCOMPETITION AND NONDISCLOSURE.
Subject to Singer's full compliance with the terms of this
Agreement including the conditions set forth below, the
Company shall pay to Singer payments at a rate equal to
$325,000 per year from the Termination Date until the third
anniversary of the Termination Date, payable no less
frequently than biweekly. All amounts paid under this
paragraph 4 shall be subject to and reduced by applicable
federal and state withholding taxes, if any.
5. BENEFIT PLANS AND FRINGE BENEFITS. Between the Termination
Date and the third anniversary of the Termination Date, Singer
shall be entitled to participate in the life, medical, and
disability benefits programs of the Company to the extent (i)
(I) the Company can arrange such participation at a cost to
the Company comparable to that applicable to covering a
current employee and (II) the Company can obtain the agreement
of its third-party insurers and stop-loss carriers and (ii)
such participation is not prohibited by law or such as to call
into question the otherwise applicable tax treatment for plans
covering employees. Except as provided in the foregoing
sentence, as of the Termination Date, Singer shall not have
the right to participate in or receive any benefit under any
employee benefit plan of A+ Network, the Company, or any of
their affiliates, any fringe benefit plan of the Company or A+
Network, or any other plan, policy, or arrangement of the
Company or A+ Network providing benefits or perquisites to
employees of the Company or A+ Network generally or
individually. Singer acknowledges and agrees that any medical
coverage provided hereunder shall be in lieu of and not in
addition to any coverage required by Section 4980B of the
Internal Revenue Code ("COBRA") (with respect to which the
Company will provide Singer with a separate notice as required
by COBRA). Notwithstanding the foregoing, Singer
- 2 -
<PAGE> 3
may elect the payment of benefits to which he is entitled
under any 401(k) plan of A+ Network as provided under the
terms of any such plan. The provision by the Company of
benefits (other than the 401(k) payments) described in this
paragraph are conditional upon Singer's compliance with all
conditions to receipt of payments specified in paragraph 4
above.
6. CONSULTING SERVICES. Between the Termination Date and the
third anniversary of the Termination Date, the Company shall
retain Singer and Singer shall make himself available to
directly consult with and advise the Company and its officers
and directors, as reasonably requested from time-to-time by
the President or Board of Directors of the Company, to provide
advice with regard to financial, business, business expansion,
and industry matters that concern the Company's one-way or
two-way paging operations, and with regard to the transition
of the ownership of A+ Network to the Company. Such services
will be performed pursuant to reasonable arrangements therefor
(including, e.g., reimbursement of out-of-pocket expenses)
that are mutually agreed to by the parties; provided, however,
that Singer shall not be required to perform duties at
specific times to the extent that such performance would
materially interfere with any other professional or business
activities in which Singer may be engaged. The parties intend
that Singer shall be a former employee of A+ Network,
predecessor to the Company, and an independent contractor to
the Company, and agree to construe Singer's obligations under
this paragraph 6 in accordance with this intention.
7. LITIGATION ASSISTANCE. In addition to the services to be
provided pursuant to paragraph 6, Singer agrees to cooperate
with and provide assistance to the Company and its legal
counsel in connection with any litigation (including
arbitration or administrative hearings) or investigation
affecting A+ Network, its predecessors, the Company, or their
affiliates in which -- in the reasonable judgment of the
Company's counsel -- Singer's assistance or cooperation is
needed. Singer shall, when the Company requests, provide
testimony or other assistance and shall travel at the
Company's request in order to fulfill this obligation. In
connection with such litigation or investigation, the Company
shall attempt to accommodate Singer's schedule, shall provide
him with reasonable notice in advance of the times in which
his cooperation or assistance is needed, and shall reimburse
Singer for any reasonable expenses incurred in connection with
such matters.
8. NONCOMPETITION. From the Termination Date until Singer ceases
to be a member of the Board of Directors of the Company (the
"Board"), Singer will not:
(a) serve as or be a consultant to or employee, officer,
agent, director, or owner of more than three percent
of another corporation, partnership, or other entity
that competes with the one-way or two-way paging
operations of the Company; or
(b) solicit for employment or endeavor in any way to
entice away from employment with the Company or its
affiliates any employee of the
- 3 -
<PAGE> 4
Company or its affiliates who is an officer or a
manager of any department.
The Company's obligations under paragraphs 4 and 5 are
expressly conditioned upon Singer's strict compliance with the
provisions of this paragraph 8.
