-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PbiYRo9wQqWiE7tfKtSf+zZ67bNUVAVb1UrNhUqFGYmI28mP6nsu71TAb/dv+Kgz XwgdgYNSJUO/yiALiSeKbQ== 0000950133-96-001623.txt : 19960816 0000950133-96-001623.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950133-96-001623 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROCALL INC CENTRAL INDEX KEY: 0000906525 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 541215634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21924 FILM NUMBER: 96614815 BUSINESS ADDRESS: STREET 1: 6910 RICHMOND HWY CITY: ALEXANDRIA STATE: VA ZIP: 22306 BUSINESS PHONE: 7036606677 MAIL ADDRESS: STREET 1: 6910 RICHMOND HWY CITY: ALEXANDRIA STATE: VA ZIP: 22306 10-Q 1 METROCALL, INC. FORM 10-Q (6/30/96). 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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: 0-21924 METROCALL, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) DELAWARE 54 - 1215634 - --------------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 6677 RICHMOND HIGHWAY, ALEXANDRIA, VIRGINIA 22306 - ------------------------------------------------------------------------------------------------ (Address of Principal Executive Offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 660-6677
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES / X / NO / / Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: CLASS OUTSTANDING AT AUGUST 1, 1996 ------------------------------------- -------------------------------- COMMON STOCK, $.01 PAR VALUE 14,638,197
2 METROCALL, INC. INDEX TO FORM 10-Q
Page Number --------------- PART I FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets, December 31, 1995 and June 30, 1996 3 Consolidated Statements of Operations for the three months ended June 30, 1995 and 1996 4 Consolidated Statements of Operations for the six months ended June 30, 1995 and 1996 5 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART I OTHER INFORMATION Item 1 Legal Proceedings 16 Item 2 Changes in Securities 16 Item 3 Defaults upon Senior Securities 16 Item 4 Submission of Matters to a Vote of Security Holders 16 Item 5 Other Information 16 Item 6 Exhibits and Reports on Form 8-K 17 SIGNATURES 20
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS METROCALL, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Information)
DECEMBER 31, JUNE 30, 1995 1996 --------------- ------------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 123,574 $ 49,377 Accounts receivable, less allowance for doubtful accounts of $968 as of December 31, 1995 and $917 as of June 30, 1996 9,785 10,788 Prepaid expenses and other current assets 1,908 2,021 ---------------- --------------- Total current assets 135,267 62,186 ---------------- --------------- PROPERTY AND EQUIPMENT: Land, buildings and leasehold improvements 9,900 10,445 Furniture, office equipment and vehicles 12,794 15,605 Paging and plant equipment 103,427 129,786 Less - Accumulated depreciation and amortization (50,175) (62,461) ---------------- --------------- 75,946 93,375 ---------------- --------------- INTANGIBLE ASSETS, net of accumulated amortization of approximately $8,875 as of December 31, 1995 and $12,437 as of June 30, 1996 129,085 192,248 EQUITY INVESTMENT IN A+ NETWORK, INC. (Note 8) - 26,759 OTHER ASSETS 316 312 ---------------- --------------- $ 340,614 $ 374,880 ================ =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 252 $ 271 Accounts payable 9,390 17,457 Obligation under tender offer (Note 8) - 45,165 Deferred revenues and subscriber deposits 1,950 2,759 Other current liabilities 7,666 7,001 ---------------- --------------- Total current liabilities 19,258 72,653 ---------------- --------------- CAPITAL LEASE OBLIGATION, net of current portion 2,849 2,745 LONG-TERM DEBT, less current maturities 150,954 150,918 DEFERRED INCOME TAX LIABILITY 11,814 11,471 MINORITY INTEREST IN PARTNERSHIP 501 500 STOCKHOLDERS' EQUITY: Preferred stock, par value $.01 per share; authorized 1,000,000 shares; none issued and outstanding - - Common stock, par value $.01 per share; authorized 20,000,000 shares; 14,626,255 shares issued and outstanding as of December 31, 1995 and June 30, 1996, respectively 146 146 Additional paid-in capital 201,956 201,956 Accumulated deficit (46,864) (65,509) ---------------- --------------- 155,238 136,593 ---------------- --------------- $ 340,614 $ 374,880 ================ ===============
See notes to condensed consolidated financial statements. 3 4 METROCALL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Share and Per Share Information) (Unaudited)
THREE MONTHS ENDED JUNE 30, -------------------------------- 1995 1996 ------------- ------------ REVENUES: Service, rent and maintenance revenues $ 23,396 $ 25,079 Product sales 4,244 6,969 ---------------- ---------------- Total revenues 27,640 32,048 Net book value of products sold (3,598) (5,910) ---------------- ---------------- 24,042 26,138 ---------------- ---------------- OPERATING EXPENSES: Service, rent and maintenance expenses 6,345 8,305 Selling and marketing 3,864 5,399 General and administrative 6,277 6,920 Depreciation and amortization 6,944 13,607 ---------------- ---------------- 23,430 34,231 ---------------- ---------------- Income (loss) from operations 612 (8,093) INTEREST EXPENSE (2,829) (4,191) INTEREST AND OTHER INCOME 8 1,157 ---------------- ---------------- LOSS BEFORE INCOME TAXES (2,209) (11,127) INCOME TAX BENEFIT 171 172 ---------------- ---------------- Net loss $ (2,038) $ (10,955) ================ ================ NET LOSS PER COMMON SHARE $ (0.19) $ (0.75) ================ ================ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,608,324 14,626,255 ================ ================
See notes to condensed consolidated financial statements. 4 5 METROCALL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Share and Per Share Information) (Unaudited)
SIX MONTHS ENDED JUNE 30, --------------------------------- 1995 1996 ------------- -------------- REVENUES: Service, rent and maintenance revenues $ 45,504 $ 48,829 Product sales 7,932 13,158 ----------------- ----------------- Total revenues 53,436 61,987 Net book value of products sold (6,750) (10,560) ----------------- ----------------- 46,686 51,427 ----------------- ----------------- OPERATING EXPENSES: Service, rent and maintenance expenses 12,642 16,498 Selling and marketing 7,827 9,992 General and administrative 12,126 12,702 Depreciation and amortization 12,713 25,098 ----------------- ----------------- 45,308 64,290 ----------------- ----------------- Income (loss) from operations 1,378 (12,863) INTEREST EXPENSE (5,408) (8,401) INTEREST AND OTHER (EXPENSE) INCOME (9) 2,511 ----------------- ----------------- LOSS BEFORE INCOME TAXES (4,039) (18,753) INCOME TAX BENEFIT 312 107 ----------------- ----------------- Net loss $ (3,727) $ (18,646) ================= ================= NET LOSS PER COMMON SHARE $ (0.35) $ (1.27) ================= ================= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,605,253 14,626,255 ================= =================
See notes to condensed consolidated financial statements. 5 6 METROCALL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
SIX MONTHS ENDED JUNE 30, ---------------------- 1995 1996 ------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,727) $ (18,646) Adjustments to reconcile net loss to net cash provided by operating activities- Depreciation and amortization 12,713 25,098 Amortization of debt financing costs 377 176 Decrease in deferred income taxes (343) (343) Write-off of deferred acquisition costs - 388 Equity in loss of A+ Network, Inc. - 153 Deferred debt financing costs (35) - Cash provided by (used in) changes in assets and liabilities: Accounts receivable (3,950) (1,002) Prepaid expenses and other current assets (186) (113) Accounts payable (1,883) 8,068 Deferred revenues 847 957 Subscriber deposits (213) (148) Other current liabilities (23) (665) ------------- ------------- Net cash provided by operating activities 3,577 13,923 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment, net (15,128) (39,065) Additions to intangibles (754) (35,265) Equity investment in A+ Network, Inc. - (13,671) Other 74 3 ------------- ------------- Net cash used in investing activities (15,808) (87,998) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 13,000 - Principal payments on long-term debt (110) (122) Proceeds from exercise of common stock options 17 - Increase in minority interest in partnership 2 - ------------- ------------- Net cash provided by financing activities 12,909 (122) ------------- ------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 678 (74,197) CASH AND CASH EQUIVALENTS, beginning of period 2,773 123,574 ------------- ------------- CASH AND CASH EQUIVALENTS, end of period $ 3,451 $ 49,377 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash payments for interest $ 5,522 $ 7,956 Cash payments for income taxes $ 31 $ 236
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING INFORMATION: On June 24, 1996, shareholders of A+ Network, Inc. tendered 2,140,526 shares of common stock to the Company, at $21.10 per share, which were purchased on July 1, 1996. In May 1995, the total number of shares of Metrocall common stock issued in its November 1994 acquisition of MetroPaging, Inc. to former MetroPaging stockholders was adjusted which reduced the total purchase price by approximately $153. See notes to condensed consolidated financial statements. 6 7 METROCALL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) 1. ORGANIZATION Metrocall, Inc. (the "Company"), is a leading provider of local, regional and nationwide paging and other wireless messaging services. The Company's selling efforts are concentrated in 16 markets in four operating regions: (i) the Northeast (Massachusetts through Delaware), (ii) the Mid-Atlantic (Maryland and the Washington, D. C. metropolitan area), (iii) the Southeast (Virginia through Florida) and (iv) the West (primarily California, Nevada and Arizona). Through its Nationwide Network, the Company provides coverage to over 860 cities representing the top 100 Standard Metropolitan Statistical Areas. 2. BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that its disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1995 Annual Report on Form 10-K. The results of operations for the three and six-month periods ended June 30, 1996, are not necessarily indicative of the results to be expected for the full year. 3. SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition The Company recognizes revenue under service, rental and maintenance agreements with customers as the related services are performed. Sales of equipment are recognized upon delivery. Cash and Cash Equivalents Cash and cash equivalents include short-term, highly liquid investments purchased with original maturities of three months or less. Property and Equipment Property and equipment are carried at cost. Depreciation is computed using the straight-line method over the following estimated useful lives.
YEARS ------ Buildings and leasehold improvements 10-31 Furniture and office equipment 5-10 Vehicles 3-5 Subscriber paging equipment 3-4 Transmission and plant equipment 5-12
In July, 1995, the Company began recording and depreciating all new pagers as a component of subscriber paging equipment. Depreciation expense recorded on new pagers in the three and six-month periods ended June 30, 1996 was approximately $1.7 million and $2.6 million, respectively. Betterments to acquired pagers are charged to depreciation expense. 7 8 METROCALL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1996 (UNAUDITED) 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Long-Lived Assets Long-lived assets and identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount should be addressed. Impairment is measured by comparing the value to the estimated undiscounted future cash flows expected to result from use of the assets and their eventual disposition. The Company has determined that as of June 30, 1996, there has been no impairment in the carrying value of long-lived assets. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." 4. NET LOSS PER COMMON SHARE Net loss per common share for the three and six month periods ended June 30, 1995 and 1996, is based upon the weighted average number of common equivalent shares outstanding during the period. The effect of outstanding options on net loss per share for the periods is not included because such options would be anti-dilutive. 5. EQUITY AND NOTES OFFERINGS On September 27, 1995, the Company completed a public offering of 4.0 million shares of Metrocall common stock (the "Equity Offering") at $28.25 per share. After underwriting discounts, commissions and other professional fees, net proceeds from the Equity Offering were approximately $107.0 million. On October 2, 1995, the Company completed a public offering of $150.0 million senior subordinated notes (the "Notes Offering"), bearing interest at 10.375% payable semi-annually on April 1 and October 1, due 2007. After underwriting discounts, commissions and other professional fees, net proceeds from the Notes Offering were approximately $145.1 million. Proceeds from the Notes Offering were used to repay approximately $113.3 million outstanding under the Company's currently existing credit facility. In connection with this repayment, the Company recognized an extraordinary charge of approximately $4.5 million in October 1995 to write off deferred debt financing and related costs. Concurrently, the existing credit facility was amended to permit the indebtedness incurred under the Notes Offering. 6. CREDIT AGREEMENT The Company currently has a secured credit agreement with a group of lenders (the "Banks") for a $175 million credit facility (the "Existing Credit Facility") consisting of a reducing revolving credit facility of $100 million and a revolving credit and term loan facility of $75 million. The Existing Credit Facility is secured by substantially all assets of the Company. The Existing Credit Facility contains covenants regarding, among other things, the maintenance of ratios of total debt to EBITDA (as defined), of EBITDA to debt service and of EBITDA to interest expense. On June 25, 1996, the Company obtained a Waiver and Consent Letter (the "Waiver") easing certain of these covenants, which the Company otherwise would not have complied with. The Waiver expires September 21, 1996. At August 1, 1996, the balance outstanding and payable under the facility was $39 million. 8 9 METROCALL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1996 (UNAUDITED) 7. STOCK OPTION PLANS During the six-month period ended June 30, 1996, pursuant to the Company's stock option plans, the Board of Directors authorized the issuance of options to purchase 520,500 shares of Metrocall common stock exercisable at prices ranging from $19.125 to $21.25 per share to certain key employees and directors of the Company. All options were issued with exercise prices equal to the fair market value at the date of grant. Certain of these options were issued under a stock option plan, the Metrocall 1996 Stock Option Plan, which was ratified by the Company's stockholders on May 1, 1996. All options granted under the Plan become fully vested and exercisable on the second anniversary of the date of grant and expire ten years from the date of grant. Total options outstanding under the Company's stock option plans at June 30, 1996, were 1,213,000 with exercise prices ranging from $13.00 to $22.25 per share. Of the total options outstanding at June 30, 1996, a total of 472,500 were currently exercisable. In addition, there are options outstanding and exercisable to purchase 27,958 shares of the Company's common stock at $1.035 per share which were assumed in connection with the acquisition of FirstPAGE USA, Inc. in August 1994. Pursuant to the Directors Stock Option Plan (the "Directors Plan"), the Board of Directors authorized the issuance of an option to purchase 1,000 shares of Metrocall common stock exercisable at $20.00 per share during the six months ended June 30, 1996. All options were issued at exercise prices equal to the fair market value at the grant date. All options granted under the Directors Plan become fully vested and exercisable on the six-month anniversary of the date of grant. Total options outstanding under the Directors Plan at June 30, 1996, were 9,000 with exercise prices ranging from $13.00 to $22.125 per share. At June 30, 1996, options outstanding to acquire 8,000 shares of the Company's common stock were exercisable. 8. EQUITY INVESTMENT IN A+ NETWORK, INC. On May 16, 1996, the Company entered into a definitive merger agreement (the "A+ Agreement") with A+ Network, Inc. of Pensacola, Florida ("A+ Network"). Under the terms of the A+ Agreement, A+ Network would become a wholly-owned subsidiary of the Company in exchange for cash, the assumption of debt and issuance of Metrocall common stock. Total consideration in the A+ Network merger is expected to be $91.8 million cash paid pursuant to the tender offer discussed below, assumption of $125 million of A+ Network indebtedness and the exchange of approximately 9.0 million shares of Metrocall common stock. The A+ Agreement provided for the commencement of a tender offer (the "Offer") by the Company for 2,140,526 shares of A+ Network common stock. The Offer commenced on May 22, 1996 and expired on June 24, 1996. Shareholders of A+ Network tendered approximately 5,362,482 shares of A+ Network common stock pursuant to the Offer and the Company purchased 2,140,526 of such shares at $21.10 per share, pursuant to the Offer. In addition, the Company purchased 2,210,217 shares at $21.10 per share of A+ Network common stock from certain principal shareholders of A+ Network on June 25, 1996 pursuant to the A+ Agreement. The Company has recorded an equity investment in A+ Network based on the value of A+ Network's net assets as of June 30, 1996. The shares of A+ Network common stock acquired pursuant to the Offer were not paid for until July 1, 1996, and, accordingly, the Company has recorded a corresponding liability for this obligation. In addition, the Company has recorded a charge of approximately $153,000 representing the Company's share of A+ Network's losses for the period the Company owned the shares. 9 10 METROCALL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1996 (UNAUDITED) 9. RECENT AND PENDING ACQUISITIONS Parkway Paging, Inc. On July 16, 1996, the Company completed its acquisition of Parkway Paging, Inc. ("Parkway") of Plano, Texas, for $28 million cash. The acquisition of Parkway adds approximately 140,000 subscribers to the Company's subscriber base. Reflected below is a summary of agreements to acquire businesses which were pending at June 30, 1996 in addition to that described in Note 8. Consummation of these pending acquisitions is subject to a number of conditions including, but not limited to, receipt of all necessary regulatory approvals. There can be no assurance that such approval can be obtained. In addition, the purchase prices of each transaction is subject to adjustment based on each company's ability to meet certain defined performance criteria. The pending transactions, if consummated, will be accounted for as purchases. Consummation of these pending acquisitions may subject the Company to additional risks and uncertainties including challenges of business integration, substantial indebtedness and needs for future capital. Satellite Paging and Message Network On February 28, 1996, the Company signed a definitive acquisition agreement (the "Satellite Agreement") with Satellite Paging of Fairfield, New Jersey and Message Network of Boca Raton, Florida (together, "Satellite"). Under the terms of the Satellite Agreement, the Company will acquire all of the assets of Satellite in exchange for approximately $28 million cash. Page America Group, Inc. On April 22, 1996, the Company signed a definitive acquisition agreement (the "Page America Agreement") with Page America Group, Inc. of Hackensack, New Jersey ("Page America"). Under the terms of the Page America Agreement, the Company will acquire substantially all of the assets of Page America for up to approximately $78.5 million, of which $55 million will be paid in cash and up to $23.5 million will be paid in the form of the Company's common stock. The maximum number of shares of common stock to be exchanged will be approximately 1.3 million. Other Acquisitions The Company incurred costs in negotiations to potentially acquire other wireless telecommunications companies. The Company has ceased further negotiations with these companies and, accordingly, recorded a charge to write off deferred acquisition costs of approximately $0.4 million in the accompanying statement of operations for the three months ended June 30, 1996. 10. CONTINGENCIES The Company has received communications from a seller in connection with an acquisition that occurred in 1994 asserting damages resulting from alleged misrepresentations in connection with the acquisition. The seller, who received shares of common stock as acquisition consideration, is seeking to receive additional shares of common stock and a seat on the Company's board of directors among other requests. If necessary, management will vigorously defend any legal actions that might arise from such assertions. The Company is subject to legal and regulatory matters in the normal course of business. In the opinion of management, the outcome of such assertions will not have a material effect on the financial position or the results of the operations of the Company. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All statements contained herein that are not historical facts, including but not limited to, statements regarding anticipated future capital requirements, the Company's future development plans, the Company's ability to obtain additional debt, equity or other financing, and the Company's ability to generate cash from operations and further savings from existing operations, are based on current expectations. These statements are forward looking within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and involve a number of risks and uncertainties. Actual results may differ materially. The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the condensed consolidated financial statements and notes thereto. OVERVIEW Metrocall is among the leading paging companies in the United States based on number of subscribers, with 1,109,647 pagers in service at June 30, 1996. During the period from February through May 1996, Metrocall announced four separate pending acquisitions which will, if completed, add approximately 1.1 million subscribers to its base of pagers in service. The results of operations for the three months ended June 30, 1996 do not reflect the results of operations of any of these companies to be acquired. The definitions below relate to management's discussion of the Company's results of operations that follows. Service, rent and maintenance revenues: include primarily monthly, quarterly, semi-annually and annually billed recurring revenue, not generally dependent on usage, charged to subscribers for paging and related services such as voice mail and pager repair and replacement. Net revenues: include service, rent and maintenance revenues and sales of customer owned and maintained ("COAM") pagers less net book value of pagers sold. Service, rent and maintenance expenses: include costs related to the management, operation and maintenance of the Company's network systems and customer support centers. Selling and marketing expenses: include salaries, commissions and administrative costs for the Company's sales force and related marketing and advertising expenses. General and administrative expenses: include executive management, accounting, office telephone, repairs and maintenance, management information systems and employee benefits. The Company derives the majority of its revenues from fixed, periodic (usually monthly) fees, generally not dependent on usage, charged to subscribers for paging services. While a subscriber remains in the Company's service, future operating results benefit from this recurring revenue stream with minimal requirements for incremental selling expenses or other fixed costs. The Company's growth and expansion into new markets require significant capital investment for the installation of paging equipment and technical infrastructure. Additionally, the Company purchases pagers for that portion of its subscriber base that leases pagers from the Company. 11 12 RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of net revenues represented by certain items in the Company's Condensed Consolidated Statements of Operations.
