SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10 - QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996.
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________________ to _____________________
Commission File Number 1-13002
----------------------
PAGING PARTNERS CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 22-3281446
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Freehold Office Plaza
4249 Route 9N, Bldg. 2
Freehold, New Jersey 07728
(address of principal executive offices)
(908) 409-7088
(Issuer's telephone number)
---------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange 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 |_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 5,657,143 shares of Common
Stock, $.01 par value, were outstanding, as of May 13, 1996.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
<PAGE>
Form 10-QSB
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
<PAGE>
PAGING PARTNERS CORPORATION
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1996 1995
----------- ------------
Current assets: (Unaudited)
Cash and cash equivalents ..................... $ 271,000 $ 553,000
Accounts receivable ........................... 1,043,000 1,073,000
Inventory ..................................... 327,000 382,000
Other ......................................... 54,000 35,000
----------- -----------
Total current assets......................... 1,696,000 2,043,000
Property and equipment .......................... 5,189,000 4,948,000
Licenses ........................................ 701,000 733,000
Other assets .................................... 22,000 22,000
----------- -----------
$ 7,607,000 $ 7,746,000
=========== ===========
LIABILITIES
Current liabilities:
Current maturities of notes payable ........... $ 125,000 $ 96,000
Accounts payable and accrued expenses ......... 468,000 345,000
Deferred revenues ............................. 456,000 477,000
----------- -----------
Total current liabilities.................... 1,049,000 918,000
Notes payable (less current maturities) ........ 1,318,000 930,000
----------- -----------
2,367,000 1,848,000
----------- -----------
STOCKHOLDERS EQUITY
Stockholders' equity:
Common stock .................................. 48,000 48,000
Additional paid-in capital .................... 10,663,000 10,663,000
Accumulated deficit ........................... (5,471,000) (4,813,000)
----------- -----------
5,240,000 5,898,000
----------- -----------
$ 7,607,000 $ 7,746,000
=========== ============
See accompanying notes to financial statements.
3
<PAGE>
PAGING PARTNERS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
Three months ended
March 31,
---------------------
1996 1995
---- ----
(Unaudited)
Revenues:
Service revenue .............................. $ 1,145,000 $ 692,000
Equipment sales revenue ...................... 438,000 289,000
----------- -----------
1,583,000 981,000
----------- -----------
Expenses:
Service ...................................... 763,000 485,000
Cost of equipment sold ....................... 474,000 319,000
Selling ...................................... 316,000 198,000
Administrative ............................... 406,000 383,000
----------- -----------
1,959,000 1,385,000
----------- -----------
Loss from operations before depreciation
and amortization .............................. (376,000) (404,000)
Depreciation and amortization .................. 257,000 154,000
----------- -----------
Loss from operations ........................... (633,000) (558,000)
Interest and other income (expense) - net ...... (25,000) 28,000
----------- -----------
NET LOSS ....................................... $ (658,000) $ (530,000)
=========== ===========
NET LOSS PER COMMON SHARE ...................... $ (.14) $ (.11)
=========== ===========
Weighted average common shares outstanding ..... 4,800,000 4,800,000
=========== ===========
See accompanying notes to financial statements.
4
<PAGE>
PAGING PARTNERS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Three Months ended
March 31,
-------------------
1996 1995
---- ----
(Unaudited)
Cash flows from operating activities:
Net loss ............................................. $(658,000) $(530,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and Amortization ...................... 257,000 154,000
Changes in operating assets and liabilities ........ 168,000 (449,000)
--------- ---------
Net cash provided (used) by operating activities . (233,000) (825,000)
--------- ---------
Cash flows from investing activities:
Redemption of marketable securities .................. -0- 998,000
Acquisition of property and equipment ................ (36,000) (354,000)
--------- ---------
Net cash provided (used) by investing activities ..... (36,000) 644,000
--------- ---------
Cash flows from financing activities: - Repayment of
notes payable ........................................ (13,000) ( -0- )
--------- ---------
Net increase in cash and cash equivalents .............. (282,000) (181,000)
Cash and cash equivalents-beginning of period .......... 553,000 303,000
Cash and cash equivalents-end of period ................ $ 271,000 $ 122,000
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest ............................... $ 30,000 $ 37,000
Debt incurred for the purchase of equipment .......... 430,000 -0-
See accompanying notes to financial statements.
5
<PAGE>
PAGING PARTNERS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The Company and basis of presentation:
The financial statements presented herein as of March 31, 1996 and for the
three month periods ended March 31, 1996 and 1995 are unaudited and, in the
opinion of management, include all adjustments (consisting only of normal
and recurring adjustments) necessary for a fair presentation of financial
position and results of operations. Such financial statements do not include
all of the information and footnote disclosures normally included in audited
financial statements prepared in accordance with generally accepted
accounting principles. The results of operations for the three month period
ended March 31, 1996 are not necessarily indicative of the results that may
be expected for the full year ended December 31, 1996. It is suggested that
these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1995 Annual Report on
Form 10-KSB.
6
<PAGE>
Item 2. Management's Discussion And Analysis Of Operations And Financial
Condition
Overview
Paging Partners Corporation (the "Company") operates a radio common carrier
paging system (the "Metro System") which provides one-way wireless messaging
services in the New York Metropolitan area and in portions of five states (New
York, New Jersey, Connecticut, Pennsylvania, and Delaware). The Company
purchased certain licenses and related assets in the Baltimore/Washington area
for the frequency on which the Metro System broadcasts and will seek to expand
the service area of the Metro System from the New York Metropolitan area to
Baltimore/Washington, D.C.
In May 1994, the Company completed its initial public offering. A
substantial portion of the proceeds of this offering were used to construct a
one-way paging system (the "Corridor System") operating on a single frequency in
the territory along Interstate 95 from Baltimore/Washington to Boston.
Construction of the Corridor System was recently completed and the Company
currently operates both the Metro and Corridor Systems. In May 1996 the Company
completed a Private Placement from which it derived gross proceeds of $1.5
million. The Company anticipates that a substantial portion of these monies will
be utilized to increase marketing efforts and further develop the Company's
AlphaPlus(TM) family of data services for pagers.
