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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 6, 1997
MOBILEMEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-26320 22-3253006
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
65 Challenger Road, Ridgefield Park, New Jersey 07660
(Address of principal executive offices)
(Zip Code)
(201) 440-8400
(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events.
On June 9, 1997, MobileMedia Corporation issued the
press release attached hereto as Exhibit 99.1, all of the terms of
which are incorporated by reference herein.
On June 6, 1997, the Federal Communications
Commission (the "FCC") issued the Order attached hereto as
Exhibit 99.2, all of the terms of which are incorporated by reference
herein.
Item 6. Resignations of Registrants Directors.
Not Applicable
Item 7. Financial Statements and Exhibits.
Not Applicable
Item 8. Change in Fiscal Year.
Not Applicable
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Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly
authorized.
MOBILEMEDIA CORPORATION,
a Delaware corporation
Date: June 9, 1997 By: /s/ Santo J. Pittsman
---------------------
Santo J. Pittsman
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit Page
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Exhibit 99.1 -- Press Release
Exhibit 99.2 -- FCC Order
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EXHIBIT 99.1
[LOGO]
MOBILEMEDIA
FOR IMMEDIATE RELEASE
Media Contact: Krista Grossman -- 714/708-9302
Investor Contact: Lynne Burns -- 201/462-4959
FCC GRANTS MOBILEMEDIA REQUEST FOR STAY OF HEARING
RIDGEFIELD PARK, NEW JERSEY, JUNE 9, 1997 -- MobileMedia Corporation
announced that the Federal Communications Commission (FCC) issued an order
on Friday, June 6, 1997 staying the hearing proceeding that had been
initiated by the FCC to evaluate MobileMedia's fitness to hold paging
licenses. The hearing had been scheduled to commence on June 10, 1997.
The FCC order stays the hearing for ten months in order to allow MobileMedia
to develop and consummate a plan of reorganization that provides for a change
of control of the Company and thus a transfer of the Company's FCC licenses.
Under the order, which is based on an FCC doctrine known as SECOND THURSDAY,
if there is a change of control that meets the conditions of SECOND THURSDAY,
the Company's FCC issues will be resolved by the transfer of the Company's
FCC licenses and the hearing will not proceed.
As noted in the order, the Company believes that a change of control will
happen under a reorganization plan that provides either for a conversion of
certain existing debt to equity, in which case existing MobileMedia shares
will be substantially diluted or eliminated, or a sale of the Company.
Joseph A. Bondi, MobileMedia's Chairman - Restructuring, said, "The stay
should remove any concerns about the FCC hearing or the impact it could have
had on MobileMedia's continuing operations. The stay will enable us to focus
all of our attention on completing the Company's operational restructuring and
in working with our creditors to achieve a consensual plan of reorganization."
Ronald R. Grawert, MobileMedia's Chief Executive Officer, said, "We are
obviously pleased with the FCC's decision to grant a stay of the hearing. We
look forward to continuing to provide reliable, efficient paging service to
our customers and offering the most up-date paging technology."
MobileMedia is the second largest provider of paging and personal
communications services in the United States, offering local, regional and
nationwide coverage to over four million subscribers in all 50 states, Canada
and the Caribbean. The Company operates two one-way nationwide networks and
is licensed to operate two nationwide narrowband PCS networks.
###
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EXHIBIT 99.2
FEDERAL COMMUNICATIONS COMMISSION FCC 97-197
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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of )
)
MOBILEMEDIA CORPORATION, et al. ) WT DOCKET NO. 97-115
)
Applicant for Authorizations and Licensee )
of Certain Stations in Various Services )
ORDER
Adopted: June 5, 1997; Released: June 6, 1997
By the Commission:
1. This order grants a Motion for Waiver and Application for Review, filed
May 13, 1997, by MobileMedia Corporation and its subsidiaries (MobileMedia). We
conclude that MobileMedia has justified granting a 10-month stay of this
proceeding to make a showing under the Commission's SECOND THURSDAY doctrine.
MobileMedia will be required to submit monthly status reports, and the stay is
conditioned on there being no sales of MobileMedia stock by MobileMedia's
officers and directors during the pendency of the stay.