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30 JUNE 30 ---------------------- ---------------------- 1995 1996 1995 1996 --------- ---------- --------- ----------- Revenues: Service, rent and maintenance 97.3 % 95.9 % 97.5 % 94.9 % Product sales 17.7 26.7 17.0 25.6 Net book value of products sold (15.0) (22.6) (14.5) (20.5) ---------- ------------ ----------- ----------- Net revenues 100.0 100.0 100.0 100.0 ---------- ------------ ----------- ----------- Operating expenses: Service, rent and maintenance 26.4 31.8 27.1 32.1 Selling and marketing 16.1 20.7 16.8 19.4 General and administrative 26.1 26.5 26.0 24.7 Depreciation and amortization 28.9 52.1 27.2 48.8 ---------- ------------ ----------- ----------- Income (loss) from operations 2.5 (31.1) 2.9 (25.0) Interest expense (11.8) (16.0) (11.6) (16.3) Interest and other income - 4.4 - 4.9 Income tax benefit 0.8 0.8 0.7 0.2 Net loss (8.5)% (41.9)% (8.0)% (36.2)% OTHER DATA: Units in service (end of period) 839,358 1,109,647 839,358 1,109,647 EBITDA (in thousands) (1) $ 7,556 $ 5,514 $ 14,091 $ 12,235 Ratio of EBITDA to net revenues (1) 31.4 % 21.1 % 30.2 % 23.8 % ARPU (2) $ 9.58 $ 7.89 $ 9.51 $ 7.93
- -------------------- (1) The ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to net revenues is calculated by dividing EBITDA by net revenues. EBITDA should not be considered in isolation or as an alternative to net income (loss), income (loss) from operations or any other measure of performance under generally accepted accounting principles. EBITDA is used by the Company for the purpose of analyzing its operating performance, leverage and liquidity. The Company's credit agreement contains various financial covenants based on "cash flow" as defined therein, which approximates EBITDA. See "-- Liquidity and Capital Resources" for discussion of capital requirements and commitments. (2) ARPU (average monthly recurring revenue per unit) is calculated by dividing (a) monthly service, rent and maintenance revenues for the period by (b) the average number of units in service for the period. Three Months ended June 30, 1996 Compared With 1995 Total revenues increased approximately $4.4 million from $27.6 million for the three months ended June 30, 1995, (the "1995 quarter") to $32.0 million for the three months ended June 30, 1996 (the "1996 quarter"). Service, rent and maintenance revenues increased approximately $1.7 million from $23.4 million in the 1995 quarter to $25.1 million in the 1996 quarter. The increase is attributable to greater service revenues due to the growth of pagers in service from 839,358 at June 30, 1995, to 1,109,647 at June 30, 1996. Monthly ARPU declined from $9.58 per unit in the 1995 quarter to $7.89 per unit in the 1996 quarter due to the increase in the base of customers serviced through indirect distribution channels. Product sales increased $2.8 million from $4.2 million in the 1995 quarter to $7.0 million in the 1996 quarter and increased as a percentage of total revenues from 15.4% in the 1995 quarter to 21.7% in the 1996 quarter, due to a higher volume of sales to resellers and other indirect sales channels. Net book value of products sold increased approximately $2.3 million from $3.6 million in the 1995 quarter to $5.9 million in the 1996 quarter. Net book value of products sold increased principally due to the increase in product sales, partially offset by depreciation on pagers. 12 13 Overall, the Company experienced a decrease in average monthly operating costs per unit in service (operating costs per unit before depreciation and amortization) from the 1995 quarter to the 1996 quarter. Average monthly operating costs per unit decreased from $6.75 per unit for the 1995 quarter to $6.49 per unit for the 1996 quarter, including the impact in the 1996 quarter of certain non-recurring charges of $0.6 million primarily associated with certain terminated merger and acquisition transactions. Each operating expense is discussed separately below. Service, rent and maintenance expenses increased approximately $2.0 million from $6.3 million in the 1995 quarter to $8.3 million in the 1996 quarter and increased as a percentage of net revenues from 26.4% in the 1995 quarter to 31.8% in the 1996 quarter. The overall increase in service, rent and maintenance expense is attributable to increased carrier line costs paid to third party service providers ($1.2 million), increased rent expense related to the addition of transmitters in the Company's Nationwide Network ($0.2 million), increased personnel costs ($0.5 million) and other operating expenses ($0.1 million). Service, rent and maintenance expense per unit has increased slightly from $2.60 per unit per month in the 1995 quarter to $2.61 per unit per month in the 1996 quarter. Continued build-out of the Company's Nationwide Network by the Company may result in increased service, rent and maintenance expenses as a percentage of net revenues. Selling and marketing expenses increased approximately $1.5 million from $3.9 million in the 1995 quarter to $5.4 million in the 1996 quarter and increased as a percentage of net revenues from 16.1% in the 1995 quarter to 20.7% in the 1996 quarter. The increase in selling and marketing expenses is primarily associated with increased sales staff and related costs ($1.3 million) and increased costs associated with product promotions ($0.2 million). Monthly selling and marketing expense per unit increased from $1.58 per unit in the 1995 quarter to $1.70 per unit in the 1996 quarter primarily due to increased sales and distribution personnel in the 1996 quarter. Selling and marketing expenses may increase as a percentage of net revenues as the Company continues its subscriber growth and net unit additions. General and administrative expenses increased approximately $0.6 million from $6.3 million in the 1995 quarter to $6.9 million in the 1996 quarter and increased as a percentage of net revenues from 26.1% in the 1995 quarter to 26.5% in the 1996 quarter. The increase is primarily due to the write-off of deferred acquisition costs ($0.4 million) and other general corporate expenses ($0.2 million). Monthly general and administrative expense per unit has decreased from $2.57 in the 1995 quarter to $2.18 in the 1996 quarter. General and administrative costs should remain constant as a percent of revenue as the Company increases its total subscriber base. Depreciation and amortization increased approximately $6.7 million from $6.9 million in the 1995 quarter to $13.6 million in the 1996 quarter, and increased as a percentage of net revenues from 28.9% in the 1995 quarter to 52.1% in the 1996 quarter. The increase in total depreciation expense resulted primarily from increased depreciation on subscriber paging equipment ($5.3 million) and on other plant and other operating equipment ($0.8 million), and on increased amortization expense ($0.5 million). Beginning in July 1995, the Company began recording all purchases of new pagers as a component of subscriber paging equipment. Amounts previously classified as inventories in the prior year financial statements have been reclassified to conform to the current period's presentation. This resulted in an increase to depreciation expense of approximately $1.7 million. Interest expense increased approximately $1.4 million, from $2.8 million in the 1995 quarter to $4.2 million in the 1996 quarter. Interest expense increased due to higher average levels of debt as a result of the Company's Notes Offering in October 1995 of $150.0 million of senior subordinated notes at an interest rate of 10.375%. Net loss increased $9.0 million in the 1996 quarter from approximately $2.0 million in the 1995 quarter to $11.0 million. EBITDA decreased approximately $2.1 million from $7.6 million in the 1995 quarter to $5.5 million in the 1995 quarter. As a percentage of net revenues, EBITDA decreased from 31.4% in the 1995 quarter to 21.1% in the 1996 quarter. 13 14 Six Months ended June 30, 1996 Compared With 1995 Total revenues increased approximately $8.6 million from $53.4 million for the six months ended June 30, 1995, ("1995") to $62.0 million for the six months ended June 30, 1996 ("1996"). Service, rent and maintenance revenues increased approximately $3.3 million in 1996 from $45.5 million in 1995 to $48.8 million in 1996. The increase is attributable to greater service revenues due to the growth of pagers in service from 839,358 at June 30, 1995, to 1,109,647 at June 30, 1996. Monthly ARPU declined from $9.51 per unit in 1995 to $7.93 per unit in 1996 due to the increase in the base of customers serviced through indirect distribution channels. Product sales increased $5.2 million from $7.9 million in 1995 to $13.1 million in 1996 and increased as a percentage of total revenues from 14.8% in 1995 to 21.2% in 1996, due to a higher volume of sales to resellers and other indirect sales channels. Net book value of products sold increased approximately $3.8 million from $6.8 million in 1995 to $10.6 million in 1996. Net book value of products sold increased principally due to the increase in product sales, partially offset by depreciation on pagers. Overall, the Company experienced a decrease in average monthly operating costs per unit in service (operating costs per unit before depreciation and amortization) from 1995 to 1996. Average monthly operating cost per unit decreased from $6.81 per unit for 1995 to $6.36 per unit for 1996. Each operating expense is discussed separately below. Service, rent and maintenance expenses increased approximately $3.9 million from $12.6 million in 1995 to $16.5 million in 1996 and increased as a percentage of net revenues from 27.1% in 1995 to 32.1% in 1996. The overall increase in service, rent and maintenance expense is primarily attributable to increased carrier line costs paid to third party service providers ($2.0 million), increased rent expense related to the addition of transmitters to the Company's Nationwide Network ($0.7 million) and increased personnel costs ($0.9 million). Service, rent and maintenance expense per unit has increased from $2.64 per unit per month in 1995 to $2.68 per unit per month in 1996. Continued build-out of the Company's Nationwide Network by the Company may result in increased service, rent and maintenance expenses as a percentage of net revenues. Selling and marketing expenses increased approximately $2.2 million from $7.8 million in 1995 to $10.0 million in 1996 and increased as a percentage of net revenues from 16.8% in 1995 to 19.4% in 1996. The increase in selling and marketing expenses is primarily associated with increased sales staff and related costs ($1.6 million) and increased advertising and promotion costs ($0.5 million). Monthly selling and marketing expense per unit has decreased from $1.64 per unit in 1995 to $1.62 per unit in 1996. Selling and marketing expenses may increase as a percentage of net revenues as the Company continues its subscriber growth and net unit additions. General and administrative expenses increased approximately $0.6 million from $12.1 million in 1995 compared to $12.7 million in 1996, but decreased as a percentage of net revenues from 26.0% in 1995 to 24.7% in 1996. Monthly general and administrative expense per unit has decreased from $2.53 per unit in 1995 to $2.06 per unit in 1996. General and administrative costs should remain constant as a percent of revenue as the Company increases its total subscriber base. Depreciation and amortization increased approximately $12.4 million from $12.7 million in 1995 to $25.1 million in 1996, and increased as a percentage of net revenues from 27.2% to 48.8% in 1995 and 1996, respectively. The increase in total depreciation expense resulted primarily from depreciation on subscriber paging equipment ($10.8 million) and on other plant and operating equipment ($1.3 million). Beginning in July 1995, the Company began recording all purchases of new pagers as a component of subscriber paging equipment. Amounts previously classified as inventories in the prior year financial statements have been reclassified to conform to the current period's presentation. This resulted in an increase to depreciation expense of approximately $2.6 million. Interest expense increased approximately $3.0 million, from $5.4 million in 1995 to $8.4 million in 1996. Interest expense increased due to higher average levels of debt as a result of the Company's Notes Offering in October, 1995 of $150.0 million of senior subordinated notes at an interest rate of 10.375%. Net loss increased $14.9 million in 1996 from approximately $3.7 million in 1995 to $18.6 million in 1996. 14 15 EBITDA decreased approximately $1.9 million from $14.1 million in 1995 to $12.2 million in 1996. As a percentage of net revenues, EBITDA decreased from 30.2% in 1995 to 23.8% in 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's operations require the availability of substantial funds to finance the maintenance and growth of its existing paging operations and customer base, development and construction of future wireless communications networks, expansion into new markets and the acquisition of other wireless communications companies. Further cash requirements include debt service, working capital and general corporate requirements. The Company financed its internal growth in 1996 through its operating cash flow and the use of available cash. Net cash provided by operating activities increased from $3.6 million for the six months ended June 30, 1995, to $13.9 million for the three months ended June 30, 1996. Cash flows used in investing activities were primarily to fund purchases of property and equipment. Capital expenditures were approximately $15.1 million and $39.1 million for the six-month periods ended June 30, 1995 and 1996, respectively. The Company experienced greater capital expenditure requirements through June 30, 1996 due to increased pager placements and the build-out of the Company's Nationwide Network. In addition to capital expenditures, the Company paid approximately $46.6 million to purchase approximately 2.2 million shares of common stock from certain principal shareholders of A+ Network, Inc. The Company paid an additional $45.2 million on July 1, 1996, upon settlement of its tender offer to purchase an additional 2.1 million shares from A+ Network, Inc. common shareholders. Cash flows used in financing activities for the six-month period ended June 30, 1996, included payments on long-term debt of approximately $122,000. The Company currently has a secured credit agreement with a group of lenders (the "Banks") for a $175 million credit facility (the "Existing Credit Facility") consisting of a reducing revolving credit facility of $100 million and a revolving credit and term loan facility of $75 million. The Existing Credit Facility is secured by substantially all assets of the Company. The Existing Credit Facility contains covenants regarding, among other things, the maintenance of ratios of total debt to EBITDA (as defined), of EBITDA to debt service and of EBITDA to interest expense. On June 25, 1996, the Company obtained a Waiver and Consent Letter (the "Waiver") easing certain of these covenants, which the Company otherwise would not have complied with. The Waiver expires September 21, 1996. At August 1, 1996, the balance outstanding and payable under the facility was $39 million. Pursuant to the terms of the Waiver approximately $15 million was available under the Existing Credit Facility as of August 1, 1996. The Company is currently working with its lenders to secure a new credit facility. The Company's ability to incur additional indebtedness (including draws on a new credit facility) is subject to certain limitations in the agreements relating to existing indebtedness. In connection with the pending acquisitions of A+ Network and Page America, the Company is obligated to assume approximately $125 million of indebtedness of A+ Network and to pay up to approximately $55 million in cash in connection with the acquisition of Page America. The Company will not be able to incur or assume indebtedness in connection with these acquisitions unless certain ratios of debt to EBITDA for the most recently reported quarter are not exceeded after the acquisition. The Company believes that it will not be able to complete these acquisitions until either reported EBITDA of the Company, A+ Network and Page America increase to a level that is sufficient to allow the Company to assume the A+ Network indebtedness and pay the acquisition consideration or the Company reduces the overall level of indebtedness that would exist after the acquisitions by raising additional equity capital or by other means. Metrocall is exploring options for raising additional equity capital should that become necessary. There can be no assurance that additional capital, either indebtedness or equity, will be available on terms satisfactory to the Company. 15 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company, from time to time, is involved in lawsuits in the normal course of business. The Company believes that its currently pending lawsuits will not have a materially adverse effect on the Company's financial position or results of operations. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Stockholders held on May 1, 1996, the following proposals were adopted by the vote specified below:
Withheld/ Broker Proposal For Against Abstain Nonvotes ---------------------------- ---------- ------------ ----------- ------------- Election of three directors: 1. Ronald V. Aprahamian 11,201,791 543,224 - 2,881,240 2. Harry L. Brock, Jr. 10,790,531 954,484 - 2,881,240 3. Richard M. Johnston 11,200,291 544,724 - 2,881,240 Ratification of Arthur Andersen LLP as independent public accountants 11,220,326 511,130 13,559 2,881,240 Adoption of the Metrocall, Inc. Employee Stock Purchase Plan 8,891,756 738,332 25,259 4,970,908 Approval of the Metrocall, Inc. 1996 Stock Option Plan 8,689,883 824,481 25,735 5,086,156 Approval of an amendment to increase the number of authorized common shares to 26,000,000 10,843,885 624,753 276,377 2,881,240
ITEM 5. OTHER INFORMATION None. 16 17 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K. 2.1 Agreement and Plan of Reorganization among Metrocall, FPGE Acquisition Corp., FirstPAGE, Wilmington Securities, Inc., First Century Partnership III and Omega Partners, L.P., dated March 15, 1994 (the "FirstPAGE Reorganization Agreement"). (a) 2.2 Certificate of Merger between FirstPAGE and FPGE Acquisition Corp. executed upon approval of the merger by the stockholders of Metrocall and FirstPAGE. (a) 2.3 Supplemental Agreement executed in connection with the FirstPAGE Reorganization Agreement.(a) 2.4 Indemnification and Escrow Agreement executed in connection with FirstPAGE Reorganization Agreement. (b) 2.5 Voting Agreement among Metrocall, FirstPAGE and certain principal stockholders of Metrocall and FirstPAGE executed in connection with the FirstPAGE Reorganization Agreement. (b) 2.6 First Amendment to FirstPAGE Reorganization Agreement. (a) 2.7 Agreement of Merger by and among Metrocall, Inc., PPI Acquisition Corp., Parkway Paging, Inc. certain shareholders of Parkway Paging, Inc., and George W. Bush, dated February 26, 1996. (c) 2.8 Asset Purchase Agreement by and among O.R. Estman, Inc. d/b/a Satellite Paging, Dana Paging, Inc. d/b/a Message Network, Bertram M. Wachtel, Edward R. Davalos, Kevan D. Bloomgren and Metrocall, Inc., dated February 28, 1996. (c) 2.9 Agreement and Plan of Merger dated as of May 16, 1996, between Metrocall, Inc. and A+ Network, Inc. (d) 2.10 Shareholders' Option and Sale Agreement dated as of May 16, 1996 between Metrocall, Inc. and certain shareholders of A+ Network, Inc. listed therein. (d) 2.11 Metrocall Stockholders Voting Agreement dated as of May 16, 1996 between May 16, 1996 between A+ Network, Inc. and certain stockholders of Metrocall, Inc. listed therein. (d) 2.12 Agreement dated May 16, 1996 among Metrocall, Inc. and Ray D. Russenberger and Elliott H. Singer regarding voting for director. (d) 3.1 Amended and Restated Certificate of Incorporation of Metrocall. * 3.2 Certificate of Amendment of Certificate of Incorporation of Metrocall, Inc. * 3.3 Fourth Amended and Restated Bylaws of Metrocall. * 4.1 Indenture, including form of 10 3/8% Senior Subordinated Notes due 2007. (f) 10.1 Loan Agreement by and among Metrocall, certain lenders and Toronto Dominion Bank as agent, dated August 31, 1994 (the "Loan Agreement"). (b) 10.2 First Amendment to Loan Agreement dated November 30, 1994. (e) 10.3 Second Amendment to Loan Agreement dated April 28, 1995. (f) 10.4 Third Amendment to Loan Agreement dated October 2, 1995. (g) 10.5 Fourth Amendment to Loan Agreement dated as of April 15, 1996 among Metrocall, Inc., Toronto Dominion (Texas), Inc., as administrative agent for the Banks, and the Banks signatory thereto. * 10.6 Waiver and Consent dated as of June 25, 1996 among Metrocall, Inc., Toronto Dominion (Texas), Inc., as administrative agent for the Banks, and the Banks signatory thereto. * 10.7 Amended and Restated 1993 Stock Option Plan of Metrocall. (h) 10.8 Directors' Stock Option Plan of Metrocall. (h) 10.9 Metrocall 1996 Stock Option Plan (i) 17 18 10.10 Employee Stock Purchase Plan of Metrocall. (i) 10.11 Deed of Lease between Douglas and Joyce Jemal, as landlord, and Metrocall, as tenant, dated April 14, 1994. (b) 10.12 Lease Agreement dated December 20, 1983, between a predecessor of Metrocall and Beacon Communications Associates, Ltd. (j) 10.13 Employment Agreement between Metrocall and William L. Collins. * 10.14 Employment Agreement between Metrocall and Vincent D. Kelly. * 10.15 Employment Agreement between Metrocall and Steven D. Jacoby. * 10.16 Change of Control Agreement between Metrocall and William L. Collins. * 10.17 Change of Control Agreement between Metrocall and Vincent D. Kelly. * 10.18 Change of Control Agreement between Metrocall and Steven D. Jacoby. * 10.19 Agreement and Plan of Merger entered into effective the 26th day of April between A+ Network, Inc. ("ACOM"), a Louisiana corporation to be formed as a wholly-owned subsidiary of ACOM, Radio and Communications Consultants, Inc., Advanced Cellular Telephone, Inc., Leroy Faith, Sr. and Eddie Ray Faith, DeWayne Faith and Leroy Faith, Jr. (d) 10.20 Asset Purchase Agreement by and between Page America Group, Inc., Page America of New York, Inc., Page America of Illinois, Inc., Page America Communications of Indiana, Inc., Page America of Pennsylvania, Inc., and Metrocall, Inc. dated as of April 22, 1996. (k) 10.21 Tax Indemnification Agreement by and among Metrocall, Harry L. Brock, Jr., Christopher A. Kidd, Vincent D. Kelly and Suzanne S. Brock. (h) 10.22 Metrocall Savings and Retirement Plan, as amended and restated dated April 1, 1995. (l) 10.23 Agreement and Plan of Merger among Metrocall; ACPI Acquisition Corporation; AllCity Paging, Norman H. Minkow; Nancy Minkow; Brian David Minkow, Karen Lynn Mercer and Steven Andrew Minkow, as Trustees of the Brian David Minkow Irrevocable Trust dated November 1, 1993; David Minkow, Karen Lynn Mercer and Steven Andrew Minkow, as Trustees of the Karen Lynn Minkow Irrevocable Trust dated November 1, 1993; Brian David Minkow, Karen Lynn Mercer and Steven Andrew Minkow, as Trustees of the Steven Andrew Minkow Irrevocable Trust dated November 1, 1993; Barry F. Hobbs; and Tom J. Hull, dated April 20, 1994 ("Agreement and Plan of Merger").