Results of Operations
The table below presents certain items in the Company's statements of
operations in dollars and as percentages of total revenues including changes
therein for the quarters ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Three Months Ended March 31
1996 1995 Change
$ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Service 1,145,000 72.3 692,000 70.5 453,000 65.5
Equipment Sales 438,000 27.7 289,000 29.5 149,000 51.6
--------- ----- ------- ----- ------- ----
Total Revenue 1,583,000 100.0 981,000 100.0 602,000 61.4
--------- ----- ------- ----- ------- ----
Operating Expenses:
Service 763,000 48.2 485,000 49.4 278,000 57.3
Cost of Equipment Sold 474,000 29.9 319,000 32.5 155,000 48.6
Selling 316,000 20.0 198,000 20.2 118,000 59.6
Administrative 406,000 25.7 383,000 39.1 23,000 6.0
--------- ----- ------- ----- ------- ----
1,959,000 123.8 1,385,000 141.2 574,000 41.4
--------- ----- ------- ----- ------- ----
EBITDA (376,000) (23.8) (404,000) (41.2) 28,000 6.9
Depreciation and Amortization 257,000 16.2 154,000 15.7 103,000 66.9
--------- ----- ------- ----- ------- ----
Loss from Operations (633,000) (40.0) (558,000) (56.9) (75,000) (13.4)
Interest and Other Expense Income (25,000) (1.6) 28,000 2.9 (53,000) (189.3)
--------- ----- ------- ----- ------- ----
Net Loss (658,000) (41.6) (530,000) (54.0) (128,000) (24.2)
--------- ----- ------- ----- ------- ----
</TABLE>
- ------------------
7
<PAGE>
Both the service and equipment sales components of revenue increased during
the periods presented reflecting both the continuing penetration of the Metro
System and initial activations on the Corridor System. Revenues from pager sales
grew more rapidly than the number of pagers sold; an increased portion of such
sales were represented by higher-priced alphanumeric pagers, although unit
prices for these products continue to decline through the first quarter of 1996.
Service cost includes transmission site rentals, telephone interconnect
services, message dispatch costs, and the costs (mostly personnel-related) of
the Company's engineering function. The increases in such costs are primarily
attributable to an increase in the number of transmission sites, which grew from
159 as of March 31, 1995 to over 210 as of March 31, 1996; increased telephone
expenses reflecting both the growth in utilization of the Company's Metro System
and the initial infrastructure for the Corridor System; and increased message
dispatch costs resulting from greater alphanumeric penetration.
Cost of equipment sold increased consistent with an increase in the value of
paging units sold. The high cost of equipment sold relative to sales revenue
reflects the Company's policy of selling pagers as an accommodation to Resellers
and not as a source of profit. This gap widened during the first quarter of 1996
due to more aggressive pricing by the Company's competitors. The Company
anticipates that it will maintain its policy of selling pagers as an
accommodation to Resellers for the immediate future. Pagers are available from a
variety of sources and the Company encourages its Resellers to buy pagers
directly from the manufacturer rather than from the Company. Nevertheless, the
Company anticipates that the cost of equipment sold will continue to increase as
the Company accelerates the number of subscribers served by both of its Systems.
The increase in selling expense resulted primarily from an increase in
personnel. Of the eighteen current full-time equivalent sales and marketing
positions, only eleven existed prior to March 31, 1995.
Increases in general and administrative expenses were also driven by
personnel increases, specifically in the areas of accounting and information
systems.
EBITDA reflects the Company's earnings (excluding interest income and
non-operating income) before taxes, depreciation and amortization, and measures
the Company's operating cash flows, which the Company considers to be a
significant measure of performance. EBITDA is commonly used in the paging
industry and by financial analysts and others who follow the industry to measure
operating performance, but should not be considered in isolation or as an
alternative to measures of operating performance or cash flows pursuant to
generally accepted accounting principles. EBITDA improved slightly in the
quarter ended March 31, 1996 from the same quarter in 1995 as revenue growth
outpaced expense growth during the period.
Depreciation increased as the Company put into service the equipment
purchased for the Corridor System. Additionally, in recognition of the faster
pace of product obsolescence in the telecommunications industry, the company is
depreciating this equipment more rapidly than in the past.
Net loss increased commensurate with the increases in depreciation and net
interest expense described above.
8
<PAGE>
Liquidity and Capital Resources
In May 1994 the Company completed its initial public offering of 1,800,000
Units, each Unit consisting of one share of Common Stock and one Redeemable
Common Stock purchase Warrant, from which it derived net proceeds of $8,942,000.
Prior to such offering the Company financed its operations from capital
contributions, loans from stockholders and through the purchase of equipment
from Motorola, Inc. under conditional sales contracts sold by Motorola to a
commercial finance company.
Upon completion of its initial public offering, the Company repaid the
balance of the notes due to stockholders, in the amount of $210,000. In
addition, the Company used $3,600,000 of the proceeds from the public offering
to repay multiple notes due to the commercial finance company which purchased
its conditional sales contracts from Motorola. In addition, the Company entered
into a three year loan agreement with a commercial bank in the amount of
$3,600,000, which loan was collateralized by restricted cash and government
securities representing approximately 95% of loan to collateral value. The
Company entered into this loan with the expectation that some or all of the cash
restrictions would be replaced by collateralization of the Company's
receivables, inventory and fixed assets. As these expectations were not met, the
Company prepaid $1.2 million in December 1994 and the remaining principal
balance of $1.8 million in June 1995. In June 1995, the Company secured $1.5
million of equipment financing from Motorola. Borrowings under this financing
bear interest at the 90-day commercial paper rate plus 6% and are collateralized
by the Company's assets. The principal balance of each borrowing is payable in
48 equal monthly installments beginning one year after the date of the advance.
The financing agreement contains various financial covenants and restrictions.
Of the financing available from Motorola, $1,368,000 was utilized by March 31,
1996, and the Company expects to utilize most, if not all, of the remaining
availability prior to its expiration in June 1996.
By relying primarily upon Resellers to build its subscriber base, the
Company has been able to avoid many of the expenses associated with the
solicitation and servicing of subscribers. Nevertheless, the construction and
initial operation of a paging system requires substantial expenditures which can
only be recouped, if at all, from the subsequent operation of the system.
Consistent with the Company's expectations, capital expenditures and operating
expenses increased during 1994 and 1995 and will remain high in 1996 as the
Company supplements its Corridor System, continues marketing activities related
to its Corridor System and increases marketing relative to its Metro System. In
addition, the Company is incurring the expenses associated with its efforts to
develop software to facilitate the receipt and transmission of data.
The Company used net cash of $233,000 from operations during the first
quarter of 1996 and used $825,000 of cash in the same quarter of 1995. This use
of cash reflects primarily the expenditures associated with the operation and
initial marketing activities related to the Corridor System and the Company's
software development efforts.
Interest and other expense was $25,000 in the March 31, 1996 quarter
reflecting interest expense for the Company's equipment financing with Motorola.
This compares to interest income of $28,000 in the March 31, 1995 quarter,
reflecting interest income on unused proceeds of the Company's initial public
offering.
9
<PAGE>
The Company's capital expenditures for the calendar years 1994 and 1995,
were $2,872,000 and $1,644,000, respectively. The Company anticipates continued
significant capital expenditures during the first half of 1996 as it supplements
its Corridor System.
Further, in July 1995, the Company agreed to pay $340,000, $130,000 of which
is payable in service credits, in connection with the acquisition of licenses
and related assets intended to expand its Metro System to the Washington, D.C.
market. Of the $210,000 to be paid in cash, $135,000 has already been paid and
$75,000 is due in quarterly installments during 1996 and 1997.
On May 10, 1996, the Company completed a Private Placement of 857,143 shares
of its Common Stock from which it obtained net proceeds of approximately
$1,300,000. The Company anticipates that a substantial portion of these monies
will be utilized to increase marketing efforts and further develop the Company's
AlphaPlus(TM) family of enhanced data services to pagers.