9. DISCLOSURE OF CONFIDENTIAL INFORMATION. Except as may be
required by the lawful order of a court or agency of competent
jurisdiction, Singer agrees to keep secret and confidential
indefinitely all non-public information concerning A+ Network,
the Company, or their affiliates that was acquired by or
disclosed to Singer during the course of his employment by A+
Network or any of its affiliates or predecessors, or during
the term of his consulting relationship (described in
paragraph 6) or his other dealings with the Company and its
affiliates, including information relating to customers
(including, without limitation, credit history, repayment
history, financial information, and financial statements),
costs and operations, financial data and plans, whether past,
current or planned and not to disclose the same, either
directly or indirectly, to any other person, firm or business
entity, or to use it in any way; provided, however, that the
provisions of this paragraph 9 shall not apply to information
that is in the public domain or that was disclosed to Singer
by independent third parties who were not bound by an
obligation of confidentiality; and provided, further, that the
Company recognizes that Singer has, during the course of his
employment with A+ Network, acquired certain general
information regarding the financial condition and borrowing
trends of A+ Network's customers and agrees that the
provisions of this paragraph 9 shall not apply to the use of
such general information provided the use thereof does not
violate applicable federal or state laws or the provisions of
paragraph 8 hereof. Singer further agrees that he will not
make any statement or disclosure that would be prohibited by
applicable federal or state laws and, for twelve months from
the Termination Date, he will not make any statement or
disclosure or express any opinion or interpretation regarding
A+ Network or the Company or their financial condition or
operations that is intended or reasonably likely to be
detrimental to the Company or any of its subsidiaries or
affiliates.
Singer acknowledges that a violation of this covenant is a
material breach of this Agreement.
10. REMEDIES. Singer hereby acknowledges that the remedies at law
for any breach of the covenants and obligations contained in
this Agreement will be inadequate and that, in the event of a
breach or a threatened breach of any of the provisions of this
Agreement, the Company shall be entitled to preliminary
restraining orders, injunctions, or such equitable remedies as
may be appropriate, in addition to all other remedies
available to the Company. In addition, Singer agrees that a
breach by him of any of the covenants and agreements contained
herein shall be deemed a breach of all such covenants and
agreements and shall entitle the Company, among other things,
to cease payments under paragraph 4 hereof and take such steps
as may be necessary to recover payments previously made to
Singer under
- 4 -
<PAGE> 5
paragraph 4 hereof (but may not recover payments of reasonable
compensation for consulting services described in paragraph
6).
Should a court of competent jurisdiction determine that the
character, duration, or geographical scope of any provision of
this Agreement is unreasonable in light of the circumstances
as they then exist, then the Company and Singer intend and
agree that the court shall construe this Agreement in such a
manner as to impose only those restrictions on the conduct of
Singer that are reasonable in light of the circumstances as
they then exist and as are necessary to assure the Company of
the intended benefit of this Agreement. If, in any judicial
proceeding, a court shall refuse to enforce all of the
separate covenants deemed included herein because, taken
together, they are more extensive than necessary to assure the
Company of the intended benefit of this Agreement, then it is
expressly understood and agreed by the Company and Employee
that those covenants that, if eliminated, would permit the
remaining separate covenants to be enforced in such
proceeding, shall, for the purpose of such proceeding, be
deemed eliminated from the provision hereof.
11. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the internal laws of Delaware, without
giving effect to any conflicts of law provisions.
12. BINDING EFFECT. This Agreement shall bind and inure to the
benefit of A+ Network, the Company, its successors and
assigns, and Singer and his heirs and legal representatives.
Singer may not assign this Agreement and the rights hereunder.
13. VOLUNTARY AGREEMENT; REASONABLENESS. Singer hereby represents
that he has carefully read and completely understands the
provisions of this Agreement and that he has entered into this
Agreement voluntarily. Singer has carefully considered the
provisions hereof and consulted with counsel of his own
choosing, and, having done so, agrees that the restrictions
set forth in paragraphs 8 and 9 hereof (including, but not
limited to, the time periods of restriction in each such
paragraph and the geographical area of restriction set forth
in Paragraph 8 hereof) are fair and reasonable and are
reasonably required for the protection of the interests of the
Company.
14. SEPARATE COVENANTS. This Agreement shall be deemed to consist
of a series of separate covenants.
15. ADMISSIONS. Singer acknowledges that the Company's payment of
the consideration described herein is made in good faith and
shall never for any purpose be considered an admission of
liability on the part of the Company, by whom liability is
expressly denied, and no past or present wrongdoing on the
part of the Company shall be implied by such payment.