(m) 10.24 First Amendment to Agreement and Plan of Merger dated November 28, 1994. (g) 13.1 Metrocall 1995 Annual Report to Shareholders. (l) 21.1 Subsidiaries of Metrocall. (l) ---------------- * Exhibit filed herewith. (a) Incorporated by reference to Metrocall's Registration Statement on Form S-4, as amended (File No. 33-79818), filed with the Commission on July 19, 1994. (b) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, filed with the Commission on November 14, 1994. (c) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q/A as amended, for the quarter ended March 31, 1996, filed with the Commission on May 14, 1996 (d) Incorporated by reference to Metrocall's Tender Offer Statement on Schedule 14D-1, filed with the Commission on May 22, 1996. (e) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A for the year ended December 31, 1994, filed with the Commission on July 26, 1995. (f) Incorporated by reference to Metrocall's Registration Statement on Form S-1, as amended (File No. 33-96042), filed with the Commission on September 27, 1995. (g) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for the quarter ended 18 19 September 30, 1995, filed with the Commission on November 14, 1995. (h) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A as amended, for the year ended December 31, 1993, filed with the Commission on July 21, 1994. (i) Incorporated by reference to Metrocall's Proxy Statement filed for the Annual Meeting of Stockholders held on May 1, 1996. (j) Incorporated by reference to Metrocall's Registration Statement on Form S-1, as amended (File No. 33-63886), filed with the Commission on July 12, 1993. (k) Incorporated by reference to Metrocall's Statement on Schedule 13D filed with the Commission on May 2, 1996. (l) Incorporated by reference to Metrocall's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the Commission on April 1, 1996. (m) Incorporated by reference to Metrocall's Current Report on Form 8-K, dated April 20, 1994, filed with the Commission on April 26, 1994. (b) REPORTS ON FORM 8-K Current Report on From 8-K dated May 16, 1996 announcing definitive merger agreement between the Company and A+ Network, Inc. 19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 14, 1996 METROCALL, INC. /s/ Vincent D. Kelly --------------------------- Vincent D. Kelly Chief Financial Officer, Treasurer and Vice President 20 21 EXHIBIT INDEX Exhibit Number Exhibit Description 2.1 Agreement and Plan of Reorganization among Metrocall, FPGE Acquisition Corp., FirstPAGE, Wilmington Securities, Inc., First Century Partnership III and Omega Partners, L.P., dated March 15, 1994 (the "FirstPAGE Reorganization Agreement"). (a) 2.2 Certificate of Merger between FirstPAGE and FPGE Acquisition Corp. executed upon approval of the merger by the stockholders of Metrocall and FirstPAGE. (a) 2.3 Supplemental Agreement executed in connection with the FirstPAGE Reorganization Agreement.(a) 2.4 Indemnification and Escrow Agreement executed in connection with FirstPAGE Reorganization Agreement. (b) 2.5 Voting Agreement among Metrocall, FirstPAGE and certain principal stockholders of Metrocall and FirstPAGE executed in connection with the FirstPAGE Reorganization Agreement. (b) 2.6 First Amendment to FirstPAGE Reorganization Agreement. (a) 2.7 Agreement of Merger by and among Metrocall, Inc., PPI Acquisition Corp., Parkway Paging, Inc. certain shareholders of Parkway Paging, Inc., and George W. Bush, dated February 26, 1996. (c) 2.8 Asset Purchase Agreement by and among O.R. Estman, Inc. d/b/a Satellite Paging, Dana Paging, Inc. d/b/a Message Network, Bertram M. Wachtel, Edward R. Davalos, Kevan D. Bloomgren and Metrocall, Inc., dated February 28, 1996. (c) 2.9 Agreement and Plan of Merger dated as of May 16, 1996, between Metrocall, Inc. and A+ Network, Inc. (d) 2.10 Shareholders' Option and Sale Agreement dated as of May 16, 1996 between Metrocall, Inc. and certain shareholders of A+ Network, Inc. listed therein. (d) 2.11 Metrocall Stockholders Voting Agreement dated as of May 16, 1996 between May 16, 1996 between A+ Network, Inc. and certain stockholders of Metrocall, Inc. listed therein. (d) 2.12 Agreement dated May 16, 1996 among Metrocall, Inc. and Ray D. Russenberger and Elliott H. Singer regarding voting for director. (d) 3.1 Amended and Restated Certificate of Incorporation of Metrocall. * 3.2 Certificate of Amendment of Certificate of Incorporation of Metrocall, Inc. * 3.3 Fourth Amended and Restated Bylaws of Metrocall. * 4.1 Indenture, including form of 10 3/8% Senior Subordinated Notes due 2007. (f) 10.1 Loan Agreement by and among Metrocall, certain lenders and Toronto Dominion Bank as agent, dated August 31, 1994 (the "Loan Agreement"). (b) 10.2 First Amendment to Loan Agreement dated November 30, 1994. (e) 10.3 Second Amendment to Loan Agreement dated April 28, 1995. (f) 10.4 Third Amendment to Loan Agreement dated October 2, 1995. (g) 10.5 Fourth Amendment to Loan Agreement dated as of April 15, 1996 among Metrocall, Inc., Toronto Dominion (Texas), Inc., as administrative agent for the Banks, and the Banks signatory thereto. * 10.6 Waiver and Consent dated as of June 25, 1996 among Metrocall, Inc., Toronto Dominion (Texas), Inc., as administrative agent for the Banks, and the Banks signatory thereto. * 10.7 Amended and Restated 1993 Stock Option Plan of Metrocall. (h) 10.8 Directors' Stock Option Plan of Metrocall. (h) 10.9 Metrocall 1996 Stock Option Plan (i) 10.10 Employee Stock Purchase Plan of Metrocall. (i) 10.11 Deed of Lease between Douglas and Joyce Jemal, as landlord, and Metrocall, as tenant, 21 22 dated April 14, 1994. (b) 10.12 Lease Agreement dated December 20, 1983, between a predecessor of Metrocall and Beacon Communications Associates, Ltd. (j) 10.13 Employment Agreement between Metrocall and William L. Collins. * 10.14 Employment Agreement between Metrocall and Vincent D. Kelly. * 10.15 Employment Agreement between Metrocall and Steven D. Jacoby. * 10.16 Change of Control Agreement between Metrocall and William L. Collins. * 10.17 Change of Control Agreement between Metrocall and Vincent D. Kelly. * 10.18 Change of Control Agreement between Metrocall and Steven D. Jacoby. * 10.19 Agreement and Plan of Merger entered into effective the 26th day of April between A+ Network, Inc. ("ACOM"), a Louisiana corporation to be formed as a wholly-owned subsidiary of ACOM, Radio and Communications Consultants, Inc., Advanced Cellular Telephone, Inc., Leroy Faith, Sr. and Eddie Ray Faith, DeWayne Faith and Leroy Faith, Jr. (d) 10.20 Asset Purchase Agreement by and between Page America Group, Inc., Page America of New York, Inc., Page America of Illinois, Inc., Page America Communications of Indiana, Inc., Page America of Pennsylvania, Inc., and Metrocall, Inc. dated as of April 22, 1996. (k) 10.21 Tax Indemnification Agreement by and among Metrocall, Harry L. Brock, Jr., Christopher A. Kidd, Vincent D. Kelly and Suzanne S. Brock. (h) 10.22 Metrocall Savings and Retirement Plan, as amended and restated dated April 1, 1995. (l) 10.23 Agreement and Plan of Merger among Metrocall; ACPI Acquisition Corporation; AllCity Paging, Norman H. Minkow; Nancy Minkow; Brian David Minkow, Karen Lynn Mercer and Steven Andrew Minkow, as Trustees of the Brian David Minkow Irrevocable Trust dated November 1, 1993; David Minkow, Karen Lynn Mercer and Steven Andrew Minkow, as Trustees of the Karen Lynn Minkow Irrevocable Trust dated November 1, 1993; Brian David Minkow, Karen Lynn Mercer and Steven Andrew Minkow, as Trustees of the Steven Andrew Minkow Irrevocable Trust dated November 1, 1993; Barry F. Hobbs; and Tom J. Hull, dated April 20, 1994 ("Agreement and Plan of Merger").(m) 10.24 First Amendment to Agreement and Plan of Merger dated November 28, 1994. (g) 13.1 Metrocall 1995 Annual Report to Shareholders. (l) 21.1 Subsidiaries of Metrocall. (l) ---------------- * Exhibit filed herewith. (a) Incorporated by reference to Metrocall's Registration Statement on Form S-4, as amended (File No. 33-79818), filed with the Commission on July 19, 1994. (b) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, filed with the Commission on November 14, 1994. (c) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q/A as amended, for the quarter ended March 31, 1996, filed with the Commission on May 14, 1996 (d) Incorporated by reference to Metrocall's Tender Offer Statement on Schedule 14D-1, filed with the Commission on May 22, 1996. (e) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A for the year ended December 31, 1994, filed with the Commission on July 26, 1995. (f) Incorporated by reference to Metrocall's Registration Statement on Form S-1, as amended (File No. 33-96042), filed with the Commission on September 27, 1995. (g) Incorporated by reference to Metrocall's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, filed with the Commission on November 14, 1995. (h) Incorporated by reference to Metrocall's Annual Report on Form 10-K/A as amended, for the year 22 23 ended December 31, 1993, filed with the Commission on July 21, 1994. (i) Incorporated by reference to Metrocall's Proxy Statement filed for the Annual Meeting of Stockholders held on May 1, 1996. (j) Incorporated by reference to Metrocall's Registration Statement on Form S-1, as amended (File No. 33-63886), filed with the Commission on July 12, 1993. (k) Incorporated by reference to Metrocall's Statement on Schedule 13D filed with the Commission on May 2, 1996. (l) Incorporated by reference to Metrocall's Annual Report on Form 10-K for the year ended December 31, 1995 filed with the Commission on April 1, 1996. (m) Incorporated by reference to Metrocall's Current Report on Form 8-K, dated April 20, 1994, filed with the Commission on April 26, 1994. 23 EX-3.1 2 CERTIFICATE OF INCORPORATION. 1 EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF METROCALL, INC. Metrocall, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: FIRST: The name of the Corporation is Metrocall, Inc. The Corporation was originally incorporated under the name Metrocall of Delaware, Inc., and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on October 26, 1982. SECOND: This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law"), and was duly adopted by the holders of all of the outstanding Common Stock of the Corporation, acting by written consent pursuant to Section 228(d) of the Delaware General Corporation Law, and restates and integrates and further amends the provisions of the Certificate of Incorporation of the Corporation, as heretofore amended. THIRD: The text of the Certificate of Incorporation of the Corporation as heretofore amended hereby is restated and amended to read in its entirety as follows: 1. NAME. The name of this corporation is Metrocall, Inc. 2. REGISTERED OFFICE AND AGENT. The registered office of the Corporation shall be located at 32 Loockerman Square, Suite L-100, Dover, Delaware 19901 in the County of Kent. The registered agent of the Corporation at such address be United States Corporation Company. 3. PURPOSE AND POWERS. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. The Corporation shall have all power necessary or helpful to engage in such acts and activities. 2 4. CAPITAL STOCK. 4.1. AUTHORIZED SHARES. The total number of shares of all classes of stock that the Corporation shall have the authority to issue is 21,000,000 shares, of which 1,000,000 shares shall be Preferred Stock, having a par value of $0.01 per share ("Preferred Stock"), and 20,000,000 shall be classified as shares of Common Stock, par value $0.01 per share ("Common Stock"). The Board of Directors is expressly authorized to provide for the classification and reclassification of any unissued shares of Preferred Stock or Common Stock and the issuance thereof in one of more classes or series without the approval of the stockholders of the Corporation. 4.2. COMMON STOCK. (a) RELATIVE RIGHTS. The Common Stock shall be subject to all of the rights, privileges, preferences and priorities of the Preferred Stock as set forth in the certificate of designations filed to establish the respective series of Preferred Stock. Each share of Common Stock shall have the same relative rights as and be identical in all respects to all the other shares of Common Stock. (b) VOTING RIGHTS. Each holder of shares of Common Stock shall be entitled to attend all special and annual meetings of the stockholders of the Corporation and, share for share and without regard to class, together with the holders of all other classes of stock entitled to attend such meetings and to vote (except any class or series of stock having special voting rights), to cast one vote for each outstanding share of Common Stock so held upon any matter or thing (including, without limitation, the election of one or more directors) properly considered and acted upon by the stockholders, except as otherwise provided in this Amended and Restated Certificate of Incorporation or by applicable law. (c) DIVIDENDS. Whenever there shall have been paid, or declared and set aside for payment, to the holders of shares of any class of stock having preference over the Common Stock as to the payment of dividends, the full amount of dividends and of sinking fund or retirement payments, if any, to which such holders are respectively entitled in preference to the Common Stock, then the holders of record of the Common Stock and any class or series of stock entitled to participate therewith as to dividends, shall be entitled to receive dividends, when, as, and if declared by the 2 3 Board of Directors, out of any assets legally available for the payment of dividends thereon. (d) DISSOLUTIONS, LIQUIDATION, WINDING UP. In the event of any discussion, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of record of the Common Stock then outstanding, and all holders of any class or series of stock entitled to participate therewith in whole or in part, as to distribution of assets, shall become entitled to participate in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Common Stock in the event of dissolution, liquidation or winding up, the full preferential amounts (if any) to which they are entitled, and shall have paid or provided for payment of all debts and liabilities of the Corporation. 4.3. PREFERRED STOCK. (a) ISSUANCE, DESIGNATIONS, POWER, ETC. The Board of Directors expressly is authorized, subject to limitations prescribed by the Delaware General Corporation Law and the provisions of this Amended and Restated Certificate of Incorporation, to provide, by resolution and by filing a certificate of designations pursuant to the Delaware General Corporation Law, for the issuance from time to time of the shares of Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and other rights of the shares of each such series and to fix the qualifications, limitations and restrictions thereon, including, but without limiting the generality of the foregoing, the following: (i) the number of shares constituting that series and the distinctive designation of that series; (ii) the dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (iv) whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; 3 4 (v) whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (vii) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and (viii) any other relative powers, preferences, and rights of that series, and qualifications, limitations or restrictions on that series. (b) DISSOLUTION, LIQUIDATION, WINDING UP. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock of each series shall be entitled to receive only such amount or amounts as shall have been fixed by the certificate of designations or by the resolution or resolutions of the Board of Directors providing for the issuance of such series. 4.4. ADJUSTMENTS OF AUTHORIZED STOCK. Except as provided to the contrary in the provisions establishing a class or series of stock, the amount of the authorized stock of the Corporation of any class or classes may be increased or decreased (but not below the number then outstanding) by the affirmative vote of a majority of the directors then in office, whether or not a quorum. 4.5. RESTRICTIONS ON FOREIGN OWNERSHIP OF SHARES. (a) No shares of stock of any class or series outstanding at any time shall be owned of record or beneficially by a person (as defined in Section 4.5(c) hereof) whose ownership thereof would constitute a violation of Section 310(a) or 310(b) of the Communications Act of 1934, as amended, or any similar or successor federal statutes. (b) The Corporation may, in its sole discretion, redeem any outstanding shares of stock of any class or series which are owned in violation of Section 4.5(a) hereof. Shares redeemed by the Corporation under this Section 4.5(b) may be redeemed for cash, property or rights, at the lesser of (i) the fair market value at the 4 5 time of the redemption or (ii) the holder's purchase price, provided the holder purchased such shares within a year prior to the redemption. The Board of Directors shall have sole discretion to determine whether shares are owned in violation of Section 4.5(a) hereof, the fair market value of any shares to be redeemed, and the value of any non-cash consideration to be provided for such shares in any such redemption. (c) For purposes of this Section 4.5, "person" shall mean an individual, a partnership, a corporation, a trust, a joint venture, an unincorporated organization, a government or any department or agency thereof or any other legal entity. 5. BOARD OF DIRECTORS. 5.1. CLASSIFICATION. Except as otherwise provided in this Amended and Restated Certificate of Incorporation or a certificate of designations relating to the rights of the holders of any class or series of Preferred Stock, voting separately by class or series, to elect additional directors under specified circumstances, the number of directors of the Corporation shall be as fixed from time to time by or pursuant to the Bylaws of the Corporation. The directors, other than those who may be elected by the holders of any class or series of Preferred Stock voting separately by class or series, shall be classified, with respect to the time for which they severally hold office, into three classes, Class I, Class II and Class III, which shall be as nearly equal in number as possible, and shall be adjusted from time to time in the manner specified in the Bylaws of the Corporation to maintain such proportionality. Each initial director in Class I shall hold office for a term expiring at the 1996 annual meeting of stockholder, each initial director in Class II shall hold office initially for a term expiring at the 1995 annual meeting of stockholders, and each initial director in Class III shall hold office for a term expiring at the 1994 annual meeting of stockholders. Notwithstanding the foregoing provisions of this Section 5.1, each director shall serve until such director's successor is duly elected and qualified or until such director's earlier death, resignation or removal. At each annual meeting of stockholders, the successors to the class of directors whose term expires at the meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors have been duly elected and qualified or until any such director's earlier death, resignation or removal. 5.2. REMOVAL. (a) Except as otherwise provided pursuant to the provisions of this Amended and Restated Certificate of Incorporation or a certificate of designations relating to the rights of the holders of any class or series of Preferred Stock, voting separately by class or series, to elect directors under specified 5 6 circumstances, any director or directors may be removed from office at any time, but only for cause (as defined in Section 5.2(b) hereof) and only by the affirmative vote, at a special meeting of the stockholders called for such a purpose, of not less than 66-2/3% of the total number of votes of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, but only if notice of such proposal was contained in the notice of such meeting. At least 30 days prior to such special meeting of stockholders, written notice shall be sent to the director or directors whose removal will be considered at such meeting. Any vacancy in the Board of Directors resulting from any such removal or otherwise shall be filled only by vote of a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified or until any such director's earlier death, resignation or removal. (b) For purposes of this Section 5.2, "cause" shall mean (i) conduct as a director of the Corporation or any subsidiary involving dishonesty of a material nature or (ii) criminal conduct (other than minor infractions and traffic violations) that relates to the performance of the director's duties as a director of the Corporation or any subsidiary. 5.3. CHANGE OF AUTHORIZED NUMBER. In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal as possible. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 5.4. DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Amendment and Restated Certificate of Incorporation or a certificate of designations applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Section 5 unless expressly provided by the certificate of designations. 5.5. LIMITATION OF LIABILITY. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, 6 7 provided that this provision shall not eliminate or limit the liability of a director (a) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) for the types of liability set forth in Section 174 of the Delaware General Corporation Law; or (d) for any transaction from which the director received any improper personal benefit. Any repeal or modification of this Section 5.5 by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. 6. INDEMNIFICATION. To the extent permitted by law, the Corporation shall fully indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgements, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding. To the extent permitted by law, the Corporation may fully indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reasons of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgements, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding. The Corporation may advance expenses (including attorneys' fees) incurred by a director or officer in advance of the final disposition of such action, suit or proceeding upon the receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to indemnification. The Corporation may advance expenses (including attorneys' fees) incurred by an employee or agent in advance of the final disposition of such action, suit or proceeding upon such terms and conditions, if any, as the Board of Directors deems appropriate. 7 8 7. ACTIONS BY STOCKHOLDERS. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders, and may not be effected by any consent in writing by such stockholders, unless such consent unanimous. 8. SPECIAL MEETINGS. Special meetings of the stockholders may be called at any time but only by (a) the chairman of the board of the Corporation, (b) a majority of the directors in office, although less than a quorum, or (c) the holders of not less than 35% of the total number of votes of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of the directors, voting together as a single class. 9. CRITERIA FOR EVALUATING CERTAIN OFFERS. The Board of Directors, when evaluating any offer of another party to (a) make a tender or exchange offer for any equity security of the Corporation, (b) merge or consolidate the Corporation with another institution, or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, shall, in connection with the exercise of its judgement, in determining what is in the best interests of the Corporation and its stockholders, be authorized to give due consideration to any such factors as the Board of Directors determines to be relevant, including, without limitation: (i) the interests of the stockholders of the Corporation; (ii) whether the proposed transaction might violate federal or state laws; (iii) the consolidation being offered in the proposed transaction, in relation to the then current market price for the outstanding capital stock of the Corporation, the market price for the capital stock of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part or through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation's financial condition and estimated future value as an independent entity; and (iv) the social, legal and economic effects upon employees, suppliers, subscribers and others having similar relationships with the Corporation, and the communities in which the Corporation conducts its business. 