PART II. OTHER INFORMATION
Item 5. Other Information
Consistent with its previously announced plans, on May 10, 1996, the
Company completed a Private Placement of shares of its Common Stock to a group
of investors including Allen & Company Incorporated ("Allen"). Pursuant to the
Private Placement the Company issued to the investors 857,143 shares of its
Common Stock at a price of $1.75 per share, for gross proceeds of $1.5 million.
As part of the Placement, the Company agreed to promptly register the 857,143
shares for sale under the Securities Act of 1993. The Company also agreed to
increase the size of its Board of Directors to seven and to elect to the Board
two individuals nominated by Allen. To date, Allen has not exercised this right.
Item 6. Exhibits And Reports On Form 8-K
Exhibit
No. Description Page No.
- ------- ----------- --------
10.1 Common Stock Purchase Agreement dated May 7, 1996,
between the Company and the Purchasers named therein. 12
10.2 Registration Rights Agreement dated May 7, 1996
between the Company and the Purchasers named therein. 31
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAGING PARTNERS CORPORATION
/s/Jeffrey M. Bachrach
--------------------------------------
Dated: May 13, 1996 By: Jeffrey M. Bachrach
Vice President and Principal Financial
and Accounting Officer
11
================================================================================
COMMON STOCK PURCHASE AGREEMENT
between
PAGING PARTNERS CORPORATION
and
ALLEN & COMPANY INCORPORATED
and certain other purchasers
dated
May 7, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 Authorization and Sale of the Shares; Closing................ 1
1.1 Authorization of the Shares.................................. 1
1.2 Sale of the Shares........................................... 1
1.3 Closing Date................................................. 1
1.4 Place of Closing............................................. 1
SECTION 2 Representations and Warranties of the Company................ 2
2.1 Organization and Standing; Certificate of Incorporation
and By-Laws ............................................... 2
2.2 Subsidiaries; Joint Ventures, Etc............................ 2
2.3 Capitalization............................................... 2
2.4 Status of Shares............................................. 3
2.5 Corporate Power; Authorization............................... 3
2.6 Enforceability............................................... 3
2.7 No Conflict.................................................. 3
2.8 Consents..................................................... 4
2.9 Compliance with Charter, By-Laws and Other Instruments....... 4
2.10 Compliance with Law.......................................... 4
2.11 Litigation and Bankruptcy.................................... 4
2.12 Real Property................................................ 4
2.13 Leases....................................................... 4
2.14 Trademarks................................................... 5
2.15 FCC Licenses................................................. 5
2.16 Employees.................................................... 5
2.17 ERISA Plans.................................................. 6
2.18 SEC Filings.................................................. 6
2.19 No Undisclosed Liabilities................................... 6
2.20 Events Subsequent to March 31, 1996.......................... 7
2.21 Condition of Assets.......................................... 8
2.22 Inventory.................................................... 8
2.23 Tax Matters.................................................. 8
SECTION 3 Representations and Warranties of the Purchasers............. 9
3.1 Experience................................................... 9
3.2 Access to Data............................................... 9
3.3 Shares Not Registered........................................ 9
3.4 Corporate Power; Authorization............................... 9
3.5 Enforceability............................................... 9
SECTION 4 Conditions Precedent to Purchasers' Obligation to Close...... 9
4.1 Representations and Warranties Correct....................... 10
i
<PAGE>
Page
----
4.2 Performance.................................................. 10
4.3 Registration Rights Agreement................................ 10
4.4 Board of Directors' Matters.................................. 10
4.5 Officers' Certificate(s)..................................... 10
4.6 Opinion of Company's Counsel................................. 10
4.7 Proceedings and Documents.................................... 10
SECTION 5 Conditions Precedent to the Company's Obligation to Close.... 11
5.1 Payment...................................................... 11
5.2 Representations and Warranties Correct at the Closing........ 11
SECTION 6 Covenants.................................................... 11
6.1 Directors; Visitation........................................ 11
6.2 S-3 Registration............................................. 11
6.3 Press Releases............................................... 11
SECTION 7 Miscellaneous................................................ 11
7.1 Governing Law................................................ 11
7.2 Successors and Assigns....................................... 12
7.3 Entire Agreement; Amendment.................................. 12
7.4 Notices, Etc................................................. 12
7.5 Delays or Omissions.......................................... 13
7.6 Brokers' and Finders' Fees................................... 13
7.7 Titles and Subtitles......................................... 13
7.8 Counterparts................................................. 13
ii
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 2.3 - Options
Schedule 2.9 - Violations of Material Agreements
Schedule 2.11 - Litigation
Schedule 2.13 - Leases
Schedule 2.14 - Trademarks
Schedule 2.15 - FCC Licenses
Schedule 2.16 - Employees
Exhibit 4.3 - Form of Registration Rights Agreement
iii
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
AGREEMENT, dated this 7th day of May, 1996, by and between PAGING PARTNERS
CORPORATION, a Delaware corporation (the "Company"), and ALLEN & COMPANY
INCORPORATED, a New York corporation ("Allen"), and the other parties which are
listed on the signature page hereto (with Allen, collectively, the
"Purchasers").
R E C I T A L S:
The Company desires to issue and sell, and the Purchasers desire to
purchase, certain securities of the Company; and the Company and the Purchasers
desire to enter into certain other agreements in connection therewith.
NOW, THEREFORE, in consideration of the premises hereof and the mutual
covenants and conditions herein contained, the parties hereto agree as follows:
SECTION 1
Authorization and Sale of the Shares; Closing
1.1 Authorization of the Shares. The Company has on or before the date
hereof authorized the sale and issuance to Purchasers of 857,143 shares (each a
"Share" and, collectively, the "Shares") of its Common Stock, par value $.01 per
share (the "Common Stock"), for a purchase price per Share of $1.75 and an
aggregate purchase price of $1,500,000.25 (the "Aggregate Purchase Price").
1.2 Sale of the Shares. Subject to the terms and conditions hereof and in
reliance upon the representations, warranties and agreements contained herein,
the Company shall issue and sell to the Purchasers, and the Purchasers shall
purchase from the Company at the Closing (as hereinafter defined), the Shares in
consideration of the Aggregate Purchase Price.
1.3 Closing Date. The closing of the purchase and sale of the Shares
hereunder and the consummation of the transactions contemplated hereby (the
"Closing") shall be held on May 10, 1996 (the "Closing Date") or at such other
time mutually acceptable to the parties but in no event no later than May 20,
1996. At the Closing, the Company shall deliver to the Purchasers a certificate
or certificates in such denominations and registered in such name or names as
requested by the Purchasers representing the Shares against payment to the
Company by a bank check or wire transfer (or combination thereof) of the
Aggregate Purchase Price.
1.4 Place of Closing. The Closing shall take place at the offices of
Phillips Nizer Benjamin Krim & Ballon LLP, 666 Fifth Avenue, New York, New York
10103, or at a place as shall be mutually agreed upon by the parties hereto.