I. BACKGROUND
2. The Commission designated this proceeding for a license revocation
hearing after MobileMedia Corporation (MobileMedia), on October 15, 1996,
disclosed the results of an internal investigation concluding that
MobileMedia had filed at least 289 false notifications on FCC Form 489 and
also filed at least 94 defective "40-Mile Rule" applications. MOBILEMEDIA
CORP., FCC 97-124 (Apr. 8, 1997) (HDO). According to MobileMedia's own
investigation, which had been conducted by outside counsel, these
notifications falsely reported the construction of facilities that had not,
in fact, been built. The October 15, 1996 report of the investigation also
disclosed the identities of several members of senior management who
participated in the deception. The Commission noted that this case "appears
to be unprecedented . . . in terms of the sheer number of false filings
involved." ID. at PARA. 12.
3. The Commission designated this matter for hearing following a further
investigation by the Wireless Telecommunications Bureau (Bureau). The
designated issues inquire into the facts and circumstance surrounding the filing
of false information with the
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FEDERAL COMMUNICATIONS COMMISSION FCC 97-197
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Commission and the construction and operation of facilities without
authorization. The issues also inquire into the possibility that false
information was contained in the October 15, 1996 report itself. As to each
issue, the Commission sought to determine which MobileMedia officers, directors,
or senior management officials participated in or knew of misconduct. We note
that earlier the Bureau terminated more than 250 authorizations held by
MobileMedia for stations that were not constructed and providing service to
subscribers by the applicable deadline and dismissed as defective nearly 100
MobileMedia applications predicated on unconstructed facilities. PUBLIC NOTICE,
DA 97-78 (WTB released Jan. 13, 1997).
4. On April 23, 1997, MobileMedia filed an "Emergency Motion for Special
Relief and Stay of Proceedings Regarding MobileMedia Corporation". In it,
MobileMedia asked the ALJ to stay the hearing in this proceeding for 10
months to permit MobileMedia to avail itself of relief under the Commission's
SECOND THURSDAY doctrine. See SECOND THURSDAY CORP, 22 FCC 2d 515, recon.
granted, 25 FCC 2d 112 (1970). SECOND THURSDAY is an exception to the
general rule that a licensee may not transfer facilities involved in a
hearing concerning its character qualifications unless it is found qualified
to remain a licensee. See JEFFERSON RADIO CO. V. FCC, 340 F.2d 781, 783
(D.C. Cir. 1964). Under SECOND THURSDAY, when such a licensee has gone into
bankruptcy, the station license may be assigned, usually by a trustee in
bankruptcy, "if individuals charged with misconduct will have no part in the
proposed operations and will either derive no benefit from favorable action
on the [assignment or transfer] application or will receive only a minor
benefit which is outweighed by equitable considerations in favor of innocent
creditors." SECOND THURSDAY CORP., 22 FCC 2d at 516 PARA. 5. The SECOND
THURSDAY doctrine "accommodates the policies of the federal bankruptcy law
with those of the Communications Act." LAROSE V. FCC, 494 F.2d 1145, 1147
n.2 (D.C. Cir. 1974).
5. MobileMedia, in its emergency motion, asked the ALJ: (1) to rule that
SECOND THURSDAY relief is available to MobileMedia and may be pursued, and (2)
to stay the hearing for 10 months to permit MobileMedia to finalize a transfer
or assignment of its facilities. It reported that, on January 30, 1997, it
filed reorganization proceedings under Chapter 11 of the Bankruptcy code and is
now a debtor-in-possession of the licensed facilities. MobileMedia asserted
that because of the complexity of the court-supervised bankruptcy proceeding, it
will not be in a position to submit a SECOND THURSDAY proposal for some time and
proposed to file quarterly status reports of its efforts. MobileMedia
acknowledged that its request posed a case of first impression since it was the
first time that a publicly traded corporation had sought SECOND THURSDAY relief.
6. The ALJ denied the requested relief. He held first that a publicly
traded corporation could not avail itself of SECOND THURSDAY relief. FCC 97M-80
(May 5, 1997) at PARA.PARA. 9-10. In this regard, he perceived a fundamental
distinction between a publicly held corporation and a privately held entity. As
to the latter, he believed that the allocation of
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funds derived from the transfer could be controlled so as to prevent the
enrichment of wrongdoers. According to the ALJ, such measures might not be
possible with respect to a publicly held corporation since there had been no
showing that there was a mechanism to prevent wrongdoers from selling their
stock at an increased price resulting from the grant of SECOND THURSDAY
relief. He noted that over the past year, MobileMedia stock has sold for as
high as 21-1/4 but that the current price (as of May 2, 1997) was only
0-17/32. He speculated that a grant of SECOND THURSDAY relief might cause a
significant increase in the value of MobileMedia's stock. Second, the ALJ
found that the hearing designation order disclosed uncertainty as to the
identity of the officers, directors, and senior managers involved in
wrongdoing. ID. at PARA 11. Thus, he concluded that it was not possible to
ensure that all wrongdoers would not benefit from the transfer of the
facilities until a hearing determined who the transgressors were. The ALJ
rejected a proposal by the Bureau to attempt to determine the identity of
wrongdoers through further investigation or in other proceedings, because he
considered the hearing more expeditious and less cumbersome. (In designating
this case for hearing, in light of MobileMedia's financial situation and the
potential impact of a protracted hearing on MobileMedia's subscribers,
investors, and creditors, the Commission had directed the ALJ to make every
effort to issue a recommended decision within six months. ID. at PARA 13.)