8 9 In connection with any such evaluation, the Board of Directors is authorized to conduct such investigations and engage in such legal proceedings as the Board of Directors may determine. 10. ANTI-GREENMAIL. Any direct or indirect purchase or other acquisition by the Corporation of any capital stock of the Corporation from any Significant Stockholder (as hereinafter defined) who has been the beneficial owner (as hereinafter defined) of such capital stock for less than two years prior to the date of such purchase or other acquisition shall, except as hereinafter expressly provided, require the affirmative vote of the holders of at least a majority of the total number of outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, excluding in calculating such affirmative vote and the total number of outstanding shares all capital stock beneficially owned by such Significant Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required or the a lesser percentage may be specified, by law, but no such affirmative vote shall be required with respect to (a) any purchase or other acquisition of capital stock of the Corporation made as part of a tender or exchange offer by the Corporation to purchase capital stock of the Corporation on the same terms from all holders of the same class of capital stock and complying with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, (b) any purchase of capital stock of the Corporation which the Board of Directors shall determine to be necessary pursuant to Section 4.5 of this Amended and Restated Certificate of Incorporation, (c) any purchase or other acquisition of capital stock of the Corporation on the same terms from all holders of such class of capital stock in accordance with the terms and conditions of any stock option or employee benefit plan of the Corporation, or (d) any purchase of capital stock of the Corporation, where the Board of Directors has determined that the purchase price per share of the capital stock does note exceed the fair market value of the capital stock. Such fair market value shall be equal to the average closing price or the mean of the bid and asked prices of a share of capital stock for the 20 trading days immediately preceding the execution of a definitive agreement to purchase the capital stock from a Significant Stockholder. For purposes of this Section 10, "Significant Stockholder" shall mean any person (other than the Corporation or any corporation of which a majority of any class of capital stock of the Corporation is owned, directly or indirectly, by the Corporation) that is the beneficial owner, directly or indirectly, of five percent or more of the voting power of the outstanding capital stock of the Corporation. For purposes of this Section 10, "Beneficial Owner," when used with respect to any capital stock of the Corporation, means any person that: 9 10 (i) individually or with any of its Affiliates (as hereinafter defined), beneficially owns capital stock directly or indirectly; (ii) individually or with any of its Affiliates, has (a) the right to acquire capital stock (whether such right is exercisable immediately or only after passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; (b) the right to vote or direct the voting of capital stock pursuant to any agreement, arrangement or understanding; or (c) the right to dispose of or to direct the disposition of capital stock pursuant to any agreement, arrangement or understanding; or (iii) individually or with any of its Affiliates, has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of capital stock with any other person that beneficially owns, or whose Affiliates beneficially own, directly or indirectly, such shares of capital stock. For purposes of this Section 10, "Affiliates" shall mean a person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, a specified person. 11. COMPROMISE OR ARRANGEMENT CLAUSE. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under Section 291 of the Delaware General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under Section 279 of the Delaware General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of the Corporation, as the case may be, and also on the Corporation. 10 11 12. AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation), the affirmative vote of 66-2/3% of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with the purpose or intent of Sections 5, 7, 8, 9, and 10 hereof, and this Section 12. Notice of any such proposed amendment, repeal or adoption shall be contained in the notice of the meeting at which it is to be considered. Subject to the provisions set forth herein, the Corporation reserves the right to amend, alter, repeal or rescind any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by law. 13. AMENDMENT OF BYLAWS. In furtherance and not in limitation of the powers conferred by the Delaware General Corporation Law, the Board of Directors is expressly authorized and empowered to adopt, amend and repeal the Bylaws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to amend or repeal Bylaws adopted by the Board of Directors as provided for in this Amended and Restated Certificate of Incorporation or in the Bylaws of the Corporation. IN WITNESS WHEREOF, Metrocall, Inc. has caused this Amended and Restated Certificate of Incorporation to be executed on its behalf on July 12, 1993. METROCALL, INC. By: /s/ HARRY L. BROCK, JR. --------------------------- Harry L. Brock, Jr. President Attest: /s/ SUZANNE S. BROCK - -------------------- Suzanne S. Brock Secretary 11 EX-3.2 3 CERTIFICATE OF INCORPORATION AMENDMENT. 1 EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF METROCALL, INC. I, the undersigned, being the Assistant Secretary of METROCALL, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DO HEREBY CERTIFY: FIRST: That Article Four of the Certificate of Incorporation be and it hereby is amended to read as follows: 4.1 Authorized Shares. The total number of shares of all classes of stock that the Corporation shall have the authority to issue is 27,000,000 shares, of which 1,000,000 shares shall be Preferred Stock, having a par value of $0.01 per share (the "Preferred Stock") and 26,000,000 shall be classified as shares of Common Stock, par value $0.01 per share ("Common Stock"). The Board of Directors is expressly authorized to provide for the classification and reclassification of any unissued shares of Preferred Stock or Common Stock and the issuance thereof in one or more classes or series without the approval of the stockholders of the Corporation. SECOND: That the amendment was duly adopted in accordance with the provisions of section 242 of the General Corporation Law of the State of Delaware. 2 IN WITNESS WHEREOF, I have signed this certificate this 25th day of June, 1996. /s/ Shirley B. White ---------------------------- Shirley B. White EX-3.3 4 BYLAWS. 1 EXHIBIT 3.3 FOURTH AMENDED AND RESTATED BYLAWS OF METROCALL, INC. 1. OFFICES 1.1. REGISTERED OFFICE. The initial registered office of the Corporation shall be in Dover, Delaware, and the initial registered agent in charge thereof shall be United States Corporation Company. 1.2. OTHER OFFICES. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or as may be necessary or useful in connection with the business of the Corporation. 2. MEETINGS OF STOCKHOLDERS 2.1. PLACE OF MEETINGS. All meetings of the stockholders shall be held at such place as may be fixed from time to time by the Board of Directors. 2.2. ANNUAL MEETINGS. The Corporation shall hold annual meetings of stockholders on the first Wednesday in May at 11 a.m. or at such other date and time as shall be designated from time to time by the Board of Directors, at which stockholders shall elect directors and transact such other business as may properly be brought before the meeting. 2.3. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or the Corporation's Amended and Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), may be called by (a) the Chairman, (b) a majority of the directors in office, whether or not a quorum, or (c) the holder of not less than 85% of the 1 2 total number of votes of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. 2.4. NOTICE OF MEETINGS. Notice of any meeting of stockholders, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given to each stockholder entitled to vote at such meeting not less than 10 days nor more than 60 days before the date of the meeting (except to the extent that such notice is waived or is not required as provided in the General Corporation Law of the State of Delaware (the "Delaware General Corporation Law")). Such notice shall be given in accordance with, and shall be deemed effective as set forth in, Section 222 (or any successor section) of the Delaware General Corporation Law. 2.5. WAIVERS OF NOTICE. Whenever the giving of any notice is required by statute, the Certificate of Incorporation or these Bylaws, a waiver thereof, in writing and delivered to the corporation, signed by the person or persons entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice (a) of such meeting, except when the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) of consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter at the beginning of the meeting. 2.6. BUSINESS AT ANNUAL MEETING. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (e) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a stockholder's notice must be received at the principal executive offices of the Corporation no later than the date designated for receipt of stockholders' proposals in a prior public disclosure made by the Corporation. If there has been no such prior public disclosure, then to be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the annual meeting; provided, however, that in the event that less than 70 days' notice of the date of this annual meeting is given to stockholders or prior public disclosure of the date of the meeting is 2 3 made, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the date on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reason for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, (d) any material interest of the stockholder in such business and (e) the same information required by clauses (b), (c) and (d) above with respect to any other stockholder that, to the knowledge of the stockholder proposing such business, supports such proposal. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2.6. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the annual meeting that a matter of business was not properly brought before its meeting in accordance with the provisions of this Section 2.6, and if the Chairman should so determine, the Chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 2.7. LIST OF STOCKHOLDERS. After the record date for a meeting of stockholders has been fixed, at least 10 days before such meeting, the officer who has charge of the stock ledger of the Corporation shall make a list of all stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place in the city where the meeting is to be held, which place is to be specified in the notice of the meeting, or at the place where the meeting is to be held. Such list, also shall, for the duration of the meeting, be produced and kept open to the examination of any stockholder who is present at the time and place of the meeting. The stock ledger of the Corporation shall be the only evidence as to the stockholders entitled to examine the list required by Section 2.7 hereof or to vote in person or by proxy at any meeting of stockholders. 2.8. QUORUM AT MEETINGS. Stockholders may take action on a matter at a meeting only if a quorum exists with respect to that matter. Except as otherwise provided by statute or by the Certificate of Incorporation, the holders of a majority of the stock issued and outstanding and entitled to vote at the meeting, and, who are present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. Once a share is represented for any purpose at a meeting (other than solely to object (a) to holding the meeting or transacting business at the meeting or (b) to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice), it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new 3 4 record date is or must be set for the adjourned meeting. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. 2.9. VOTING AND PROXIES. Unless otherwise provided in the Delaware General Corporation Law or in the Certificate of Incorporation, and subject to the other provisions of these Bylaws, each stockholder shall be entitled to one vote on each matter, in person or by proxy, for each share of the Corporation's capital stock that has voting power and that is held by such stockholder. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed appointment of proxy shall be irrevocable if the appointment form states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. 2.10. REQUIRED VOTE. If a quorum exists, action on a matter (other than the election of directors) is approved if the votes cast favoring the action exceed the votes cast opposing the action, unless the Certificate of Incorporation or the Delaware General Corporation Law requires a greater number of affirmative votes (in which case such different requirement shall apply). Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election (provided a quorum exists), and the election of directors need not be by written ballot. The Board of Directors, in its discretion, may require that any votes cast at such meeting shall be cast by written ballot. 2.11. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders, and may not be effected by any consent in writing by such stockholders, unless such written consent is unanimous, and the writing or writings are delivered to the Corporation for inclusion in the Minute Book of the Corporation. 2.12. INSPECTORS OF ELECTION. The director or the person presiding at the meeting shall appoint one or more inspectors of election and any substitute inspectors to act at the meeting or any adjournment thereof. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according 4 5 to the beat of his or her ability. The inspectors shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies and ballots, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. The inspectors may appoint and retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. On request of the person presiding at the meeting, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. 3. DIRECTORS 3.1. POWERS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things, subject to any limitation set forth in the Certificate of Incorporation, these Bylaws or agreements among stockholders which are otherwise lawful. 3.2. NUMBER AND ELECTION. The number of directors which shall constitute the whole board shall not be fewer than three nor more than 11. Within the limits above specified, the number of directors shall be determined by resolution of the Board of Directors. Directors shall be elected only by stockholders at annual meetings of stockholders, other than the initial board of directors and except as provided in Section 3.3 hereof in the case of vacancies and newly created directorships. Each director elected shall hold office for the term for which such director is elected and until such director's successor is elected and qualified or until such director's earlier resignation or removal. 3.3. VACANCIES. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled, for the unexpired term, by the concurring vote of a majority of the directors then in office, whether or not a quorum, and any director so chosen shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified or until such director's earlier death, resignation or removal. 5 6 3.4. CLASSES; TERMS OF OFFICE. Unless otherwise provided in the Certificate of Incorporation, the Board of Directors shall divide the directors into three classes; and, when the number of directors is changed, shall determine the class or classes to which the increased or decreased number of directors shall be apportioned; provided, however, that no decrease in the number of directors shall affect the term of any director then in office. At each annual meeting of stockholders, directors elected to succeed those whose terms are expiring shall be elected for a term of office expiring at the annual meeting of stockholders held in the third year following their election and until their respective successors are elected and qualified, or until such director's earlier death, resignation or removal. 3.5. NOMINATION OF DIRECTORS. Nominations of persons for election to the Board of Directors may be made by the Board of Directors, or by any stockholder of the Corporation entitled to vote for the election of directors at the annual meeting who complies with the notice procedures set forth in this Section 3.5. Nominations by stockholders shall be made pursuant to timely notice in writing to the Secretary. To be timely, a stockholder's notice shall be received at the principal executive offices of the Corporation no later than the date designated for receipt of stockholders' proposals in a prior public disclosure made by the Corporation. If there has been no such prior public disclosure, then to be timely, a stockholders nomination must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the annual meeting; provided, however, that in the event that less than 70 days' notice of the date of the meeting is given to stockholders or prior public disclosure of the date of the meeting is made, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving notice (i) the name and address, as they appear on the Corporation's books, of the stockholder proposing such nomination, and (ii) the class and number of shares of the Corporation which are beneficially owned by the stockholder. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.5. The Chairman of the meeting shall, if the facts warrant, determine and declare to the annual meeting that a nomination was not made in accordance with the provisions of this Section 3.5, and if the Chairman should so determine, the Chairman shall so declare to the meeting and the defective nomination shall be disregarded. 6 7 3.6. MEETINGS. (a) REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. (b) SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman, the Vice Chairman or Chief Executive Officer on one day's notice to each director, either personally or by telephone, express delivery service (so that the scheduled delivery date of the notice is at least one day in advance of the meeting), telegram or facsimile transmission, and on five days' notice by mail (effective upon deposit of such notice in the mail). The notice need not describe the purpose of a special meeting. (c) TELEPHONE MEETINGS. Members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all participating directors can simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. (d) ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing, and the writing or writings are delivered to the Corporation for inclusion in the Minute Book of the Corporation. (e) WAIVER OF NOTICE OF MEETING; PRESUMPTION OF ASSENT. A director may waive any notice required by statute, the Certificate of Incorporation or these Bylaws before or after the date and time stated in the notice. Except as set forth below, the waiver must be in writing, signed by the director entitled to the notice, and delivered to the Corporation for inclusion in the Minute Book of the Corporation. Notwithstanding the foregoing, a director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. A director who is present at a meeting is presumed to have assented to any action taken unless such director enters a dissent or abstention in the minutes of the meeting or files a written dissent to such action no later than five days after such director 7 8 receives a copy of the minutes of the meeting, provided that the right to dissent shall not apply to a director who votes in favor of such action. (f) QUORUM AND VOTE AT MEETINGS. At all meetings of the Board of Directors, a quorum of the Board of Directors consists of a majority of the total number of directors prescribed pursuant to Section 3.2 hereof (or, if no number is prescribed, the number in office immediately before the meeting begins). The vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these Bylaws. In the absence of a quorum for any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 3.7. COMPENSATION OF DIRECTORS. The Board of Directors shall have the authority to fix the compensation of directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 4. COMMITTEES 4.1. CREATION OF COMMITTEES. The Board of Directors may by resolution create one or more committees including, but not limited to, an Executive Committee, and appoint members of the Board of Directors to serve on them. The Board of Directors shall create (a) an Audit Committee for the purpose of examining and considering matters relating to the financial affairs of the Corporation, and (b) a Compensation Committee for the purpose of establishing and implementing an executive compensation policy. Each committee may have one or more members, who serve at the pleasure of the Board of Directors, provided that the Audit Committee and the Compensation Committee shall consist of at least a majority of non-employee directors. The creation of a committee and appointment of members to it shall be approved by a majority of all the directors in office when the action is taken, whether or not a quorum. The same rules that govern meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the Board of Directors apply to committees and their members as well. 4.2. COMMITTEE AUTHORITY. To the extent specified by the Board of Directors or in the Certificate of Incorporation, each committee may exercise the authority of the Board of Directors, except that a committee 8 9 may not: (i) approve or recommend to stockholders action that is required by law to be approved by stockholders; (ii) fill vacancies on the Board of Directors or on any of its committees; (iii) amend the Certificate of Incorporation; (iv) adopt, amend or repeal these Bylaws; (v) approve a plan of merger not requiring stockholder approval; (vi) authorize or approve a distribution, except according to a general formula or method prescribed by the Board of Directors; or (vii) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board of Directors may authorize a committee, or a senior executive officer of the Corporation, to do so within the limits specifically prescribed by the Board of Directors. 5. OFFICERS 5.1. POSITIONS. The officers of the Corporation shall be a Chairman, Vice Chairman, a Chief Executive Officer, a Chief Financial Officer, a Chief Operating Officer, a President, a Secretary and a Treasurer, and such other officers as the Board of Directors (or an officer authorized by the Board of Directors) from time to time may appoint, including one or more Executive Vice Presidents, Vice Presidents, Assistant Secretaries and Assistant Treasurers. Each such officer shall exercise such powers and perform such duties as shall be set forth below and such other powers and duties as from time to time may be specified by the Board of Directors or by any officer(s) authorized by the Board of Directors to prescribe the duties of such other officers. Any number of offices may be held by the same person. 