<PAGE>
SECTION 2
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as follows:
2.1 Organization and Standing; Certificate of Incorporation and By-Laws.
The Company is a corporation duly organized and validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
and is in good standing in each other jurisdiction in which the character of its
properties or the nature of its business requires such qualification, except
where the failure to so qualify would have no material adverse impact upon the
business, operations or prospects of the Company. The Company has the requisite
corporate power to own the properties owned by it and to conduct business as now
being conducted by it and as proposed to be conducted by it. The Company has
furnished counsel to the Purchasers with true, correct and complete copies of
its Certificate of Incorporation, as amended to date (as amended, the
"Charter"), and By-Laws, as amended to date (as amended, the "By-Laws") and no
actions have been taken to amend, modify or repeal the forms of the Charter and
By-Laws delivered to counsel to Purchasers.
2.2 Subsidiaries; Joint Ventures, Etc. The Company has no subsidiaries and
does not control, directly or indirectly, or have an interest in, any
corporation, association, partnership, joint venture or other business entity.
2.3 Capitalization.
(a) The Company's authorized capital stock consists of 21,000,000 shares,
of which:
(i) 20,000,000 shares are Common Stock, of which (A) 4,800,000 shares
are duly issued and are outstanding, fully-paid and
non-assessable and, (B) 2,373,500 shares were set aside for
issuance upon exercise of the warrants, options and rights noted
on Schedule 2.3 hereto; and
(ii) 1,000,000 shares are Preferred Stock, par value $.01 per share,
none of which are issued and outstanding.
(b) Except as set forth herein and on Schedule 2.3 hereto, there are, and
immediately after the Closing there will be, no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding on the Company for the purchase or acquisition of any shares of its
capital stock. Except as set forth herein and on Schedule 2.3, there are, and
immediately after the Closing there will be, no agreements, restrictions or
encumbrances (including, without limitation, rights of first refusal, rights of
first offer, proxies or voting agreements) with respect to any shares of capital
stock of the Company (whether outstanding or issuable upon conversion or
exercise of outstanding securities), except as contemplated in this Agreement.
2
<PAGE>
(c) All shares of capital stock and other securities issued prior to the
Closing have been issued in transactions in compliance with the Securities Act
of 1933, as amended (the "Securities Act") and all applicable state securities
or "blue sky" laws. The Company has not violated, and is not in violation of,
the Securities Act or any applicable state securities or "blue sky" laws in
connection with the issuance of any shares of capital stock or other securities.
2.4 Status of Shares. The Shares, when sold and issued in compliance with
the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any mortgage, pledge, lien, security
interest, encumbrance or charge of any kind whatsoever (each, a "Lien" and
collectively, "Liens").
2.5 Corporate Power; Authorization. The Company has all requisite corporate
power and authority to enter into this Agreement and the Registration Rights
Agreement (defined in Section 4.3 below), to sell, issue and deliver the Shares,
and to carry out and perform its obligations under this Agreement and the
Registration Rights Agreement. On or prior to the Closing, the Company's
directors and stockholders shall have taken all action necessary for the
authorization, execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement and the authorization, sale,
issuance and delivery of the Shares.
2.6 Enforceability. Each of this Agreement and the Registration Rights
Agreement is the valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally and to general equitable
principles.
2.7 No Conflict. The execution, delivery and performance by the Company of
this Agreement and the Registration Rights Agreement and its compliance herewith
and therewith, and the sale, issuance and delivery of the Shares do not result
in any violation of, and do not conflict with, or result in a breach of any of
the terms of, or constitute a default under, the Charter or By-Laws. The
execution, delivery and performance by the Company of this Agreement and the
Registration Rights Agreement, and its compliance herewith and therewith, and
the sale, issuance and delivery of the Shares do not result in any violation of
and do not conflict with, or result in a breach of any of the terms of, or
constitute a default under, any mortgage, indenture, agreement, instrument,
judgment, decree, order, rule or regulation or other restriction to which the
Company is a party or by which it is bound or the provision of any state or
Federal law to which the Company is subject, or result in the creation of any
Lien upon any of the properties or assets of the Company pursuant to any such
term, or result in the suspension, revocation, impairment, forfeiture or
non-renewal of any permit, license, authorization or approval applicable to the
Company's operations or any of its assets or properties.
2.8 Consents. No consent, approval, qualification, order or authorization
of, or filing with, any governmental authority, including, without limitation,
the Secretary of State of Delaware, is required in connection with the Company's
valid execution, delivery or perfor-
3
<PAGE>
mance of this Agreement and the Registration Rights Agreement, the offer, sale
or issuance of the Shares by the Company, or the consummation of any other
transaction contemplated on the part of the Company hereby or thereby, except
for such filings as have been made on or prior to the Closing.
2.9 Compliance with Charter, By-Laws and Other Instruments. The Company is
not in violation of any term of its Charter or By-Laws. The Company is not in
violation of any term of any mortgage, indenture, contract, agreement or
instrument to which it is a party or by which the Company is bound or to which
the Company's properties or assets are subject which would have a change in or
effect on, which is, or is reasonably likely to be, materially adverse to the
financial condition, operations, assets, liabilities or business of the Company.
2.10 Compliance with Law. The Company is in compliance in all material
respects with all judgments, decrees, orders, rules and regulations or other
restriction to which the Company is a party or by which it is bound and the
provisions of state and Federal laws to which the Company is subject.
2.11 Litigation and Bankruptcy.
(a) Except as set forth on Schedule 2.11, there are no actions, suits,
proceedings, investigations or claims pending or, to the Company's knowledge,
threatened against or involving the Company.
(b) The Company has not admitted in writing its inability to pay its debts
generally as they become due, filed or consented to the filing against it of a
petition in bankruptcy or a petition to take advantage of any insolvency act,
made an assignment for the benefit of creditors, consented to the appointment of
a receiver for itself or for the whole or any substantial part of its property
or assets, or had a petition in bankruptcy filed against it, been adjudicated
bankrupt, or filed a petition or answer seeking reorganization or arrangement
under the federal bankruptcy laws or any other similar law or statute of the
United States of America or any other jurisdiction.
2.12 Real Property. The Company does not hold title to or otherwise own any
real property.
2.13 Leases. Schedule 2.13 attached hereto contains a true, correct and
complete list (including the amounts of rent called for and a description of the
leased property) of all leases under which the Company is a lessee or sublessee
of real property except for "site leases" or similar arrangements with respect
to the Company's transmitters. The Company holds valid leasehold or licensed
interests in the properties which it leases or which are licensed to it, and
enjoys peaceful and undisturbed possession under all such leases. All such
leases are valid and enforceable in accordance with their respective terms
(subject to applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws of general application affecting enforcement of creditors'
rights generally and to general equitable principles), are in full force
4
<PAGE>
and effect, without any default by the Company or, to the Company's knowledge,
by any landlord under any such lease, or any condition, event or act which, with
the giving of notice or lapse of time, or both, would constitute such a default.