The ALJ denied MobileMedia leave to appeal his interlocutory ruling pursuant
to 47 C.F.R. Sec. 1.301(b), which permits the appeal of interlocutory rulings
at the discretion of the presiding judge. SEE MOBILEMEDIA CORP., FCC 97M-83
(May 13, 1997).
II. THE PLEADINGS
7. Initially, MobileMedia argues that the Commission should waive 47
C.F.R. Sec. 1.301(b) and entertain an appeal despite the ALJ's failure to grant
leave. In its application for review MobileMedia argues that the ALJ had no
basis for holding that a publicly held corporation could not qualify for SECOND
THURSDAY relief. It reiterates its pledge to devise a reorganization plan
consistent with SECOND THURSDAY. Moreover, MobileMedia observes that the
Commission will have the opportunity to review any such proposal. MobileMedia
also faults the ALJ for finding that a hearing will be necessary to determine
the identity of wrongdoers. According to MobileMedia, because SECOND THURSDAY
applies to ACCUSED wrongdoers, not ADJUDICATED wrongdoers, a hearing is not
required to identify them. MobileMedia stresses that SECOND THURSDAY relief
would serve to protect thousands of innocent creditors to whom over $1.1 billion
is owned and would accommodate the concerns of bankruptcy law.
8. The Bureau supports MobileMedia's application for review. The Bureau
argues that the SECOND THURSDAY doctrine should apply to publicly traded
corporations as well as to privately held licensees. Indeed, the Bureau
observes that the need to protect creditors may be more compelling in the case
of a large corporation because of their number and the quantity of debt
involved. The Bureau asserts that it would be premature to rule out the
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FEDERAL COMMUNICATIONS COMMISSION FCC 97-197
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possibility of SECOND THURSDAY relief in advance of a specific proposed
transaction. The Bureau suggests that MobileMedia might be required to make a
proffer as to available mechanisms for ensuring that suspected wrongdoers will
not be unjustly enriched. The Bureau also contends that the hearing should be
suspended for a period of time not exceeding what is justified by the procedural
timetable of the bankruptcy court and that MobileMedia should be required to
make monthly status reports.
9. Comments in support of MobileMedia's motion were also filed by the
Official Committee of Unsecured Creditors of MobileMedia Corporation (the
Committee). Because the Committee is not a party to this proceeding, we will
treat its pleadings as an amicus brief. The Committee contends that the SECOND
THURSDAY doctrine should be applied to publicly held corporations just as it is
to privately held entities. It further asserts that Second Thursday relief is
needed to protect the public holders of $500 million in unsecured MobileMedia
bonds, such as pension funds, mutual funds, and life insurance companies. The
Committee indicates that it will work with MobileMedia to devise a
reorganization plan that will ensure that no wrongdoers realize benefits.
10. Other comments were filed by the Chase Manhattan Bank (the Bank), as
agent for MobileMedia's Secured creditors. We will also treat this pleading as
an amicus brief. Like the Committee, the Bank argues that SECOND THURSDAY
should apply equally to publicly and privately held companies. The Bank
contends that extending such relief to publicly held corporations will
facilitate financing by such entities. The Bank urges that a stay is necessary
to prevent the deterioration of MobileMedia's business to the detriment of
innocent creditors and that there is no necessity to adjudicate the identity of
wrongdoers. The Bank asserts that the ALJ's concerns about the enrichment of
wrongdoers is highly speculative in advance of a specific proposal.
11. In reply to the Bureau's comments, MobileMedia submits a detailed
description of the Chapter 11 reorganization process in support of its position
that a 10-month say is reasonable. MobileMedia also agrees to file monthly
status reports. Additionally, as described in more detail in paragraphs 15-16,
below, MobileMedia submitted a letter further addressing the concerns raised by
the ALJ. Letter from Richard E. Wiley to The Honorable Reed E. Hundt and
Commissioners (June 3, 1997).