5.2. POWERS. (a) Each officer shall have, in addition to the duties and powers set forth herein, such duties and powers as are commonly incident to such officer's office and such additional duties and powers as the Board of Directors may from time to time authorize. (b) Powers of attorney, proxies, waivers of notice of meetings, consents and other instruments relating to securities or partnership interests owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman, the Chief Executive Officer or the President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities, or at any meeting of any partnership in which the Corporation owns an interest at any such meeting, and shall possess and may exercise any and all rights and powers incident to the ownership of such securities or partnership interest and which, as the owner thereof, the Corporation might have possessed and exercised if present. 9 10 5.3. CHAIRMAN. The Chairman shall (when present) preside at all meetings of the Board of Directors and stockholders, and shall ensure that all orders and resolutions of the Board of Directors and stockholders are carried into effect. The Chairman may execute bonds, mortgages and other contracts, under the seal of the Corporation, if required, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 5.4. VICE CHAIRMAN. The Vice Chairman shall, in the absence of the Chairman, preside at all meetings of the Board of Directors and stockholders and, without limiting the foregoing, shall when serving in such capacity exercise the powers vested in the Chairman in Sections 2.6 and 3.5. The Vice Chairman may execute bonds, mortgages and other contracts, under the seal of the Corporation, if required, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 5.5 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Corporation shall have overall responsibility and authority for the Corporation's strategic planning and for evaluating potential mergers and acquisitions and new business opportunities, subject to the authority of the Board of Directors and the Management Operations Committee. The Chief Executive Officer may execute bonds, mortgages and other contracts, under the seal of the Corporation, if required, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation, provided that the Chief Executive, in the absence of the President, may sign or execute any document or instrument where the signing and execution thereof shall be expressly delegated to the "President" of the Corporation. 5.6. CHIEF OPERATING OFFICER. The Chief Operating Officer of the Corporation shall have overall responsibility and authority for the technical systems, sales and marketing and customer service operations of the Corporation, subject to the authority of the Board of Directors and the Management Operations Committee. 5.7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer of the Corporation shall have overall responsibility and authority for the financial affairs of the Corporation including, without limitation, oversight of 10 11 the Corporation's accounting, inventory, management information systems, internal audit and billing functions, subject to the authority of the Board of Directors and the Management Operations Committee. 5.8 PRESIDENT. The President, subject to the authority of the Board of Directors, shall have general charge and supervision of the business of the Corporation, and shall have such duties and powers as shall be designated from time to time by the Board of Directors. The President may execute bonds, mortgages and other contracts, under the seal of the Corporation, if required, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 5.9. VICE PRESIDENT. Any Vice President shall have such duties and powers as shall be set forth in these Bylaws or as shall be designated from time to time by the Board of Directors or by the Chairman, the Chief Executive Officer or the President. Any Vice President may execute bonds, mortgages and other documents under the seal of the Corporation, except where required or permitted by law to be otherwise executed and except where the execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. 5.10. SECRETARY. The Secretary shall have responsibility for preparation of minutes of meetings of the Board of Directors and of the stockholders and for authenticating records of the Corporation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors. The Secretary or an Assistant Secretary also may attest all instruments signed by any other officer of the Corporation. 5.11. ASSISTANT SECRETARY. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary. 5.12. TREASURER. The Treasurer shall have responsibility for the custody of the corporate funds and securities and shall see to it that full and accurate accounts of receipts and disbursements are kept in books belonging to the Corporation. The Treasurer shall render to the Chairman, the Vice Chairman, the Chief Executive Officer, the President, the Vice President, and the Board of 11 12 Directors, upon request, an account of all financial transactions and of the financial condition of the Corporation. 5.13. ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there shall have been no such determination, than in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer. 5.14. MANAGEMENT OPERATIONS COMMITTEE. The Management Operations Committee shall be comprised of the Vice Chairman, who shall serve as the Chairman of such Committee, the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer. The responsibilities of the Management Operations Committee shall include development of a business plan of the Corporation which addresses acquisition, strategies, the integration of the businesses of the Corporation and that of any acquired entities, including FirstPAGE USA, Inc. and MetroPaging, Inc. (formerly AllCity Paging, Inc.), development of a strategy for exploitation of nationwide licenses held by the Corporation, development of sales, marketing and distribution strategies of the Corporation, coordination of the integrated management and daily operations of the Corporation and in general recommend to the Board of Directors of such other initiatives as the Management Operations Committee considers appropriate to further the growth and successful operations of the Corporation, subject to the authority of the Board of Directors. 5.15. TERM OF OFFICE. The officers of the Corporation shall hold office until their successors are chosen and qualified or until their death, earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors 5.16. COMPENSATION. The compensation of officers of the Corporation shall be fixed by the Compensation Committee of the Board of Directors. 5.17. FIDELITY BONDS. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise. 12 13 6. CAPITAL STOCK. 6.1. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of the Corporation's stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate (representing the number of shares registered in certificate form) signed in the name of the Corporation by the Chairman, the Vice Chairman, the Chief Executive Officer, the President, or any Vice President, and by the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary. Any or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. 6.2. LOST CERTIFICATES. The Board of Directors, Chairman, Vice Chairman, Chief Executive Officer, President or Secretary may direct a new certificate of stock to be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming that the certificate of stock has been lost, stolen or destroyed. When authorizing such issuance of a new certificate, the Board of Directors or any such officer may, as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner's legal representative, to advertise the same in such manner as the Board of Directors or such officer shall require and/or to give the Corporation a bond, in such sum as the Board of Directors or such officer may direct, as indemnity against any claim that may be made against the Corporation on account of the certificate alleged to have been lost, stolen or destroyed or an account of the issuance of such new certificate or uncertified shares. 6.3. RECORD DATE. (a) ACTIONS BY STOCKHOLDERS. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders (or to take any other action), the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not be less than 10 nor more than 60 days before the meeting or action requiring a determination of stockholders. 13 14 In order that the Corporation may determine the stockholders entitled to consent to corporate action without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, unless the Board of Directors fixes a new record date. If no record date is fixed by the Board of Directors, the record date shall be at the close of business on the day next preceding the day on which the notice is given, or if notice is not required or is waived, at the close of business on the day next preceding the day on which the meeting is held or such other action is taken, except that (if no record date is established by the Board of Directors) the record date for determining stockholders entitled to consent to corporate action without a meeting is the first date on which a stockholder delivers a signed written consent to the Corporation for inclusion in the Minute Book of the Corporation. (b) PAYMENTS. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) STOCKHOLDERS OF RECORD. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to receive notifications, to vote as such owner, and to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise may be provided by the Delaware General Corporation Law. 7. INSURANCE The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation (or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another 14 15 corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) against liability asserted against or incurred by such person in such capacity or arising from such person's status as such (whether or not the corporation would have the power to indemnify such person against the same liability). 8. INDEMNIFICATION 8.1. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (whether criminal, administrative or investigative) by reason of fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe that such conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had unreasonable cause to believe that such conduct was unlawful. (b) This Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that such person is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that such conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful. 15 16 8.2. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation. No such indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (b) The Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation. No such indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. 8.3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this Section 8 shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because such person or persons have met the applicable standard of conduct set forth in Sections 8.1 and 8.2 hereof. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel, in a written opinion, or (c) by a majority of the stockholders entitled to vote generally in the election of directors. 16 17 8.4. ADVANCEMENT OF EXPENSES. The Corporation may advance expenses (including attorneys' fees) incurred by a director or officer in advance of the final disposition of such action, suit or proceeding upon the receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to indemnification. The Corporation may advance expenses (including attorneys' fees) incurred by any employee or agent in advance of the final disposition of such action, suit or proceeding upon such terms and condition, if any, as the Board of Directors deems appropriate. 9. GENERAL PROVISIONS 9.1. INSPECTION OF BOOKS AND RECORDS. Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act an behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office or at its principal place of business. 9.2. DIVIDENDS. The Board of Directors may declare dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and the laws of the State of Delaware. 9.3. RESERVES. The Board of Directors may set apart, out of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve. 9.4. EXECUTION OF INSTRUMENTS. All checks, drafts or other orders for the payment of money, and promissory notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. 17 18 9.5. FISCAL YEAR. The fiscal year of the Corporation shall begin on January 1 and end on December 31. 9.6. SEAL. The corporate seal shall be in such form as the Board of Directors shall approve. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. 10. AMENDMENTS TO BYLAWS The Board of Directors may from time to time adopt, amend and repeal these Bylaws. Such action by the Board of Directors shall require the affirmative vote of at least a majority of the directors then in office. If stockholders are entitled to vote with respect thereto to amend or repeal Bylaws adopted by the Board of Directors as may be provided in the Certificate of Incorporation or by law, then the affirmative vote of 66-2/3% of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the amendment or repeal of Bylaws by the stockholders of the Corporation. 18 EX-10.5 5 LOAN AGREEMENT AMENDMENT. 1 EXHIBIT 10.5 FOURTH AMENDMENT TO LOAN AGREEMENT THIS FOURTH AMENDMENT TO LOAN AGREEMENT (the "Amendment"), made as of this 15th day of April, 1996 among Metrocall, Inc., a Delaware corporation (the "Borrower"), The Toronto-Dominion Bank, PNC Bank, National Association, The Bank of New York, First Union National Bank of North Carolina, Fleet National Bank, The First National Bank of Boston, Union Bank of California, N.A., NatWest Bank N.A., The Riggs National Bank of Washington, D.C., Royal Bank of Canada and IBJ Schroder Bank & Trust Company (collectively, the "Banks") and Toronto Dominion (Texas), Inc., as administrative agent for the Banks (the "Administrative Agent"), W I T N E S S E T H: WHEREAS, the Borrower, the Administrative Agent and the Banks are parties to that certain Loan Agreement dated as of August 31, 1994, as amended by that certain First Amendment to Loan Agreement dated as of November 30, 1994, as amended by that certain Second Amendment to Loan Agreement dated as of April 28, 1995, and as further amended by that certain Third Amendment to Loan Agreement dated as of October 2, 1995 (the "Loan Agreement"); and WHEREAS, the Borrower has requested the Administrative Agent and the Banks to agree to amend and waive certain provisions of the Loan Agreement as provided herein; NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties agree that all capitalized terms used herein which are not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. (a) Article 1 of the Loan Agreement, Definitions, is hereby amended by deleting the existing definition of "Change in Control Event" in its entirety and by substituting the following in lieu thereof: "`Change in Control Event' shall mean the occurrence of any of the following events or the existence of any of the following conditions: (i) a person or entity or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of persons or entities shall have become the beneficial owner of a majority (by voting power or otherwise) of the securities of the Borrower ordinarily having the right to vote in the election of directors, (ii) during any consecutive three-year period 2 commencing on or after September 27, 1995, individuals who at the beginning of such period constituted the Board of Directors of the Borrower (together with any directors who are members of such Board of Directors of the Borrower on September 27, 1995 and any new directors whose election by such Board of Directors of the Borrower or whose nomination for election by the stockholders of the Borrower was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Borrower then in office, (iii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Borrower to any person or entity or group (as defined above in this definition) of persons or entities (other than any wholly owned Subsidiary of the Borrower), (iv) the merger or consolidation of the Borrower with or into another corporation or the merger of another corporation into the Borrower with the effect that immediately after such transaction any person or entity or group (as defined above in this definition) of persons or entities shall have become the beneficial owner of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the outstanding securities of the surviving corporation ordinarily having the right to vote in the election of directors, (v) the adoption of a plan leading to the liquidation or dissolution of the Borrower or (vi) or any "change of control" or "change of control event," however designated or denominated, shall have been deemed to have occurred under any agreement of the Borrower or any of its Subsidiaries having an aggregate economic value to such Person exceeding $5,000,000; provided, however, that none of the following, in itself, constitutes or will constitute a Change in Control Event within the meaning of this Agreement: (A) the existence of the Voting Agreement dated as of August 31, 1994, among the Borrower and the other parties thereto, as in effect on September 27, 1995 (the "Voting Agreement"); (B) any termination of the Voting Agreement; (C) any amendment or modification of the Voting Agreement that does not (x) add any Person as a party to the Voting Agreement, (y) increase the number of directors who may be designated by any Person or group thereunder, or (z) purport to bind the Borrower, its Board of Directors or any member of the Borrower's Board of Directors to cause or use efforts to cause any Person to be elected or appointed to serve as an officer of the Borrower or to constitute or appoint any Person to any committee of the Board of Directors of the -2- 3 Borrower (in either case at any time after the Effective Time (as defined in the Voting Agreement)), or otherwise to direct or influence the policies of the Borrower by any means other than the election of directors or the designation of Persons to stand for election as directors; (D) the beneficial ownership by the Stockholders (as such term is defined in the Voting Agreement), collectively, of a majority of the outstanding shares of Common Stock; (E) the sale or disposition of any securities of the Borrower by, or other decrease in the percentage ownership in any class of such securities of, any Stockholder or Stockholders; or (F) the purchase or acquisition of any securities of the Borrower by, or other increase in the percentage ownership in any class of such securities of, any Stockholder or Stockholders; provided further, however, that, notwithstanding the foregoing, (1) the beneficial ownership by any individual Stockholder, by the Metrocall Group or the FirstPAGE Group (as such terms are defined in the Voting Agreement), respectively, or by any other group (as defined above) of which any Stockholder is a part, of a majority (by voting power or otherwise) of securities of the Borrower ordinarily having the right to vote in the election of directors, or (2) any transaction or event that constitutes a "Rule 13e-3 transaction" within the meaning of Rule 13e-3(a)(3) of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (or what would constitute such a Rule 13e-3 transaction if the Person effecting such transaction was an affiliate of the Borrower within the meaning of such rule), shall nevertheless constitute a Change in Control Event for all purposes of this Agreement." (b) Article 1 of the Loan Agreement, Definitions, is hereby further amended by adding the following definitions of "Board of Directors," "Common Stock" and "Voting Agreement" thereto in the appropriate alphabetical order: "'Board of Directors' when used with reference to the Borrower, shall mean the Board of Directors of the Borrower, or the Executive Committee of the Board of Directors of the Borrower." "'Common Stock' shall mean, in respect of any Person, Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person." -3- 4 "'Voting Agreement' shall have the meaning ascribed to such term in the definition of "'Change in Control Event'." 2. Amendments to Schedules to Loan Agreement. (a) Schedule 4 to the Loan Agreement, Litigation, is hereby amended by deleting the existing Schedule 4 in its entirety and by substituting the attached Schedule 4, Litigation, in lieu thereof. (b) Schedule 5 to the Loan Agreement, Agreements with Affiliates, is hereby amended by deleting the existing Schedule 5 in its entirety and by substituting the attached Schedule 5, Agreements with Affiliates, in lieu thereof. 3. Waiver of Default. The Administrative Agent and the Banks hereby waive any Default or Event of Default which may have arisen under Section 8.1(p) of the Loan Agreement due the fact that Christopher A. Kidd is no longer the chief executive officer of the Borrower. 4. Strict Compliance. Except for the amendments and waiver set forth above, the text of the Loan Agreement shall remain unchanged and in full force and effect. The amendments and waiver agreed to herein shall not constitute a modification of the Loan Agreement or a course of dealing with the Administrative Agent and the Banks, or any of them, at variance with the Loan Agreement such as to require further notice by the Administrative Agent, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement, as amended by this Amendment, in the future. 5. Representations and Warranties. The Borrower hereby represents and warrants to and in favor of the Administrative Agent and the Banks as follows: (a) Each representation and warranty set forth in Article 4 of the Loan Agreement, as amended hereby, is hereby restated and affirmed as true and correct in all material respects as of the date hereof, except to the extent previously fulfilled in accordance with the terms of the Loan Agreement, as amended hereby, and to the extent relating specifically to the Agreement Date or otherwise inapplicable; (b) The Borrower has the corporate power and authority (i) to enter into this Amendment, and (ii) to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it; -4- 5 (c) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower, and constitutes the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with its terms; and (d) The execution and delivery of this Amendment and performance by the Borrower under the Loan Agreement, as amended hereby, does not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor be in contravention of or in conflict with the Certificate of Incorporation or By-Laws of the Borrower, or any provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is party or by which the Borrower's assets or properties are bound. 6. Conditions Precedent to Effectiveness of Amendment. The effectiveness of this Amendment is subject to: (i) the truth and accuracy of the representations and warranties contained in Section 4 hereof; (ii) receipt by the Administrative Agent and the Banks of a signed legal opinion of Wilmer, Cutler & Pickering, counsel to the Borrower and its Subsidiaries, in form and substance satisfactory to the Administrative Agent and its special counsel; (iii) receipt by the Administrative Agent and the Banks of a certificate of incumbency with respect to each Authorized Signatory of the Borrower, in form and substance satisfactory to the Administrative Agent and its special counsel; and (iv) receipt of any other documents that the Administrative Agent, the Banks, or any of them, may reasonably request, certified by an officer of the Borrower if so requested. 7. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same agreement. 8. Law of Contract. This Amendment shall be deemed to be made pursuant to the laws of the State of New York and shall be construed, interpreted, performed and enforced in accordance therewith. -5- 6 9. Loan Document. This Amendment shall constitute a Loan Document. 10. Effective Date. Upon satisfaction of the conditions precedent referred to in Section 5 above, this Amendment shall be effective as of April 15, 1996. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -6- 7 IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers or representatives to execute, deliver and seal this Amendment as of the day and year first above written, to be effective as set forth in Section 9 hereof. BORROWER: METROCALL, INC., a Delaware corporation By: [SIG] ------------------------------------------------------- Its: Chief Financial Officer and Treasurer --------------------------------------------- [CORPORATE SEAL] Attest: /s/ SHIRLEY B. WHITE --------------------------------------------------- Its: Assistant Secretary --------------------------------------------- ADMINISTRATIVE TORONTO DOMINION (TEXAS), INC., as AGENT: Administrative Agent By: /s/ SOPHIA D. SGAIL ------------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ BANKS: THE TORONTO-DOMINION BANK By: /s/ SOPHIA D. SGAIL -------------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ PNC BANK, NATIONAL ASSOCIATION By: /s/ KELLEY L. CLAYPOOL ------------------------------------------------------- Name: Kelley L. Claypool ------------------------------------------------- Title: Banking Officer ------------------------------------------------ THE BANK OF NEW YORK By: /s/ EDWARD F. RYAN, JR. ------------------------------------------------------- Name: Edward F. Ryan, Jr. ------------------------------------------------- Title: Senior Vice President ------------------------------------------------