2.14 Trademarks.
(a) Schedule 2.14 attached hereto sets forth a true, complete and accurate
list of all trademarks and trademark applications (collectively, "Trademarks")
now owned, licensed or controlled by the Company, and attached to Schedule 2.14
are true and correct copies of all Trademarks registered by the Company with the
United States Patent and Trademark Office. No Trademarks have been adjudged
invalid or unenforceable, in whole or in part, and there is no litigation or
proceeding pending concerning the validity or enforceability of the registered
Trademarks. To the Company's knowledge, each of the issued Trademarks is valid
and enforceable. The Company is the sole and exclusive owner of the entire right
and title to and interest in each of the trademark registrations, free and clear
of any Liens. The Company has not received any communication(s), or otherwise
received any information, asserting a claim by any person to the ownership of or
right to use said Trademarks, or alleging that the Company has violated, or by
conducting its business as proposed to be conducted would violate, any of the
rights of any other person or entity, and the Company does not know of any basis
for any such claim.
(b) The Company is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner or licensee of,
or other claimant to, any Trademarks being used by the Company with respect to
its use thereof or in connection with the conduct of its business or otherwise.
The Company is not a party to any agreement concerning the Trademarks used or to
be used by the Company in its business as conducted or as proposed to be
conducted.
2.15 FCC Licenses. Schedule 2.15 attached hereto sets forth a true,
complete and correct list prepared as of April 26, 1996, of the licenses, and
all amendments thereto, issued to the Company by the United States Federal
Communications Commission (collectively, "FCC Licenses"). All FCC Licenses are
in full force and effect, without any default by the Company nor, to the
knowledge of the Company, has there occurred event or act which, with the giving
of notice or lapse of time, or both, would constitute such a default. The FCC
Licenses listed on Schedule 2.15 constitute all of FCC Licenses that are
required or necessary for the Company to conduct its business as presently
conducted.
2.16 Employees. Schedule 2.16 attached hereto contains a true, complete and
correct list of the Company's employees as of the date hereof and the respective
offices and titles thereof. The Company has complied in all material respects
with all applicable laws, rules and regulations of governmental agencies or
authorities relating to the employment of labor in connection with the operation
of its business, including, without limitation, ERISA and the regulations and
published interpretations thereunder, the requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, related to employees and
former
5
<PAGE>
employees ("COBRA"), and those relating to wages, hours, collective bargaining,
unemployment insurance, workers' compensation, equal employment opportunity and
the payment and withholding of taxes, including income and social security
taxes. The Company has not agreed to recognize any union or other collective
bargaining unit, nor has any union or other collective bargaining unit been
certified as representing any of its employees. The Company has not experienced
any strikes, work stoppages, significant grievance proceedings or filings of
claims of unfair labor practices.
2.17 ERISA Plans. The Company does not maintain any pension, profit
sharing, retirement, fringe benefit, deferred compensation, stock purchase,
stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance or any other type of employee
benefit plan, program or arrangement within the meaning of Section 3.3 of the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"),
including without limitation any defined benefit plan ("Defined Benefit Plan")
within the meaning of Section 3(35) of ERISA or Section 414(j) of the Code or
any defined contribution plan ("Defined Contribution Plan") within the meaning
of Section 3(34) of ERISA or Section 414(i) of the Code or any multi-employer
plan ("Multi-employer Plan") within the meaning of Section 3(37) and 4001(a)(3)
of ERISA (hereinafter each individually referred to as a "Plan" and collectively
referred to as the "Plans") on behalf of any current or former officers or
employees of the Company or their beneficiaries (whether on an active or frozen
basis).
2.18 SEC Filings.
(a) The Company has delivered to the Purchasers its Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995, (the "Company's Exchange Act
Filing"). The Company's Exchange Act Filing, as of its filing date, contained no
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Since December 31, 1995, there has been no material adverse change in
the assets or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations of the Company, except that the
Company has continued to incur losses and utilize its cash and cash equivalents
as reflected in its Exchange Act Filings.
2.19 No Undisclosed Liabilities. Except as set forth in the notes to the
financial statements included in the Company's Exchange Act Filing, the
liabilities on the Company's December 31, 1995 balance sheet (the "Company's
Balance Sheet") consist solely of accrued obligations and liabilities incurred
by the Company in the ordinary course of business to persons or entities which
are not affiliates of the Company. Except as set forth on Schedule 2.19, the
Company has no liabilities other than (i) liabilities disclosed in the Company's
Balance Sheet and (ii) liabilities which have arisen after December 31, 1995 in
the ordinary course of business consistent with past practice. There are no
asserted claims for indemnification by any person or entity against the Company
under any law or agreement or pursuant to the Charter or By-
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<PAGE>
laws, and the Company is not aware of any facts or circumstances that might
reasonably give rise to the assertion of such a claim against the Company.
2.20 Events Subsequent to December 31, 1995. Except as set forth on
Schedule 2.20, since December 31, 1995, the Company has not:
(a) issued any stock, bond or other corporate security (including without
limitation securities convertible into or rights to acquire capital stock
of the Company) other than as provided herein or described in the Company's
Exchange Act Filings;
(b) borrowed any amount or incurred or become subject to any liability
(absolute, accrued or contingent), except current liabilities incurred,
liabilities under contracts entered into, borrowings under its credit
facilities, liabilities for customer advances and liabilities in respect of
letters of credit, all of which are in the ordinary course of business;
(c) discharged or satisfied any Lien or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities
shown on the Company's Balance Sheet, current liabilities incurred since
the date of the Company's Balance Sheet in the ordinary course of business
and as described in or contemplated by the Company's Exchange Act Filings;
(d) declared or made any payment or distribution to stockholders or
purchased or redeemed any shares of its capital stock or other securities;
(e) mortgaged, pledged or subjected to Lien any of its assets, tangible or
intangible, other than Liens of current real property taxes not yet due and
payable;
(f) sold, assigned or transferred any of its tangible assets except in the
ordinary course of business, or canceled any debt or claim;
(g) sold, assigned, transferred or granted any license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset other than in the ordinary course of business;
(h) suffered any material loss of property or waived any right of
substantial value whether or not in the ordinary course of business;
(i) suffered any material adverse change in its relations with, or any loss
or threatened loss of, any of its suppliers or customers;
(j) made any change in the employment arrangements or benefits for its
executive officers from that disclosed in the Company's Exchange Act
Filings;
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<PAGE>
(k) made any material change in the manner of its business or operations;
(l) made any material change in any method of accounting or accounting
practice, except for any such change required by reason of a concurrent
change in generally accepted accounting principles or disclosed in the
Company's Exchange Act Filings;
(m) entered into any transaction except in the ordinary course of business
or as otherwise contemplated hereby, except for a Termination Agreement and
related agreements entered into with Harris Bookfor; or
(n) entered into any commitment (contingent or otherwise) to do any of the
foregoing except as contemplated hereby.