III. DISCUSSION
12. MobileMedia has shown good cause to review the ALJ's ruling. His
order involves novel questions as to the applicability of the SECOND THURSDAY
doctrine. Moreover, the resolution of this question potentially affects the
outcome of this proceeding, which would have an impact on numerous members of
the public with a financial stake in MobileMedia's fate. We therefore believe
that this appeal raises basic and far reaching considerations of public policy
in matters of vital concern relating to the public interest, justifying a waiver
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of 47 C.F.R. Sec. 1.301(b). SEE COMMUNICATIONS SATELLITE CORP., 32 FCC 2d
533, 534-35 Para. 5 (1971). We therefore entertain MobileMedia's application
for review.
13. Turning to the merits, we believe that the public interest
considerations underlying SECOND THURSDAY apply to publicly traded corporations
as well as to privately held companies. In both cases, there is the same need
to balance the possible injury to the Commission's regulatory authority that
might flow from a wrongdoer's realization of benefits against the public
interest in innocent creditors' recovery from the sale and assignment of the
license to a qualified party. SEE LAROSE V. FCC, 494 F.2d at 1149. Although,
as the ALJ correctly noted, it may be more difficult for a publicly traded
corporation to demonstrate compliance with the SECOND THURSDAY doctrine,
publicly traded corporations should be afforded the same opportunity to make
this showing as privately held companies. In this case, as noted above, the
scope of the misconduct is extremely serious and the scope of potential
wrongdoers is quite broad. As a result, serious enforcement action has been
pursued. In addition to the Commission designating MobileMedia's applications
for hearing and its licenses for a revocation hearing, the Bureau terminated
more than 250 MobileMedia authorizations and dismissed nearly 100 MobileMedia
applications affected by misrepresentations. PUBLIC NOTICE, DA 97-78 (WTB
released Jan. 13, 1997). The Commission is committed to strong enforcement of
its rules and simply will not countenance the kind of behavior at issue in this
case involving hundreds of misrepresentations to the FCC. Nevertheless, there
is unquestionably a danger of severe harm to a multitude of innocent creditors
here. Moreover, for reasons set forth below, we conclude that MobileMedia has
made a reasonable showing that means exist to prevent the potential wrongdoers
from realizing anything more than minimal benefits through assignment of the
facilities. This showing is sufficient to justify a temporary suspension of the
hearing for MobileMedia to pursue SECOND THURSDAY relief, with certain
conditions discussed below.
14. MobileMedia has committed itself to making a showing that "any
individuals charged with misconduct at the time of the [reorganization] plan's
confirmation will . . . not derive any benefit from the plan's approval, except
to the extent permitted by SECOND THURSDAY." Emergency Motion for Special
Relief and Stay of Proceedings Regarding MobileMedia Corporation, filed April
23, 1997 at 10. Although MobileMedia has not yet submitted a specific
transaction for our review, MobileMedia and its creditors contemplate that:
MobileMedia will either be sold outright to a third party,
with the proceeds going first to pay off the secured
creditors and then the remaining proceeds used to pay off
the unsecured creditors; or a plan of reorganization will be
approved by the bankruptcy court, pursuant to which the
unsecured creditors would become the owners of the Company,
replacing entirely the current shareholders. [footnote
omitted].
5
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FEDERAL COMMUNICATIONS COMMISSION FCC 97-197
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Comments in Support of Emergency Motion for Special Relief and Stay of
Proceedings Regarding MobileMedia Corporation, filed April 29, 1997 by the
Committee at 3. MobileMedia maintains that either of these plans would greatly
reduce if not eliminate any equity held by shareholders, including suspected
wrongdoers. SEE Emergency Motion for Special Relief and Stay of Proceedings
Regarding MobileMedia Corporation, filed April 23, 1997 by MobileMedia at 9;
Comments of Secured Lenders in Support of Motion for Waiver and Application for
Review, filed May 15, 1997 at 7 n.6; Comments in Support of Emergency Motion for
Special Relief and Stay of Proceedings Regarding MobileMedia Corporation, filed
April 29, 1997 by the Committee at 5.