8 FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: [SIG] ------------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ FLEET NATIONAL BANK By: /s/ ALEXANDER G. IVANOV ------------------------------------------------------- Name: Alexander G. Ivanov ------------------------------------------------- Title: Banking Officer ------------------------------------------------ By: /s/ JEFFREY R. GREENE ------------------------------------------------------- Name: Jeffrey R. Greene ------------------------------------------------- Title: Banking Officer ------------------------------------------------ THE FIRST NATIONAL BANK OF BOSTON By: /s/ MARY E. MEDUSKI ------------------------------------------------------- Name: Mary E. Meduski ------------------------------------------------- Title: Director ------------------------------------------------ UNION BANK OF CALIFORNIA, N.A. By: /s/ JOHN C. LEE ------------------------------------------------------- Name: John C. Lee ------------------------------------------------- Title: Banking Officer ------------------------------------------------ NATWEST BANK N.A. By: /s/ TANYA CROSSLEY ------------------------------------------------------- Name: Tanya Crossley ------------------------------------------------- Title: Vice President ------------------------------------------------
9 THE RIGGS NATIONAL BANK OF WASHINGTON, D.C. By: /s/ ANA G. TESTBLUM ------------------------------------------------------- Name: Ana G. Testblum ------------------------------------------------- Title: Vice President ------------------------------------------------ ROYAL BANK OF CANADA By: /s/ JOHN P. PAGE ------------------------------------------------------- Name: John P. Page ------------------------------------------------- Title: Senior Manager ------------------------------------------------ IBJ SCHRODER BANK & TRUST COMPANY By: /s/ M. MCLAUGHLIN ------------------------------------------------------- Name: M. Mclaughlin ------------------------------------------------ Title: Vice President ------------------------------------------------
EX-10.6 6 WAIVER & CONSENT LETTER. 1 EXHIBIT 10.6 WAIVER AND CONSENT LETTER As of June 25, 1996 Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Attn: Vincent D. Kelly Re: Loan Agreement dated as of August 31, 1994 (as the same is amended or restated from time to time, the "Loan Agreement") among Metrocall, Inc. (the "Borrower"), The Toronto-Dominion Bank, PNC Bank, National Association, The Bank of New York, First Union National Bank of North Carolina, Fleet National Bank, The First National Bank of Boston, Union Bank of California, N.A., Fleet Bank, N.A. (formerly known as NatWest Bank N.A.), The Riggs National Bank of Washington, D.C., Royal Bank of Canada and IBJ Schroder Bank & Trust Company (collectively, the "Banks"), and Toronto Dominion (Texas), Inc. as administrative agent for the Banks (the "Administrative Agent") Ladies and Gentlemen: This letter, when accepted by you, will reflect our agreement with respect to certain matters arising in respect of the Loan Agreement by virtue of certain acquisitions and investments proposed to be made by the Borrower. 1. Waivers of Financial Covenants. By signing this Waiver and Consent Letter in the spaces provided below, and notwithstanding anything contained in the Loan Agreement which may be construed to the contrary, but subject to the terms and conditions hereof, the Administrative Agent and the Banks hereby waive compliance by the Borrower with the following financial covenants until September 21, 1996: (a) The Administrative Agent and the Banks hereby waive compliance with Section 7.8 of the Loan Agreement, Leverage Ratio, provided that (i) as of the end of the calendar quarter ending June 30, 1996, and (ii) at the time of any Advance under the Loan Agreement (after giving effect thereto), the ratio of (x) the aggregate amount of Indebtedness for Money Borrowed (other than Subordinated Debt) of the Borrower and its Subsidiaries on a consolidated basis determined in accordance with GAAP to (y) Annualized Operating Cash Flow for the fiscal quarter being tested or for the most recently completed fiscal quarter for which financial 2 Metrocall, Inc. As of June 25, 1996 Page 2 statements are required to have been delivered pursuant to Section 6.1 of the Loan Agreement, as the case may be, does not exceed 2.5:1. (b) The Administrative Agent and the Banks hereby waive compliance with Section 7.9 of the Loan Agreement, Annualized Operating Cash Flow to Pro Forma Debt Service, provided that (i) as of the end of the calendar quarter ending June 30, 1996, and (ii) at the time of any Advance under the Loan Agreement (after giving effect thereto), the ratio which would otherwise be calculated under such Section exceeds 1.25:1. (c) The Administrative Agent and the Banks hereby waive compliance with Section 7.11 of the Loan Agreement, Operating Cash Flow to Interest Expense, provided that (i) as of the end of the calendar quarter ending June 30, 1996, and (ii) at the time of any Advance under the Loan Agreement (after giving effect thereto), the ratio of which would otherwise be calculated under such Section exceeds 1.5:1. 2. Consents and Waivers Relating to Proposed Acquisitions. In addition, and notwithstanding anything contained in the Loan Agreement which may be construed to the contrary, including, without limitation, the first two sentences of Section 4.1(n), Compliance with Regulations G, T, U and X, Section 5.10, Use of Proceeds, and Section 7.6, Investments and Acquisitions of the Loan Agreement, but subject to the terms and conditions hereof, the Administrative Agent and the Banks hereby consent to the following transactions: (a) the acquisition by the Borrower of O.R. Estman, Inc. d/b/a Satellite Paging (New York) for a Net Purchase Price not to exceed $30,000,000 and Parkway Paging, Inc. (Texas) for a Net Purchase Price not to exceed $30,000,000, provided that, in each such case, (i) no Default then exists or would be caused thereby, and (ii) the Borrower has provided to the Administrative Agent and the Banks a compliance certificate specifically demonstrating the Borrower's pro forma compliance with Sections 7.8, 7.9, 7.10 and 7.11 of the Loan Agreement after giving effect to the waivers contained herein and after giving effect to the proposed Acquisition, as well as all documentation with respect to such Acquisition prescribed by the terms of Section 5.13 of the Loan Agreement; and (b) the acquisition by the Borrower of up to 40% of the shares of the capital stock of A+ Network, Inc. ("A+ Shares") and options to acquire an additional 11% of such A+ Shares for a Net Purchase Price not to exceed $92,000,000 with a combination of cash on hand and proceeds 3 Metrocall, Inc. As of June 25, 1996 Page 3 of the Loans, after which acquisition the amount available for investments under Section 7.6(c) of the Loan Agreement shall be deemed to be $100,000,000 minus such Net Purchase Price. Notwithstanding anything contained in the Loan Agreement or any other Loan Document which may be construed to the contrary, but subject to the terms and conditions hereof, the Administrative Agent and the Banks hereby relinquish, release, disclaim and waive any requirement for the granting of, any Lien on A+ Shares now owned or hereafter acquired by the Borrower or any of its Subsidiaries as security for the Obligations to the extent that the A+ Shares constitute "margin stock" as such term is defined under Regulations G and U of the Board of Governors of the Federal Reserve System, as in effect from time to time ("Regulations G and U"). The Borrower hereby confirms, acknowledges and agrees, however, that the provisions of Section 7.2, Limitation on Liens, shall remain in effect and unchanged with respect to all assets of the Borrower and its Subsidiaries, including, without limitation, A+ Shares. The consents and waivers granted herein are subject to receipt by the Administrative Agent of (i) a duly executed Federal Reserve Form U-1 or G-3 for each Bank; (ii) an opinion of counsel to the Borrower and its Subsidiaries addressed to the Administrative Agent and the Banks, which the Borrower hereby directs such counsel to provide to the Administrative Agent and the Banks; and (iii) all other documentation which may be reasonably requested by the Administrative Agent or any of the Banks with respect hereto or the transactions contemplated hereby; all of which shall be in form and substance satisfactory to the Administrative Agent. No waiver by the Administrative Agent and the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth above, and the Administrative Agent and the Banks expressly reserve the right to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in all other respects. The waivers granted herein shall not constitute a modification of the Loan Agreement or a course of dealing by the Administrative Agent and the Banks at variance with the Loan Agreement such as to require further notice by the Administrative Agent or the Banks of their intent to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. In requesting this Waiver and Consent Letter, the Borrower represents and warrants that each representation and warranty set forth in Article 4 of the Loan Agreement is true and correct as of the date hereof, except with respect to the statement contained in Section 4.1(n) of the Loan Agreement, Compliance with Regulations G, T, U and X, to the effect that no proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying "margin stock" under the terms of Regulations G and U, which representation and warranty is hereby 4 Metrocall, Inc. As of June 25, 1996 Page 4 waived by the Administrative Agent and the Banks solely with respect to the acquisition of the A+ Shares contemplated herein. However, the Borrower represents and warrants, and at the time of each Advance of the Loans hereafter (after giving effect to the application of the proceeds of such Advance) will be deemed to have represented and warranted, that not more than twenty-five percent (25%) of the value (determined in accordance with Regulations G and U) of the assets which are subject to Section 7.2 of the Loan Agreement, Limitations on Liens, constitute "margin stock," as such term is defined in Regulations G and U. This Waiver and Consent Letter may be executed in multiple counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Capitalized terms used in this Waiver and Consent Letter and not otherwise defined are used as defined in the Loan Agreement. This Waiver and Consent Letter shall be construed in accordance with and governed by the internal laws of the State of New York applicable to agreements made and to be performed in the State of New York. Please acknowledge your acceptance of the terms and provisions set forth herein by signing where indicated below. Very truly yours, ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent By: /s/ Sophia D. Sgarbi ----------------------------------- Name: Sophia D. Sgarbi ------------------------ Title: Vice President ----------------------- 5 Metrocall, Inc. As of June 25, 1996 Page 5 BANKS: THE TORONTO-DOMINION BANK By: /s/ Sophia D. Sgarbi ---------------------------------------- Name: Sophia D. Sgarbi ----------------------------- Title:Mgr. Syndications & Credit Admin ---------------------------- PNC BANK, NATIONAL ASSOCIATION By: /s/ Kelley L. Claypool --------------------------------------- Name: Kelley L. Claypool ----------------------------- Title: Banking Officer ---------------------------- THE BANK OF NEW YORK By: /s/ Edward F. Ryan, Jr. ---------------------------------------- Name: Edward F. Ryan, Jr. ----------------------------- Title: Senior Vice President ---------------------------- FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: /s/ Stephen A. McKenna ---------------------------------------- Name: Stephen A. McKenna --------------------------- Title: Vice President ---------------------------- 6 Metrocall, Inc. As of June 25, 1996 Page 6 FLEET NATIONAL BANK By: /s/ Paula H. Lang ---------------------------------------- Name: Paula H. Lang ----------------------------- Title: Vice President ---------------------------- THE FIRST NATIONAL BANK OF BOSTON By: /s/ Mary E. Meduski ---------------------------------------- Name: Mary E. Meduski ----------------------------- Title: Director ---------------------------- UNION BANK OF CALIFORNIA, N.A. By: /s/ John C. Lee ---------------------------------------- Name: John C. Lee ----------------------------- Title: Banking Officer ---------------------------- 7 Metrocall, Inc. As of June 25, 1996 Page 7 FLEET BANK, N.A. (formerly known as NatWest Bank, N.A.) By: /s/ Leonard Maddox ---------------------------------------- Name: Leonard Maddox ----------------------------- Title: Senior Vice President ---------------------------- THE RIGGS NATIONAL BANK OF WASHINGTON, D.C. By: /s/ Ana G. Tesblum ---------------------------------------- Name: Ana G. Tesblum ----------------------------- Title: Vice President ---------------------------- ROYAL BANK OF CANADA By: /s/ Thomas M. Byrne ---------------------------------------- Name: Thomas M. Byrne ----------------------------- Title: Manager ---------------------------- IBJ SCHRODER BANK & TRUST COMPANY By: /s/ Merily McLaughlin ---------------------------------------- Name: Merily McLaughlin ----------------------------- Title: Vice President ---------------------------- 8 Metrocall, Inc. As of June 25, 1996 Page 8 Agreed to and accepted: BORROWER: METROCALL, INC. By: /s/ Vincent D. Kelly ------------------------------------------------ Name: Vincent D. Kelly ------------------------------------- Its: Chief Financial Officer, --------------------------------------- Treasurer and Vice President EX-10.13 7 EMPLOYMENT AGREEMENT (COLLINS). 1 EXHIBIT 10.13 EMPLOYMENT AGREEMENT This Employment Agreement dated as of May 15, 1996 (the "Agreement") is made by and between Metrocall, Inc., a Delaware corporation (the "Company") and WILLIAM L. COLLINS, III (the "Executive"). The employment agreement between the Company and the Executive dated as of January 16, 1996 is hereby canceled and replaced with this Agreement. WHEREAS, in consideration of the Executive's service to the Company as President and Chief Executive Officer of the Company and the Executive's agreement not to compete with the Company, the Company and the Executive desire to enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Employment. The Company agrees to continue to employ the Executive and the Executive agrees to remain employed by the Company as the President and Chief Executive Officer of the Company based upon the terms and conditions set forth in this Agreement, for the period of time specified in Section 3. In such position, the Executive shall report directly and exclusively to the Board of Directors of the Company (the "Board"). 2. Duties and Authority. During the term of this Agreement, as President and Chief Executive Officer of the Company, under the direction and subject to the control of the Board (which direction shall be such as is customarily exercised over a chief executive officer of a public company), the Executive shall be responsible for the business, affairs, properties, and operations of the Company and shall have general executive charge, management, and control of the Company, with all such powers and authority with respect to such business, affairs, properties, and operations as may be reasonably incident to such duties and responsibilities. During the term of this Agreement, the Executive shall have such powers, authority, functions, and responsibilities for the Company and corporations affiliated with the Company as he possessed as of May 1, 1996 and such additional duties, powers, authority, functions, and responsibilities as the Board (and not a committee thereof) shall assign to him that do not (except with the Executive's consent) 2 interfere with, or detract from, those vested in or being performed by the Executive for the Company as of the beginning of the term of this Agreement. The Executive shall devote the Executive's reasonable best efforts and full business time to the performance of the Executive's duties and the advancement of the business and affairs of the Company. 3. Term. The term of this Agreement and the period of employment of the Executive by the Company hereunder shall commence on the date of this Agreement and shall end on December 31, 1999; provided, however, that the term shall be automatically extended for additional one (1) year periods on each anniversary date of this Agreement, unless and until either party notifies the other party not less than ninety (90) days before such anniversary date that such party is terminating this Agreement, which termination shall be effective as of the end of such initial term or extended term, as the case may be (the "Expiration Date"), or until sooner terminated as hereinafter set forth. 4. Salary and Expenses. (a) In consideration for the Executive's services, the Company shall pay to the Executive an annual base salary (the "Base Salary") equal to Three Hundred Thousand Dollars ($300,000). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company's payroll procedures. The Company shall deduct and withhold all necessary social security and withholding taxes and any other similar sums required by law or authorized by the Executive with respect to the payment of the Base Salary. The Board shall review the Executive's salary annually before December 31 and may increase, but not decrease, his Base Salary in any renewal, extension, or replacement of this Agreement. The Company shall review the appropriateness of creating additional forms of nonqualified executive compensation to cover the Executive. (b) To the maximum extent permitted by applicable state and federal law, the Executive shall be eligible, at no cost to the Executive, to participate in all of the Company's benefit plans, including fringe benefits available to the Company's senior executives and use of an automobile suitable for the chief executive officer of a public company. -2- 3 (c) The Company shall pay any premiums due and payable on the Executive's whole life policy in effect on the date of this Agreement (or such other policy as the Executive and the Company agree shall be substituted for that policy) between the date of this Agreement and the Expiration Date (d) The Executive shall be entitled to (i) time off for all public holidays observed by the Company and (ii) vacation days in accordance with the applicable policies for the Company's senior executives. (d) The Company shall reimburse the Executive for all reasonable expenses the Executive incurs in accordance with the guidelines adopted from time to time by the Company. 5. Confidential Information. (a) The Executive covenants and agrees that the Executive will not at any time, without the prior written consent of the Board or a person authorized by the Board, publish or disclose to any third party, use for the Executive's own benefit or advantage, or make available for others to use, any confidential information with respect to any of the Company's products, services, subscribers, suppliers, marketing techniques, methods, or future plans disclosed to the Executive as a result of the Executive's employment with the Company, to the extent such information has heretofore remained confidential (except for unauthorized disclosures) and except as otherwise ordered by a court of competent jurisdiction. (b) The Executive acknowledges that the restrictions contained in Section 5(a) are reasonable and necessary, in view of the nature of the Company's business, in order to protect the legitimate interests of the Company, and that any violation thereof would result in irreparable injury to the Company. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 5(a), the Company shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any such confidential information. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or -3- 4 threatened breach, including, without limitation, recovery of damages from the Executive. 