2.21 Condition of Assets. The physical assets and properties of the
Company, including its machinery and equipment, are in sound operating
condition, ordinary wear and tear excepted. Such assets and properties of the
Company have been given regular maintenance in the ordinary course of business.
2.22 Inventory. The inventories shown on the Balance Sheet and any
inventory acquired by the Company during the period from January 1, 1996 up to
but not including the Closing Date, consist of items of a quality and quantity
useable or saleable in the ordinary course of business of the Company. All items
included in the inventories are the property of the Company, except for sales
made in the ordinary course of business since the dates indicated, and for each
of these sales either the purchaser has made full payment or the purchaser's
liability to make payment is reflected in the books of the Company.
2.23 Tax Matters. The Company has timely filed all federal, state and local
tax returns, estimates and reports with respect to the business of the Company
believed by it to be required to be filed by it as of the date hereof and has
paid in full all taxes shown to be due by such returns, estimates or reports.
The Company knows of no audit, assessment, notice of deficiency, claim or demand
for taxes or proposed deficiency against the Company for any federal, state or
local taxes. The Company has not consented to a waiver or extension of the
statute of limitations for assessments of any tax liability for any year with
any department of any federal, state, local or foreign government responsible
for the administration of tax laws.
SECTION 3
Representations and Warranties of the Purchasers
Each of the Purchasers represents and warrants to the Company as follows:
8
<PAGE>
3.1 Experience. He or it has such knowledge and experience in finance and
business matters that he or it is capable of evaluating the merits and risks of
an investment in the Shares and of making an informed decision with respect
thereto.
3.2 Access to Data. He or it has had full opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the full opportunity to review the Company's books,
records and facilities.
3.3 Shares Not Registered. He or it acknowledges that the Shares have not
been registered under the Act, it being understood and agreed that the Company
has certain obligations to register the Shares as more fully set forth in
Section 6.2 hereto. He or it acknowledges that the Shares must be held
indefinitely unless they are registered under the Securities Act or an exemption
from such registration is available and that the certificates representing the
Shares shall have endorsed thereon legends to the effect that the Shares have
not been registered under the Act, and such other legends required to be placed
thereon by applicable state laws.
3.4 Corporate Power; Authorization. Such of the Purchasers which are
partnerships or corporations have all requisite partnership or corporate power
and authority to enter into this Agreement and the Registration Rights Agreement
and to carry out and perform its obligations under the terms of this Agreement
and the Registration Rights Agreement. The directors and stockholders of those
Purchasers which are corporations and the shareholders of those Purchasers which
are partnerships have taken all action necessary for the authorization,
execution, delivery and performance by it of this Agreement and the Registration
Rights Agreement.
3.5 Enforceability. Each of this Agreement and the Registration Rights
Agreement is the valid and binding obligation of the Purchasers, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally and to general equitable
principles.
SECTION 4
Conditions Precedent to Purchasers' Obligation to Close
The obligation of the Purchasers to purchase the Shares at the Closing is
subject to the fulfillment to the Purchasers' reasonable satisfaction on or
prior to the Closing Date of each of the following conditions:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2 hereof, shall be true and correct in
all respects on the Closing Date.
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<PAGE>
4.2 Performance. All covenants, agreements and conditions contained in this
Agreement to be performed or complied with by the Company on or prior to the
each such Closing Date shall have been performed or complied with in all
respects.
4.3 Registration Rights Agreement. The Company shall have executed and
delivered the registration rights agreement substantially in the form of Exhibit
4.3 attached hereto (the "Registration Rights Agreement").
4.4 Board of Directors' Matters. Subject to Section 6.1 hereof, the number
of the directors on the Company's Board of Directors shall have been increased
from five (5) to seven (7) and, upon Closing, Allen's two (2) nominees shall be
appointed directors on the Company's Board of Directors.
4.5 Officers' Certificate(s).
(a) The Company shall have delivered to the Purchasers a certificate of the
chief executive or chief operating officer of the Company dated the Closing
Date, in form and substance reasonably satisfactory to the Purchasers,
certifying to the fulfillment of the conditions specified in this Section 4.
(b) The Company shall have delivered to the Purchasers a certificate of the
Secretary of the Company dated the Closing Date, in form and substance
reasonably satisfactory to the Purchasers, certifying as to the Charter, By-laws
and incumbency.
4.6 Opinion of Company's Counsel. The Purchasers shall have received from
Phillips Nizer Benjamin Krim & Ballon LLP, counsel to the Company, an opinion
addressed to the Purchasers, dated the Closing Date to the effect that the
Company is duly organized and validly existing; that all corporate action
necessary or appropriate in connection with the transaction contemplated hereby
has been taken and that the Shares, when paid for as contemplated hereby, shall
have been duly authorized, validly issued and are non-assessable.
4.7 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers.
SECTION 5
Conditions Precedent to the Company's Obligation to Close
The obligation of the Company to sell the Shares at the Closing is subject
to the fulfillment to the Company's reasonable satisfaction on or prior to the
Closing Date of each of the following conditions:
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<PAGE>
5.1 Payment. The Purchasers shall have paid in full the Aggregate Purchase
Price.
5.2 Representations and Warranties Correct at the Closing. The
representations and warranties made by the Purchasers in Section 3 hereof shall
be true and correct in all respects on the Closing Date.
SECTION 6
Covenants
6.1 Directors; Visitation. So long as the Purchasers in the aggregate, hold
at least 50% of the Shares purchased hereunder, upon request of Allen, the
Company shall use diligent efforts to cause two (2) individuals designated by
Allen, and reasonably acceptable to the Company, to be elected to the Company's
Board of Directors. In the event that Allen elects, during such time as the
Purchasers hold at least 50% of the Shares purchased hereunder, not to appoint
designees to the Board of Directors, then the Company shall give notice to and
permit a representative of Allen to attend and observe, but not vote at, each
meeting of the Board of Directors and provide such representative with copies of
the materials provided to the members of the Board of Directors for such
meeting.
6.2 S-3 Registration. Promptly following the Closing, the Company shall use
its best efforts to register the Shares on Form S-3 or such other form as may be
deemed appropriate by the Company, pursuant to the Registration Rights
Agreement.
6.3 Press Releases. Prior to any press release or other public disclosure
relating to the sale and purchase of the Shares hereunder, the Company and Allen
shall confer and reach an agreement upon the contents of any such disclosure.
SECTION 7
Miscellaneous
7.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of New York.
7.2 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
7.3 Entire Agreement; Amendment. This Agreement (including the Schedules
and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
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<PAGE>
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated, except by a written instrument signed by the Company and the
Purchasers.
7.4 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, return receipt requested, or delivered either by hand, by
messenger or by nationally recognized overnight courier, addressed:
(a) if to the Purchasers, to the following address, or at such other
address as the Purchasers shall have furnished to the Company in writing:
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attn: James W. Quinn
with a copy to:
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attn: Guy N. Molinari, Esq.
and
(b) if to the Company, to the following address, or at such other address
as the Company shall have furnished to the Purchasers in writing,
Paging Partners Corporation
Freehold Office Plaza
4249 Route 9 North
Building 2
Freehold, New Jersey 07728
Fax: (908) 409-7366
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attention: Monte Engler, Esq. or
Vincent J. McGill, Esq.