15. Nevertheless, as the ALJ correctly pointed out, MobileMedia must
demonstrate that potential wrongdoers could not benefit as a result of this
process through, for example, the sale of stock in the interim. To this end,
the Commission's Office of General Counsel held an informal conference with
all parties on May 30, 1997, to clarify the representations set forth in the
pleadings before us. Following the conference, we received a letter
containing further relevant information. Letter from Richard E. Wiley to The
Honorable Reed E. Hundt and Commissioners (June 3, 1997). These
clarifications have given us the assurance, which the ALJ did not have, that
little likelihood exists that suspected wrongdoers will be able to profit
from the grant of a stay or the ultimate grant of SECOND THURSDAY relief.
16. It appears that any stock currently in the hands of suspected
wrongdoers has irretrievably lost all substantial value. We take official
notice that MobileMedia's stock, which traded for as much as $27 a share in
late 1995, has not traded for as much as $2 a share since even before
MobileMedia disclosed its wrongdoing in October 1996. As of the close of
June 3, the stock was listed at 50 cents a share, and it has now been
delisted from the Nasdaq National Market, on which it was traded publicly.
Letter from Richard E. Wiley, SUPRA. In view of the projection that any
reorganization will eliminate all or nearly all of these stockholders'
equity, it seems unlikely that granting a stay or SECOND THURSDAY relief will
result in any trading that could substantially benefit suspected wrongdoers.
In any event, MobileMedia has confirmed that any stock in the hands of
officers and directors cannot freely be traded and that limitations also
exist on employee's ability to sell stock. ID. Thus, it appears that any
benefit to potential wrongdoers, including those that have not been
specifically identified, would be at most "minor". See SECOND THURSDAY, 22
FCC 2d at 516 PARA. 5.
17. We will therefore grant the relief that MobileMedia seeks. In this
regard, given the complexities of the process through which any
reorganization plan must be approved, we agree that a 10-month stay to
finalize such a plan is reasonable. As a further safeguard, the stay will be
conditioned on MobileMedia's ensuring that no MobileMedia stock owned by its
directors and officers be transferred or sold during the pendency of the
stay. We stress, as noted above, that the magnitude of the false filings at
issue in this case appears to be
6
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unprecedented. Accordingly, we emphasize that we will scrutinize
MobileMedia's SECOND THURSDAY showing with extreme care to ensure full
compliance with the SECOND THURSDAY showing with respect to all potential
wrongdoers, that is, all former and current officers, directors, and senior
managers. In this regard, MobileMedia's SECOND THURSDAY request shall
demonstrate with specificity its compliance with the standard with respect to
all such persons. This shall include a showing that its former and current
officers, directors and senior managers will not receive compensation for
their equity interests and will have no role in the future operation and
management of the company. In addition, MobileMedia shall demonstrate that
its current officers, directors, and senior managers have not benefitted from
sale of their stock in the interim. MobileMedia's SECOND THURSDAY request
shall be filed with the Commission as part of this proceeding and will be
acted on by the Commission. Any failure to make a persuasive showing of
compliance with the SECOND THURSDAY standard in all respects will lead to
denial of the request and resumption of the hearing.
18. We take this opportunity to reiterate that the scope of the HDO
includes whether any former or current MobileMedia officers, directors and
senior managers have engaged in wrongdoing. In this regard, we instruct
Commission staff in all Bureaus and Offices that any radio applications in
which these former or current officers, directors or senior managers have
attributable interests shall not be granted without resolution of this issue
as it pertains to that individual, either in the context of this hearing, if
SECOND THURSDAY relief is ultimately not granted, or in the context of
another specific application. To assist in this effort, the Chief, Wireless
Telecommunications Bureau, within 10 days of the release date of this order,
shall provide to all Bureaus and Offices a copy of this order, along with a
list of all such persons. A copy of the list should also be provided to the
Chairman and the Commissioners. In addition, to the extent a Bureau or
Office recommends that any application in which such an individual holds an
attributable interest should be granted, it shall refer the matter to the
Commission for disposition.
IV. ORDERING CLAUSE
19. ACCORDINGLY, IT IS ORDERED, That the Motion for Waiver and
Application for Review, filed May 13, 1997, by MobileMedia Corporation and
its subsidiaries IS GRANTED; that these proceedings ARE STAYED for a period
of 10 months or as specified in a further order of the Commission; that the
stay IS CONDITIONED on there being no transfers or sales of MobileMedia's
stock owned by MobileMedia's officers and directors during the pendency of
the stay; and that MobileMedia IS DIRECTED to file monthly status reports
with the Commission as to the progress of the bankruptcy proceedings.
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FEDERAL COMMUNICATIONS COMMISSION
William F. Caton
Acting Secretary
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