- 5 -
<PAGE> 6
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Company and Singer and supersedes all prior
agreements relating to the subject matter hereof (including
the Employment Agreement), and may be changed only by a
writing signed by the parties hereto. Any and all prior
representations, statements, and discussions regarding the
subject matter of this Agreement have been merged into and/or
replaced by the terms of this Agreement.
17. NO MODIFICATION. Neither this Agreement nor any of the right
or obligations of the parties hereunder may be assigned,
modified, altered or amended in any way except by agreement in
writing duly executed by the parties hereto and no other
person shall have or be construed to have any legal or
equitable right, remedy or claim under, in respect of, or by
virtue of this Agreement or any provision herein contained.
18. CONDITIONAL EFFECTIVENESS. The obligations of the parties
under this Agreement are contingent on and subject to the
Closing identified in the Merger Agreement, and neither party
shall be bound hereby unless and until the Closing described
in the Merger Agreement occurs.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed by their authorized
representatives, under seal and with the intent that this Agreement shall
constitute a sealed instrument, as of the day and year first above written.
METROCALL, INC.
Date: By: /s/ VINCENT D. KELLY
--------------------- --------------------------------
Vincent D. Kelly
Chief Financial Officer
Date: By: /s/ ELLIOTT H. SINGER
--------------------- --------------------------------
Elliott H. Singer
- 7 -
<PAGE> 1
Exhibit 10.33
AMENDMENT TO
CONSULTING, NO CONFLICT AND NONDISCLOSURE AGREEMENT
This Amendment to Consulting, No Conflict and Nondisclosure Agreement
(this "Amendment") is entered into as of October 1, 1999 (the "Effective Date")
by and between Metrocall, Inc., a Delaware corporation (the "Company") and
Elliott H. Singer ("Singer").
RECITAL
The Company and Singer wish to amend the Consulting, No Conflict and
Nondisclosure Agreement entered into effective as of May 16, 1996 between the
Company and Singer (the "Agreement") as set forth below and in accordance with
Paragraph 17 of the Agreement.
AGREEMENTS
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the Company and Singer hereby agree as follows:
1. Paragraph 4 of the Agreement is hereby amended by replacing
the first sentence of Paragraph 4 with the following sentence:
"Subject to Singer's full compliance with the terms of this Agreement
including the conditions set forth below, the Company shall pay to
Singer payments at a rate equal to $365,625 per year from the
Termination Date until the fourth anniversary of the Termination Date,
payable no less frequently than biweekly or payable in lump sum at
Singer's option."
<PAGE> 2
2. Paragraph 5 of the Agreement is hereby amended by replacing the
first sentence of Paragraph 5 with the following and adding the following
additional sentence:
"Subject to Singer's full compliance with the terms of this Agreement
including the conditions set forth below, between the Termination Date
and the fourth anniversary of the Termination Date, Singer shall be
entitled to participate in the life, medical, and disability benefits
programs of the Company to the extent (i) (I) the Company can arrange
such participation at a cost to the Company comparable to that
applicable to covering a current employee and (II) the Company can
obtain the agreement of its third-party insurers and stop-loss carriers
and (ii) such participation is not prohibited by law or such as to call
into question the otherwise applicable tax treatment for plans covering
employees. The Company shall pay any applicable premiums."
3. Paragraph 6 of the Agreement is hereby amended by replacing the
words "third anniversary" in the first sentence of Paragraph 6 with the words
"fourth anniversary".
4. This Amendment in no way shall limit or otherwise affect
Singer's options as set forth in Attachment 1 hereto.
5. This Amendment shall become effective as of the date first above
written. Except as expressly set forth in this Amendment, this Amendment shall
not by implication or otherwise limit, impair, constitute a waiver of, or
otherwise affect the rights and remedies of either Singer or the Company under
the Agreement, and shall not amend or in any way affect the terms, conditions,
obligations, covenants or agreements contained in the Agreement, all of which
are ratified and affirmed and shall continue in full force and effect. This
Amendment shall apply and be effective only with respect to the provisions of
the Agreement specifically referred to herein. Except as specifically amended
hereby, the Agreement shall continue in full force and effect in accordance with
the provisions thereof as in existence on the date hereof. After the date
hereof, any reference to the Agreement shall mean the Agreement as amended
hereby.
6. This Amendment shall be construed in accordance with and
governed by the internal laws of Delaware, without giving effect to any
conflicts of law provisions.