Fax: (212) 262-5152
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<PAGE>
7.5 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Shares, upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
7.6 Brokers' and Finders' Fees. Each party hereto (i) represents and
warrants that, except for Bentley Securities, which was hired by and will be
compensated by the Company, it has not retained a finder or broker in connection
with the transactions contemplated by this Agreement and (ii) hereby agrees to
indemnify and to hold the other party harmless of and from any liability for
commission or compensation in the nature of an agent's fee to any broker or
other person or firm incurred in connection with the transactions contemplated
hereby (and the costs and expenses of defending against such liability or
asserted liability) arising from any act by it or any of its employees or
representatives.
7.7 Titles and Subtitles. The titles of the paragraphs and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
PAGING PARTNERS CORPORATION
By: /s/ Richard Giacchi
-------------------------
Title: President
PURCHASERS:
Allen & Company Incorporated
By: /s/ Eugene Protash
-------------------------
Title: Asst VP
No. of Shares 443,571
/s/ Glenn Okun
-----------------------------
Name: Glenn Okun
No. of Shares 114,286
/s/ Terry Allen Kramer
-----------------------------
Name: Terry Allen Kramer
No. of Shares 61,324
/s/ Bruce Allen
-----------------------------
Name: Bruce Allen
No. of Shares 57,143
/s/ Susan Allen
-----------------------------
Name: Susan Allen
No. of Shares 61,324
/s/ Paul Gould
-----------------------------
Name: Paul Gould
No. of Shares 17,282
/s/ John Schneider
-----------------------------
Name: John Schneider
No. of Shares 20,305
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<PAGE>
/s/ Harold Wit
-----------------------------
Name: Harold Wit
No. of Shares 15,331
/s/ Philip Scaturro
-----------------------------
Name: Philip Scaturro
No. of Shares 15,331
/s/ Nancy Peretsman
-----------------------------
Name: Nancy Peretsman
No. of Shares 15,331
/s/ Robert Mackie
-----------------------------
Name: Robert Mackie
No. of Shares 20,305
/s/ Mary Cullen
-----------------------------
Name: Mary Cullen
No. of Shares 4,181
/s/ Brian J. Murphy
-----------------------------
Name: Brian Murphy
No. of Shares 11,429
(Page 15 of Common Stock Purchase Agreement
dated May 7, 1996)
15
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made as of this 7th day of
May, 1995, by and between Paging Partners Corporation, a Delaware corporation
(the "Company"), and each of the purchasers which are signatories hereto
(collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the parties hereto are entering into a Common Stock Purchase
Agreement dated the date hereof (the "Stock Purchase Agreement"), pursuant to
which the Purchasers are purchasing 857,143 shares (the "Shares") of the
Company's Common Stock, par value $.01 per share;
WHEREAS, it is a condition to the execution and delivery of the Stock
Purchase Agreement that the parties thereto execute and deliver an agreement
granting the Purchasers certain registration rights with respect to the Shares,
upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Holder" or "Holders" shall mean any holder of the Registrable Securities.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean the Shares and any securities issued in
respect of the Shares upon any stock split, stock dividend, merger,
consolidation, recapitalization or similar event.
<PAGE>
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Sections 2 or 3 hereof, including, without limitation, any
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, the fees and expenses of
one counsel for all the selling Holders and other holders of the Company's
securities and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for any Holder (other than the fees and disbursements
of counsel included under Registration Expenses).
2. Registration. Promptly after the date hereof, the Company shall use best
efforts to effect, as promptly as practicable, the registration of the
Registrable Securities on Form S-3 (including, without limitation, the execution
of an undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act) or, if
for any reason Form S-3 is not available, on such other Form as may be
appropriate for the registration of the Registrable Securities, provided that
such registration statement shall be filed with the Commission within 45 days of
the date hereof. The Company shall keep such Registration Statement effective,
or shall file such post-effective amendments or subsequent Registration
Statements as are necessary to enable the Holders to distribute the Registrable
Securities, until such time as the Registrable Shares, in the opinion of Company
counsel, are available for sale pursuant to Rule 144 under the Securities Act.
Notwithstanding the foregoing, the Company may impose limited blackout periods
during which the Holders will not be able to sell pursuant to Registration
Statements. Further, the Company's obligations under this paragraph shall
terminate in all events on the third anniversary of the date hereof.
3. "Piggyback" Registration; Underwriting.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a securityholder or securityholders
exercising their respective demand registration rights (other than a
registration relating solely to employee benefit plans, a registration relating
solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales), then the Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within thirty (30) days after receipt of the
written notice from the Company described in
2
<PAGE>
clause (i) above, except as set forth in Section 3(b) below. Such written
request may specify all or a part of a Holder's Registrable Securities.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders by written notice. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company
distributing its securities for its own account through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company. Notwithstanding any other provision of
this Section 3, if the representative of the underwriters advises the Company in
writing that, in its opinion, inclusion of the Registrable Securities in the
underwriting would materially and adversely affect the underwriting, the
representative may (subject to the allocation priority set forth below), limit
the number of Registrable Securities to be included in the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its account and then in the following manner:
(i) the securities requested to be registered by other persons
who by virtue of agreements with the Company are entitled to include their
securities in any such registration (collectively, "Other Stockholders")
shall be excluded from such registration and underwriting to the extent
required by such limitation in proportion, as nearly as practicable, to
the respective amounts of securities which they had requested to be
registered, and
(ii) if a limitation on the number of shares is still required,
the securities being sold for the account of the Holders shall be excluded
from such registration and underwriting to the extent required by such
limitation in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities and other securities which they had
requested to be included in such registration.
If any Holder of Registrable Securities or Other Stockholder who has requested
inclusion in such registration as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the underwriter and the other Holders. The securities so withdrawn
shall also be withdrawn from registration.
(c) Notwithstanding the foregoing, in the event that the Company gives
the notice provided for in Section 3(a)(i) above and any Holder elects not to
participate in the offering described in such notice, or fails to provide the
notice of intent to participate within the time prescribed therefor, then such
Holder shall not sell, assign, mortgage, transfer, pledge, create a security
interest in or lien upon, encumber, give, place in trust, hypothecate or
otherwise in any manner dispose of any of the Registrable Securities then held
by such Holder for a period commencing on the date of the aforesaid notice from
the Company until thirty (30) days following the effectiveness of the
registration statement relating to the offering.
4. Expenses and Procedure of Registration.
3
<PAGE>
(a) The Company shall bear all Registration Expenses and the selling
securityholders shall bear all Selling Expenses (in proportion, as nearly as
practicable, to the securities of each securityholder being registered) incurred
in connection with any registration, qualification or compliance pursuant to the
provisions of Section 2 or 3.