2
<PAGE> 3
7. This Amendment may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute on contract.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment or caused this Amendment to be duly executed by their authorized
representatives as of the day and year first above written.
METROCALL, INC.
By: /s/ Vincent D. Kelly
-------------------------------
Vincent D. Kelly
Chief Financial Officer
Date: October 1, 1999
By: /s/ Elliott Singer
-----------------------------
Elliott Singer
Date: October 1, 1999
4
<PAGE> 5
Attachment 1
ELLIOTT SINGER OPTIONS REPORT
AS OF OCTOBER 1, 1999
<TABLE>
<CAPTION>
Grant Date Grant Type Options Option Price Expiration Date Options Exercisable
Outstanding
<S> <C> <C> <C> <C> <C>
1/17/1997 Non Qualified 10,000 $ 6.00 1/17/2007 10,000 current
2/4/1997 Non Qualified 88,408 6.00 11/9/2004 88,408 current
2/4/1997 Non Qualified 53,044 6.00 8/17/2005 53,044 current
2/6/1997 Non Qualified 5,000 6.00 2/5/2007 5,000 current
1/17/1998 Non Qualified 1,000 5.125 1/17/2008 1,000 current
2/4/1998 Non Qualified 10,000 5.125 2/3/2008 10,000 current
1/17/1999 Non Qualified 1,000 5.625 1/16/2009 1,000 current
2/3/1999 Non Qualified 10,000 5.125 2/2/2009 10,000 current
178,452 178,452
</TABLE>
<PAGE> 1
EXHIBIT 11.1
METROCALL, INC.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net loss $ (60,323) $ (129,142) $ (172,484)
Preferred dividends (7,750) (11,767) (16,462)
Gain on repurchase of Series B
Preferred -- -- 2,208
----------- ------------ ------------
Net loss attributable to common
stockholders $ (68,073) $ (140,909) $ (186,738)
=========== ============ ============
Weighted-average shares outstanding:
Shares outstanding, beginning of
period 24,521 40,548 41,583
Shares issued in acquisitions 2,492 -- --
Share issued for exercise of
stock options 1 -- --
Shares issued in settlement of
litigation -- 390 --
Shares issued in employee stock
purchase plan 73 92 191
----------- ------------ ------------
Weighted-average shares outstanding 27,087 41,030 41,774
=========== ============ ============
Loss per share attributable to
common stockholders $ (2.51) $ (3.43) $ (4.47)
=========== ============ ============
</TABLE>
<PAGE> 1
Exhibit 21.1
Subsidiaries of Registrant
Metrocall USA (a Delaware corporation)
McCaw RCC Communications, Inc. (a Washington corporation)
Advanced Nationwide Messaging Corporation (a Washington corporation)
MSI, Inc. (a Nevada corporation)
Mobilefone Services, L.P. (a Texas limited partnership)
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K into the Company's previously filed
Registration Statements on Form S-3, File No. 33-81606; Form S-3, File No.
33-92520; Form S-3, File No. 333-13123; Form S-3, File No. 333-19139; Form S-3,
File No. 333-24607; Form S-3, File No. 333-31719; Form S-3, File No. 333-76143;
Form S-8, File No. 33-83452; Form S-8, File No. 33-99556; Form S-8, File No.
333-29595; Form S-8, File No. 333-72279 and Form S-8, File No. 333-71239.
Vienna, Virginia /s/ Arthur Andersen LLP
March 10, 2000 ----------------------------------
Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,787
<SECURITIES> 0
<RECEIVABLES> 59,117
<ALLOWANCES> 7,103
<INVENTORY> 0
<CURRENT-ASSETS> 58,135
<PP&E> 469,694
<DEPRECIATION> 192,330
<TOTAL-ASSETS> 1,025,547
<CURRENT-LIABILITIES> 95,043
<BONDS> 777,627
158,757
0
<COMMON> 419
<OTHER-SE> (152,553)
<TOTAL-LIABILITY-AND-EQUITY> 1,025,547
<SALES> 61,487
<TOTAL-REVENUES> 610,187
<CGS> 39,072
<TOTAL-COSTS> 721,946
<OTHER-EXPENSES> (407)
<LOSS-PROVISION> 15,306
<INTEREST-EXPENSE> 85,115
<INCOME-PRETAX> (235,539)
<INCOME-TAX> (63,055)
<INCOME-CONTINUING> (186,739)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (172,484)
<EPS-BASIC> (4.47)
<EPS-DILUTED> (4.47)
</TABLE>