(b) In the case of each registration effected by the Company pursuant to
this Agreement (other than those effected pursuant to Section 2), the Company
will keep each Holder advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will:
(i) Keep such registration effective for a period of six months
or until the Holder or Holders have completed the distribution described in
the registration statement relating thereto, whichever first occurs;
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of securities covered by such registration statement;
(iii) Furnish such number of prospectuses and other documents
incident thereto, including any term sheet or any amendment of or
supplement to the prospectus, as a Holder from time to time may reasonably
request;
(iv) Cause all such Registrable Securities to be listed on each,
if any, securities exchange on which similar securities issued by the
Company are then listed; and
(v) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission.
5. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, with respect to
which registration, qualification or compliance has been effected pursuant to
this Section 5, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on 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 the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls
4
<PAGE>
any such underwriter, for any legal and any other expenses as they are
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by it are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers and
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of the Securities Act and the rules and regulations
thereunder, each other Holder and each of their officers, directors and
partners, and each person controlling such Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or 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, and will reimburse the Company and such Holders,
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice in writing to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
5. 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 which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 5 is unavailable
to an Indemnified Party in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the
5
<PAGE>
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 the Company on the one hand and the shareholders offering
securities in the offering (the "Selling Shareholders") on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and the
Selling Shareholders on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of material fact or
the omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Selling Shareholders and the parties' relevant
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Selling Shareholders agree that
it would not be just and equitable if contribution pursuant to this Section 5(d)
were based solely upon the number of entities from whom contribution was
requested or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 5(d). The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to above in this Section 5(d) shall be deemed
to include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
6. Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may request in writing and
as shall be necessary or desirable in connection with any registration,
qualification or compliance referred to in this Agreement.
7. Transfer or Assignment of Registration Rights. The rights to cause the
Company to register securities granted to the Holders by the Company under
Sections 2 or 3 may be transferred or assigned, provided that the Company is
given written notice at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the Registrable Securities with respect to which such
registration rights are being transferred or assigned, and provided further that
the transferee or assignee of such rights assumes the obligations of the Holders
under this Agreement.
8. Termination. The Company's obligations under Sections 2 and 3 of this
Agreement shall terminate on the third anniversary of the date hereof.
9. Entire Agreement; Amendment; Waiver. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof. No amendment, alteration or modification of this Agreement shall be
valid unless in each instance such amendment, alteration or modification is
expressed in a written instrument executed by the Company and the Holders of at
least majority of the Registrable Securities. No waiver of any provision of this
Agreement shall be valid unless it is expressed in a written instrument duly
executed by the party or parties making such waiver. The failure of any party to
insist, in any one or more instances, on performance of any of the terms and
conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the
6
<PAGE>
future performance of any such term, covenant or condition but the obligation of
any party with respect thereto shall continue in full force and effect.
10. Specific Performance. The parties hereby declare that it is impossible
to measure in money the damages which will accrue to a party hereto by reason of
a failure to perform any of the obligations under this Agreement. Therefore, all
parties hereto shall have the right to specific performance of the obligations
of the other parties under this Agreement, and if any party hereto shall
institute an action or proceeding to enforce the provisions hereof, any person
(including the Company) against whom such action or proceeding is brought hereby
waives the claim or defense therein that such party has an adequate remedy at
law, and such person shall not urge in any such action or proceeding the claim
or defense that such remedy at law exists.
11. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, return receipt requested, or transmitted by facsimile or delivered
either by hand, by messenger or by nationally recognized overnight courier,
addressed:
(a) if to the holders of the Registrable Securities, to the following
address or at such other address as they shall have furnished to the
Company in writing:
c/o Allen & Company Incorporated
711 Fifth Avenue
New York, New York 10022
Attn: James W. Quinn
with a copy to:
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attn: Guy N. Molinari, Esq.
and
(b) if to the Company, to the following address, or at such other
address as the Company shall have furnished to the holders of the
Registrable Securities and each such other holder in writing,
7
<PAGE>
Paging Partners Corporation
Freehold Office Plaza
4249 Route 9 North
Building 2
Freehold, New Jersey 07728
Fax: (201)
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103
Attention: Vincent J. McGill, Esq. or
Monte Engler, Esq.
Fax: (212) 262-5152
Alternatively, to such other address as a party hereto supplies to each
other party in writing.
12. Successors and Assigns. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective transferees, successors and assigns of the parties hereto, whether so
expressed or not.
13. Governing Law. This Agreement is to be governed by and interpreted
under the laws of the State of New York giving effect to the principles of
conflicts of laws thereof.
14. Titles and Subtitles. The titles of the sections of this Agreement are
for the convenience of reference only and are not to be considered in construing
this Agreement.
15. Severability. The invalidity or unenforceability of any provisions of
this Agreement shall not be deemed to affect the validity or enforceability of
any other provision of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PAGING PARTNERS CORPORATION
By: /s/ Richard Giacchi
-----------------------------
Name: Richard Giacchi
Title: President
PURCHASERS
Allen & Company Incorporated
By: /s/ Eugene Protash
-----------------------------
Name: Eugene Protash
Title: Asst VP
No. of Shares 443,571
/s/ Glenn Okun
---------------------------------
Name: Glenn Okun
No. of _______________
/s/ Terry Allen Kramer
---------------------------------
Name: Terry Allen Kramer
No. of Shares 61,324
/s/ Bruce Allen
---------------------------------
Name: Bruce Allen
No. of Shares_________
/s/ Susan Allen
---------------------------------
Name: Susan Allen
No. of Shares 61,324
/s/ Paul Gold
---------------------------------
Name: Paul Gould
No. of Shares 17,282
---------------------------------
Name: John Schneider
No. of Shares_________
9
<PAGE>
/s/ Harold Wit
---------------------------------
Name: Harold Wit
No. of Shares 15,331
/s/ Philip Scaturro
---------------------------------
Name: Philip Scaturro
No. of Shares 15,331
/s/ Nancy Peretsman
---------------------------------
Name: Nancy Peretsman
No. of Shares 15,331
/s/ Robert Mackie
---------------------------------
Name: Robert Mackie
No. of Shares 20,305
/s/ Mary Cullen
---------------------------------
Name: Mary Cullen
No. of Shares 4,181
/s/ Brian Murphy
---------------------------------
Name: Brian Murphy
No. of Shares 11,429
(Page 10 of Registration Rights Agreement
dated May 7, 1996)
10
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 271,000
<SECURITIES> 0
<RECEIVABLES> 1,043,000
<ALLOWANCES> 0
<INVENTORY> 327,000
<CURRENT-ASSETS> 1,696,000
<PP&E> 5,189,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,607,000
<CURRENT-LIABILITIES> 1,049,000
<BONDS> 1,318,000
0
0
<COMMON> 48,000
<OTHER-SE> 5,192,000
<TOTAL-LIABILITY-AND-EQUITY> 7,607,000
<SALES> 438,000
<TOTAL-REVENUES> 1,583,000
<CGS> 474,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,485,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,000
<INCOME-PRETAX> (658,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (658,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (658,000)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