6. Covenant Not to Compete. The Executive agrees that, through the position of President and Chief Executive Officer, the Executive has established valuable and recognized expertise in the paging business and has had and will have access to the trade secrets and confidential information of the Company. The Executive hereby enters into a covenant restricting the Executive from soliciting employees of the Company and from competing against the Company (the "Covenant Not to Compete") upon the terms and conditions described below: (a) During the Executive's employment, the Executive agrees that the Executive will not, without the prior written consent of the Company: (i) induce or attempt to induce any of the Company's employees to terminate their employment with the Company in order to become an director, officer, employee, consultant, or independent contractor to or for any enterprise with which the Executive has an interest, whether as a proprietor, partner, shareholder, employee, agent, director, or officer; (ii) at any time and in any state or other jurisdiction in the United States in which the Company is engaged in business or, during the Executive's employment, has developed plans to engage in business: (1) engage in, including as a director, agent, or representative, or have any direct or indirect financial interest (whether as a partner, shareholder, or owner) in any enterprise that engages in, the business of owning and operating one-way paging and wireless messaging networks, voice mail services or data transmitting services (the "Business"); or (2) participate as an employee or officer in any enterprise in which the Executive's responsibility relates to the Business. The ownership by the Executive of less than five percent (5%) of the outstanding equity securities of any corporation, partnership, limited liability company, trust, or other entity shall not be deemed a violation of this Section 6(a)(ii). The ownership by the Executive of his current percentage of equity securities or his position as an officer or -4- 5 director of USA Telecommunications, Inc. or Collins Broadcasting Systems shall not be deemed a violation of this Section 6(a)(ii). (iii) solicit or cause or encourage any person to solicit any Business in competition with the Company from any person who is a client of the Company during the Executive's employment hereunder. (b) The Executive agrees that the restrictions set forth in this Section 6 are reasonable, proper, and necessitated by legitimate business interests of the Company and do not constitute an unlawful or unreasonable restraint upon the Executive' ability to earn a livelihood. The parties agree that in the event any of the restrictions in this Agreement, interpreted in accordance with the Agreement as a whole, are found to be unreasonable a court of competent jurisdiction, such court shall determine the limits allowable by law and shall enforce the same. (c) The Executive further acknowledges that it may be impossible to assess the monetary damages incurred by the Executive's violation of this Agreement, and that violation of this Agreement will cause irreparable injury to the Company. Accordingly, the Executive agrees that the Company will be entitled, in addition to all other rights and remedies that may be available, to an injunction enjoining and restraining the Executive and any other involved party from committing a violation of this Agreement. In addition, the Company will be entitled to such damages as it can demonstrate it has sustained by reason of the violation of this Agreement by the Executive and/or others. However, recourse to any remedy hereunder shall not constitute an exclusive remedy for the Company, but rather the Company may resort to other remedies or a combination of remedies as it may choose. The Executive and the Company also agree in the event that either party is successful in whole or in part in any legal action against the other party under this Agreement, that the successful party will be entitled to payment of all costs, including reasonable attorney's fees, from the other party. -5- 6 7. Termination. Notwithstanding any other provision of this Agreement, this Agreement shall terminate upon the death of the Executive, or it may be terminated with thirty (30) days' written notice as follows: (a) The Company may terminate this Agreement under the following circumstances: (i) if the Executive is unable to perform any services by reason of illness, physical, or mental disability, or other similar incapacity ("Disability") that continues for more than six (6) consecutive months; (ii) or for "Cause." For purposes of this Agreement, "Cause" means (A) dishonesty of a material nature that relates to the performance of services under this Agreement, (B) criminal conduct (other than minor infractions and traffic violations) that relates to the performance of services under this Agreement, or (C) the Executive's willfully breaching or failing to perform his duties as described in Section 2 hereof, which act or omission results in a material adverse effect on the Company. No act or failure to act on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive has engaged in the conduct set forth in this paragraph and specifying the particulars thereof in detail. (b) The Executive may terminate this Agreement at any time upon sixty (60) days' prior written notice. -6- 7 (c) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 8. Compensation Upon Termination. (a) Death. If the Executive's employment is terminated by the Executive's death, the Company shall pay to the Executive's estate, or as may be directed by the legal representatives to such estate, (i) the Executive's full Base Salary through the Executive's date of death and all other unpaid amounts, if any, to which the Executive is entitled as of the Executive's date of death, under any Company fringe benefit or incentive compensation plan or program, at the time such payments would otherwise ordinarily be due; and (ii) the Executive's full Base Salary that would have been payable to the Executive from the Executive's date of death through the Expiration Date, in a lump sum within forty-five (45) days after his death. (b) Disability. During any period that the Executive fails to perform the Executive's duties hereunder as a result of incapacity due to Disability (the "Disability Period"), the Executive shall continue to receive (i) the Executive's full Base Salary through the Executive's date of disability and all other unpaid amounts, if any, to which the Executive is entitled as of the Executive's date of disability, under any Company fringe benefit or incentive compensation plan or program, at the time such payments are due; and (ii) the Executive's full Base Salary that would have been payable to the Executive from the Executive's date of disability through the Expiration Date, at the time such payments would otherwise ordinarily be due; provided, however, that any payments made to the Executive during the Disability Period shall be reduced by any amounts paid or payable to the Executive under any Company disability benefit plans. -7- 8 (c) For Cause. If the Company terminates the Executive's employment for Cause, the Company shall pay the Executive's full Base Salary through the date specified in the Notice of Termination and the Company shall have no further obligations to the Executive under this Agreement. (d) Voluntary. If the Executive terminates his employment for other than Good Reason, the Company shall pay the Executive the Executive's full Base Salary through the date specified in the Notice of Termination and from the date of termination through the earlier of (I) one (1) year from the date of termination or (ii) the Expiration Date, at the time such payments would otherwise ordinarily be due. "Good Reason" means the occurrence, without the Executive's express written consent, of any of the following circumstances: (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement or of the Metrocall, Inc. Change of Control Agreement for Chief Executive Officer dated of even date herewith (the "Change of Control Agreement"), and the continued failure of the Company to cure such default within fifteen (15) days after the Executive gives a written demand for performance to the Company, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) the assignment to the Executive of any duties inconsistent with, or any substantial diminution in, such Executive's status or responsibilities as in effect on the date hereof, including imposition of travel obligations that differ materially from required business travel as of the date hereof; (iii) any diminution in the status or responsibilities of the Executive's position from that which existed as of the date hereof, whether by reason of the Company's ceasing to be a public company under the -8- 9 Securities Exchange Act of 1934, becoming a subsidiary of a successor public company, or otherwise; (iv) (I) a reduction in the Executive's Base Salary as in effect on the date hereof, as that amount may be increased from time to time; or (II) the failure to pay a bonus award to which the Executive is otherwise entitled under any short-term incentive plan in which the Executive then participates, at the time such awards are usually paid; (v) the termination of employment of Steven D. Jacoby or Vincent D. Kelly (other than a termination (I) by the Company for "Cause" or (II) because of death or "Disability" as those terms are defined in their respective employment agreements), including a termination that results from a failure by the Company and Jacoby or Kelly to reach agreement to continue Jacoby's or Kelly's employment on terms at least as favorable to him, in the aggregate, as those in effect when his then existing employment agreement expired; (vi) a change in the principal place of the Executive's employment, as in effect on the date hereof, or as in effect after any subsequent change to which the Executive consented in writing, to a location more than thirty-five (35) miles distant from the location of such principal place; (vii) (I) the Company's failure to continue in effect any incentive compensation plan or stock option plan in which the Executive participates, unless the Company has provided an equivalent alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) to the Executive, or (II) the Company's failure to continue the Executive's participation in any such incentive or stock option plan on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as of the date hereof or as of any succeeding December 31; -9- 10 (viii) the Company's violation of any applicable criminal law not due to the Executive's gross negligence or willful misconduct; (ix) the failure of the Company or any successor to obtain a satisfactory written agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 12 below; or (x) any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Sections 7(a)(ii) and 7(c) as applicable. For purposes of this Agreement, no such purported termination shall be effective except as constituting Good Reason. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (e) Other. Except as otherwise provided in Section 8(f) for terminations after a Change in Control, if the Company terminates the Executive's employment other than for Cause or Disability (under Section 8(b) hereof), or if the Executive terminates employment with the Company for Good Reason, the Company shall pay the Executive (i) the Executive's full Base Salary through the date specified in the Notice of Termination within two (2) days after such date and all other unpaid amounts, if any, to which the Executive is entitled as of the date specified in the Notice of Termination, under any Company fringe benefit or incentive compensation plan or program, at the time such payments are due; (ii) the full Base Salary and any other amounts that would have been payable to the Executive hereunder from the date specified in the Notice of Termination through the Expiration Date within forty-five (45) days after such date; -10- 11 (iii) the premiums on the Executive's whole life policy (as set forth in Section 4(c) hereof) until the earlier of the end of the time during the insurance policy during which premiums are due or the Expiration Date. (iiv) in lieu of exercising or retaining any rights the Executive may have to exercise some or all of the outstanding stock options that he then holds (including any rights to exercise stock options that arise during the Term if he were to remain employed and including any that would otherwise terminate as result of his termination of employment), the Executive may elect within sixty (60) days after termination of employment to surrender such rights to the Company and receive in exchange therefor a cash payment equal to the aggregate difference, if positive, between (a) the "fair market value" (determined as of the date of termination using the higher of the "fair market value" (i) as defined in the terms of the applicable option plan or option agreement as of the date of termination and (ii) as defined in the plan or agreement on the date of grant) of the shares of common stock subject to the options and (b) the option prices of the shares subject to such surrendered options; and the Company shall make such payment within forty-five (45) days after the Executive notifies the Company of his election to surrender all or a portion of his options. (f) Termination of Employment after a Change in Control. If, after a Change of Control (as defined in the Change of Control Agreement), the Company terminates the Executive's employment other than for Cause or Disability, or if the Executive terminates employment with the Company for Good Reason after a Change of Control, Executive's compensation and benefits shall be exclusively determined by the terms of the Change of Control Agreement as then in effect. (g) Mitigation. The Executive shall not be required to mitigate amounts payable pursuant to this section by seeking other employment or otherwise. 9. Notices. All notices, demands, requests, or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied, or mailed by first class registered or certified mail, postage prepaid, addressed as follows: -11- 12 (a) if to the Company: Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Telecopier: (703) 768-5407 Attention: Francis A. Martin, III with a copy (which shall not constitute notice) to Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037-1420 Telecopier: (202) 663-6363 Attention: George P. Stamas and John B. Watkins (a) if to the Executive: William L. Collins, III 314 River Bend Road Great Falls, Virginia 22066 or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request, or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect. 11. Survival. It is the express intention and agreement of the parties that the provisions of Section 5 shall survive three (3) years after the termination of this Agreement. -12- 13 12. Assignment; Successors. The rights and obligations of the parties to this Agreement shall not be assignable, except that the rights and obligations of the Company hereunder shall be assignable in connection with any subsequent merger, consolidation, sale of substantially all of the assets of the Company, or similar reorganization of a successor. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement before the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company as provided in Section 6 of the Change of Control Agreement. 13. Binding Effect. Subject to any provisions restricting assignment, this Agreement shall be binding upon the parties and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors, and assigns. 14. Amendment; Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the both parties. Neither the waiver by either of the parties of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights, or privileges. 15. Headings. Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction, or scope of any of the provisions of this Agreement. 16. Governing Law. This Agreement, the rights and obligations of the parties, and any claims or disputes arising from this Agreement, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia (but not including the choice of law rules thereof). -13- 14 17. Entire Agreement. This Agreement and the Change of Control Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and supersede all prior oral or written agreements, commitments, or understandings with respect to the matters provided for in this Agreement and the Change of Control Agreement. 18. Arbitration. The Executive may designate in writing to the Company (in which case this Section 18 shall have effect but not otherwise) that any dispute that may arise directly or indirectly in connection with this Agreement, the Executive's employment, or the termination of the Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, or other legal theory, shall be determined solely by arbitration in Washington, D.C. under the rules of the American Arbitration Association (the "AAA"). The only legal claims between the Executive, on the one hand, and the Company or any Subsidiary, on the other, that would not be included in this agreement to arbitration are claims by the Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by the Executive that seek judicial relief in the form of specific performance of the right to be paid until the termination date during the pendency of any dispute or controversy arising under Section 7(a)(ii). If this Section 18 is in effect, any claim with respect to this Agreement, the Executive's employment, or the termination of the Executive's employment must be established by a preponderance of the evidence submitted to the impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the then current procedures of the AAA and under the AAA's then current Model Employment Arbitration Rules. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Section 18 is in effect, the decision of the arbitrator (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. Section Section 1-15, not state law, shall govern the arbitrability of all claims. -14- 15 19. Cancellation of Previous Agreements. In consideration of this Agreement, the Executive hereby waives any and all rights under and releases, and indemnifies and holds the Company and its successors and assigns, harmless from any damage, loss, liability, judgment, fine, penalty, assessment, settlement, cost, or expense including, without limitation, reasonable expenses of investigation, reasonable attorneys' fees and other reasonable legal costs and expenses incident to any of the foregoing or to the enforcement of this Section, whether or not suit is brought or, if brought, whether or not such suit is successful, in whole or in part arising out of or relating to any and all employment, consulting, non-competition, bonus, or other compensatory plan, program, arrangement, or contract relating to the employment of the Executive, written or oral, between the Executive and the Company or any person affiliated with the Company, and the Executive consents to the termination of each such agreement and arrangement effective as of the date of this Agreement; provided, however, that nothing herein shall constitute a termination or waiver of the Change of Control Agreement. 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed, on their behalf as of the day and year first hereinabove written. METROCALL, INC. Date: May 15, 1996 By: /s/ Richard D. Johnston ------------ ----------------------- Richard D. Johnston Chairman of the Board Date: May 15, 1996 /s/ William L. Collins, III ------------ --------------------------- William L. Collins, III | | Executive's Copy -- | | Company's Copy --
-15- EX-10.14 8 EMPLOYMENT AGREEMENT (KELLY). 1 EXHIBIT 10.14 EMPLOYMENT AGREEMENT This Employment Agreement dated as of May 15, 1996 (the "Agreement") is made by and between Metrocall, Inc., a Delaware corporation (the "Company") and VINCENT D. KELLY (the "Executive"). The employment agreement between the Company and the Executive dated as of June 1, 1993 and amended as of January 1, 1996 is hereby canceled and replaced with this Agreement. WHEREAS, in consideration of the Executive's service to the Company as Chief Financial Officer of the Company and the Executive's agreement not to compete with the Company, the Company and the Executive desire to enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Employment. The Company agrees to continue to employ the Executive and the Executive agrees to remain employed by the Company as the Chief Financial Officer of the Company based upon the terms and conditions set forth in this Agreement, for the period of time specified in Section 3. In such position, the Executive shall report directly to the Chief Executive Officer. 2. Duties and Authority. During the term of this Agreement, as Chief Financial Officer of the Company, under the direction and subject to the control of the Chief Executive Officer, the Executive shall be responsible for the financial operations of the Company and shall have general executive charge, management, and control of financial management of the Company, with all such powers and authority with respect to such business, affairs, properties, and operations as may be reasonably incident to such duties and responsibilities. During the term of this Agreement, the Executive shall have such powers, authority, functions, and responsibilities for the Company and corporations affiliated with the Company as he possessed as of May 1, 1996 and such additional duties, powers, authority, functions, and responsibilities as the Chief Executive Officer shall assign to him that do not (except with the Executive's consent) interfere with, or detract from, those vested in or being performed by the Executive for the Company as of the beginning of the term of this Agreement. The Executive shall devote the Executive's 2 reasonable best efforts and full business time to the performance of the Executive's duties and the advancement of the business and affairs of the Company. 3. Term. The term of this Agreement and the period of employment of the Executive by the Company hereunder shall commence on the date of this Agreement and shall end on December 31, 1999; provided, however, that the term shall be automatically extended for additional one (1) year periods on each anniversary date of this Agreement, unless and until either party notifies the other party not less than ninety (90) days before such anniversary date that such party is terminating this Agreement, which termination shall be effective as of the end of such initial term or extended term, as the case may be (the "Expiration Date"), or until sooner terminated as hereinafter set forth. 4. Salary and Expenses. (a) In consideration for the Executive's services, the Company shall pay to the Executive an annual base salary (the "Base Salary") equal to Two Hundred Twenty-Five Thousand Dollars ($225,000). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company's payroll procedures. The Company shall deduct and withhold all necessary social security and withholding taxes and any other similar sums required by law or authorized by the Executive with respect to the payment of the Base Salary. The Board shall review the Executive's salary annually before December 31 and may increase, but not decrease, his Base Salary in any renewal, extension, or replacement of this Agreement. The Company shall review the appropriateness of creating additional forms of nonqualified executive compensation to cover the Executive. (b) To the maximum extent permitted by applicable state and federal law, the Executive shall be eligible, at no cost to the Executive, to participate in all of the Company's benefit plans, including fringe benefits available to the Company's senior executives and use of an automobile suitable for a senior executive of a public company. -2- 3 (c) The Executive shall be entitled to (i) time off for all public holidays observed by the Company and (ii) vacation days in accordance with the applicable policies for the Company's senior executives. (d) The Company shall reimburse the Executive for all reasonable expenses the Executive incurs in accordance with the guidelines adopted from time to time by the Company. 5. Confidential Information. (a) The Executive covenants and agrees that the Executive will not at any time, without the prior written consent of the Board or a person authorized by the Board, publish or disclose to any third party, use for the Executive's own benefit or advantage, or make available for others to use, any confidential information with respect to any of the Company's products, services, subscribers, suppliers, marketing techniques, methods, or future plans disclosed to the Executive as a result of the Executive's employment with the Company, to the extent such information has heretofore remained confidential (except for unauthorized disclosures) and except as otherwise ordered by a court of competent jurisdiction. (b) The Executive acknowledges that the restrictions contained in Section 5(a) are reasonable and necessary, in view of the nature of the Company's business, in order to protect the legitimate interests of the Company, and that any violation thereof would result in irreparable injury to the Company. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 5(a), the Company shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any such confidential information. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including, without limitation, recovery of damages from the Executive. 6. Covenant Not to Compete. The Executive agrees that, through the position of Chief Financial Officer, the Executive has established valuable and recognized expertise in the -3- 4 paging business and has had and will have access to the trade secrets and confidential information of the Company. The Executive hereby enters into a covenant restricting the Executive from soliciting employees of the Company and from competing against the Company (the "Covenant Not to Compete") upon the terms and conditions described below: (a) During the Executive's employment and for twelve (12) months thereafter, the Executive agrees that the Executive will not, without the prior written consent of the Company: (i) induce or attempt to induce any of the Company's employees to terminate their employment with the Company in order to become an director, officer, employee, consultant, or independent contractor to or for any enterprise with which the Executive has an interest, whether as a proprietor, partner, shareholder, employee, agent, director, or officer; (ii) at any time and in any state or other jurisdiction in the United States in which the Company is engaged in business or, during the Executive's employment, has developed plans to engage in business: (1) engage in, including as a director, agent, or representative, or have any direct or indirect financial interest (whether as a partner, shareholder, or owner) in any enterprise that engages in, the business of owning and operating one-way paging and wireless messaging networks, voice mail services or data transmitting services (the "Business"); or (2) participate as an employee or officer in any enterprise in which the Executive's responsibility relates to the Business. The ownership by the Executive of less than five percent (5%) of the outstanding equity securities of any corporation, partnership, limited liability company, trust, or other entity shall not be deemed a violation of this Section 6(a)(ii). (iii) solicit or cause or encourage any person to solicit any Business in competition with the Company from any person who is a client of the Company during the Executive's employment hereunder. -4- 5 (b) The Executive agrees that the restrictions set forth in this Section 6 are reasonable, proper, and necessitated by legitimate business interests of the Company and do not constitute an unlawful or unreasonable restraint upon the Executive' ability to earn a livelihood. The parties agree that in the event any of the restrictions in this Agreement, interpreted in accordance with the Agreement as a whole, are found to be unreasonable a court of competent jurisdiction, such court shall determine the limits allowable by law and shall enforce the same. (c) The Executive further acknowledges that it may be impossible to assess the monetary damages incurred by the Executive's violation of this Agreement, and that violation of this Agreement will cause irreparable injury to the Company. Accordingly, the Executive agrees that the Company will be entitled, in addition to all other rights and remedies that may be available, to an injunction enjoining and restraining the Executive and any other involved party from committing a violation of this Agreement. In addition, the Company will be entitled to such damages as it can demonstrate it has sustained by reason of the violation of this Agreement by the Executive and/or others. However, recourse to any remedy hereunder shall not constitute an exclusive remedy for the Company, but rather the Company may resort to other remedies or a combination of remedies as it may choose. The Executive and the Company also agree in the event that either party is successful in whole or in part in any legal action against the other party under this Agreement, that the successful party will be entitled to payment of all costs, including reasonable attorney's fees, from the other party. 7. Termination. Notwithstanding any other provision of this Agreement, this Agreement shall terminate upon the death of the Executive, or it may be terminated with thirty (30) days' written notice as follows: (a) The Company may terminate this Agreement under the following circumstances: (i) if the Executive is unable to perform any services by reason of illness, physical, or mental disability, or other similar incapacity ("Disability") that continues for more than six (6) consecutive months; -5- 6 (ii) or for "Cause." For purposes of this Agreement, "Cause" means (A) dishonesty of a material nature that relates to the performance of services under this Agreement, (B) criminal conduct (other than minor infractions and traffic violations) that relates to the performance of services under this Agreement, or (C) the Executive's willfully breaching or failing to perform his duties as described in Section 2 hereof, which act or omission results in a material adverse effect on the Company. No act or failure to act on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive has engaged in the conduct set forth in this paragraph and specifying the particulars thereof in detail. (b) The Executive may terminate this Agreement at any time upon sixty (60) days' prior written notice. (c) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. -6- 7 8. Compensation Upon Termination. (a) Death. If the Executive's employment is terminated by the Executive's death, the Company shall pay to the Executive's estate, or as may be directed by the legal representatives to such estate, (i) the Executive's full Base Salary through the Executive's date of death and all other unpaid amounts, if any, to which the Executive is entitled as of the Executive's date of death, under any Company fringe benefit or incentive compensation plan or program, at the time such payments would otherwise ordinarily be due; and (ii) the Executive's full Base Salary that would have been payable to the Executive from the Executive's date of death through the Expiration Date, in a lump sum within forty-five (45) days after his death. (b) Disability. During any period that the Executive fails to perform the Executive's duties hereunder as a result of incapacity due to Disability (the "Disability Period"), the Executive shall continue to receive (i) the Executive's full Base Salary through the Executive's date of disability and all other unpaid amounts, if any, to which the Executive is entitled as of the Executive's date of disability, under any Company fringe benefit or incentive compensation plan or program, at the time such payments are due; and (ii) the Executive's full Base Salary that would have been payable to the Executive from the Executive's date of disability through the Expiration Date, at the time such payments would otherwise ordinarily be due; provided, however, that any payments made to the Executive during the Disability Period shall be reduced by any amounts paid or payable to the Executive under any Company disability benefit plans. (c) For Cause. If the Company terminates the Executive's employment for Cause, the Company shall pay the Executive's full Base Salary through the date specified in the Notice of Termination and the Company shall have no further obligations to the Executive under this Agreement. (d) Voluntary. If the Executive terminates his employment for other than Good Reason, the Company shall pay the Executive the Executive's full Base Salary through the date specified in the Notice of Termination and from the date of termination through the earlier of (I) one (1) year from the date of termination or -7- 8 (ii) the Expiration Date, at the time such payments would otherwise ordinarily be due. "Good Reason" means the occurrence, without the Executive's express written consent, of any of the following circumstances: (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement or of the Metrocall, Inc. Change of Control Agreement for Chief Financial Officer dated of even date herewith (the "Change of Control Agreement"), and the continued failure of the Company to cure such default within fifteen (15) days after the Executive gives a written demand for performance to the Company, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) the assignment to the Executive of any duties inconsistent with, or any substantial diminution in, such Executive's status or responsibilities as in effect on the date hereof, including imposition of travel obligations that differ materially from required business travel as of the date hereof; (iii) any diminution in the status or responsibilities of the Executive's position from that which existed as of the date hereof, whether by reason of the Company's ceasing to be a public company under the Securities Exchange Act of 1934, becoming a subsidiary of a successor public company, or otherwise; (iv) (I) a reduction in the Executive's Base Salary as in effect on the date hereof, as that amount may be increased from time to time; or (II) the failure to pay a bonus award to which the Executive is otherwise entitled under any short-term incentive plan in which the Executive then participates, at the time such awards are usually paid; -8- 9 (v) the termination of employment of William L. Collins, III or Steven D. Jacoby (other than a termination (I) by the Company for "Cause" or (II) because of death or "Disability" as those terms are defined in their respective employment agreements), including a termination that results from a failure by the Company and Collins or Jacoby to reach agreement to continue Collins' or Jacoby's employment on terms at least as favorable to him, in the aggregate, as those in effect when his then existing employment agreement expired; (vi) a change in the principal place of the Executive's employment, as in effect on the date hereof, or as in effect after any subsequent change to which the Executive consented in writing, to a location more than thirty-five (35) miles distant from the location of such principal place; (vii) (I) the Company's failure to continue in effect any incentive compensation plan or stock option plan in which the Executive participates, unless the Company has provided an equivalent alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) to the Executive, or (II) the Company's failure to continue the Executive's participation in any such incentive or stock option plan on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as of the date hereof or as of any succeeding December 31; (viii) the Company's violation of any applicable criminal law not due to the Executive's gross negligence or willful misconduct; (ix) the failure of the Company or any successor to obtain a satisfactory written agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 12 below; or -9- 10 (x) any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Sections 7(a)(ii) and 7(c) as applicable. For purposes of this Agreement, no such purported termination shall be effective except as constituting Good Reason. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (e) Other. Except as otherwise provided in Section 8(f) for terminations after a Change in Control, if the Company terminates the Executive's employment other than for Cause or Disability (under Section 8(b) hereof), or if the Executive terminates employment with the Company for Good Reason, the Company shall pay the Executive (i) the Executive's full Base Salary through the date specified in the Notice of Termination within two (2) days after such date and all other unpaid amounts, if any, to which the Executive is entitled as of the date specified in the Notice of Termination, under any Company fringe benefit or incentive compensation plan or program, at the time such payments are due; (ii) the full Base Salary and any other amounts that would have been payable to the Executive hereunder from the date specified in the Notice of Termination through the Expiration Date within forty-five (45) days after such date; and (iii) in lieu of exercising or retaining any rights the Executive may have to exercise some or all of the outstanding stock options that he then holds (including any rights to exercise stock options that arise during the Term if he were to remain employed and including any that would otherwise terminate as result of his termination of employment), the Executive may elect within sixty (60) days after termination of employment to surrender such rights to the Company and receive in exchange therefor a cash payment equal to the aggregate difference, if positive, between (a) the -10- 11 "fair market value" (determined as of the date of termination using the higher of the "fair market value" (i) as defined in the terms of the applicable option plan or option agreement as of the date of termination and (ii) as defined in the plan or agreement on the date of grant) of the shares of common stock subject to the options and (b) the option prices of the shares subject to such surrendered options; and the Company shall make such payment within forty-five (45) days after the Executive notifies the Company of his election to surrender all or a portion of his options. (f) Termination of Employment after a Change in Control. If, after a Change of Control (as defined in the Change of Control Agreement), the Company terminates the Executive's employment other than for Cause or Disability, or if the Executive terminates employment with the Company for Good Reason after a Change of Control, Executive's compensation and benefits shall be exclusively determined by the terms of the Change of Control Agreement as then in effect. (g) Mitigation. The Executive shall not be required to mitigate amounts payable pursuant to this section by seeking other employment or otherwise. 9. Notices. All notices, demands, requests, or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied, or mailed by first class registered or certified mail, postage prepaid, addressed as follows: (a) if to the Company: Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Telecopier: (703) 768-5407 Attention: Francis A. Martin, III -11- 12 with a copy (which shall not constitute notice) to Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037-1420 Telecopier: (202) 663-6363 Attention: George P. Stamas and John B. Watkins (a) if to the Executive: Vincent D. Kelly 11807 Chapel Road Clifton, VA 22024 or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request, or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect. 11. Survival. It is the express intention and agreement of the parties that the provisions of Section 5 shall survive three (3) years after the termination of this Agreement. 12. Assignment; Successors. The rights and obligations of the parties to this Agreement shall not be assignable, except that the rights and obligations of the Company hereunder shall be assignable in connection with any subsequent merger, consolidation, sale of substantially all of the assets of the Company, or similar reorganization of a successor. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure -12- 13 of the Company to obtain such assumption and agreement before the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company as provided in Section 6 of the Change of Control Agreement. 13. Binding Effect. Subject to any provisions restricting assignment, this Agreement shall be binding upon the parties and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors, and assigns. 14. Amendment; Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the both parties. Neither the waiver by either of the parties of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights, or privileges. 15. Headings. Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction, or scope of any of the provisions of this Agreement. 16. Governing Law. This Agreement, the rights and obligations of the parties, and any claims or disputes arising from this Agreement, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia (but not including the choice of law rules thereof). 17. Entire Agreement. This Agreement and the Change of Control Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and supersede all prior oral or written agreements, commitments, or understandings with respect to the matters provided for in this Agreement and the Change of Control Agreement. 18. Arbitration. The Executive may designate in writing to the Company (in which case this Section 18 shall have effect but not otherwise) that any dispute that may arise directly or -13- 14 indirectly in connection with this Agreement, the Executive's employment, or the termination of the Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, or other legal theory, shall be determined solely by arbitration in Washington, D.C. under the rules of the American Arbitration Association (the "AAA"). The only legal claims between the Executive, on the one hand, and the Company or any Subsidiary, on the other, that would not be included in this agreement to arbitration are claims by the Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by the Executive that seek judicial relief in the form of specific performance of the right to be paid until the termination date during the pendency of any dispute or controversy arising under Section 7(a)(ii). If this Section 18 is in effect, any claim with respect to this Agreement, the Executive's employment, or the termination of the Executive's employment must be established by a preponderance of the evidence submitted to the impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the then current procedures of the AAA and under the AAA's then current Model Employment Arbitration Rules. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Section 18 is in effect, the decision of the arbitrator (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. Section Section 1-15, not state law, shall govern the arbitrability of all claims. 19. Cancellation of Previous Agreements. In consideration of this Agreement, the Executive hereby waives any and all rights under and releases, and indemnifies and holds the Company and its successors and assigns, harmless from any damage, loss, liability, judgment, fine, penalty, assessment, settlement, cost, or expense including, without limitation, reasonable expenses of investigation, reasonable attorneys' fees and other reasonable legal costs and expenses incident to any of the foregoing or to the enforcement of this Section, whether or not suit is brought or, if brought, whether or not such suit is successful, in whole or in part arising out of or relating to any and all employment, consulting, non-competition, bonus, or other compensatory plan, program, -14- 15 arrangement, or contract relating to the employment of the Executive, written or oral, between the Executive and the Company or any person affiliated with the Company, and the Executive consents to the termination of each such agreement and arrangement effective as of the date of this Agreement; provided, however, that nothing herein shall constitute a termination or waiver of the Change of Control Agreement. 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed, on their behalf as of the day and year first hereinabove written. METROCALL, INC. Date: May 15, 1996 By: /s/ Richard D. Johnston ------------ ----------------------- Richard D. Johnston Chairman of the Board Date: May 15, 1996 /s/ Vincent D. Kelly ------------ -------------------- Vincent D. Kelly | | Executive's Copy -- | | Company's Copy --
-15- EX-10.15 9 EMPLOYMENT AGREEMENT (JACOBY). 1 EXHIBIT 10.15 EMPLOYMENT AGREEMENT This Employment Agreement dated as of May 15, 1996 (the "Agreement") is made by and between Metrocall, Inc., a Delaware corporation (the "Company") and STEVEN D. JACOBY (the "Executive"). The employment agreement between the Company and the Executive dated as of August 31, 1994 and amended as of January 1, 1996 is hereby canceled and replaced with this Agreement. WHEREAS, in consideration of the Executive's service to the Company as Chief Operating Officer of the Company and the Executive's agreement not to compete with the Company, the Company and the Executive desire to enter into this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Employment. The Company agrees to continue to employ the Executive and the Executive agrees to remain employed by the Company as the Chief Operating Officer of the Company based upon the terms and conditions set forth in this Agreement, for the period of time specified in Section 3. In such position, the Executive shall report directly to the Chief Executive Officer. 2. Duties and Authority. During the term of this Agreement, as Chief Operating Officer of the Company, under the direction and subject to the control of the Chief Executive Officer, the Executive shall be responsible for the operations of the Company and shall have general executive charge, management, and control of sales, marketing, and other operational matters for the Company, with all such powers and authority with respect to such business, affairs, properties, and operations as may be reasonably incident to such duties and responsibilities. During the term of this Agreement, the Executive shall have such powers, authority, functions, and responsibilities for the Company and corporations affiliated with the Company as he possessed as of May 1, 1996 and such additional duties, powers, authority, functions, and responsibilities as the Chief Executive Officer shall assign to him that do not (except with the Executive's consent) interfere with, or detract from, those vested in or being performed by the Executive for the Company as of the beginning of the term of this Agreement. The Executive shall devote the Executive's 2 reasonable best efforts and full business time to the performance of the Executive's duties and the advancement of the business and affairs of the Company. 3. Term. The term of this Agreement and the period of employment of the Executive by the Company hereunder shall commence on the date of this Agreement and shall end on December 31, 1999; provided, however, that the term shall be automatically extended for additional one (1) year periods on each anniversary date of this Agreement, unless and until either party notifies the other party not less than ninety (90) days before such anniversary date that such party is terminating this Agreement, which termination shall be effective as of the end of such initial term or extended term, as the case may be (the "Expiration Date"), or until sooner terminated as hereinafter set forth. 4. Salary and Expenses. (a) In consideration for the Executive's services, the Company shall pay to the Executive an annual base salary (the "Base Salary") equal to Two Hundred Twenty-Five Thousand Dollars ($225,000). The Base Salary shall be payable biweekly or in such other installments as shall be consistent with the Company's payroll procedures. The Company shall deduct and withhold all necessary social security and withholding taxes and any other similar sums required by law or authorized by the Executive with respect to the payment of the Base Salary. The Board shall review the Executive's salary annually before December 31 and may increase, but not decrease, his Base Salary in any renewal, extension, or replacement of this Agreement. The Company shall review the appropriateness of creating additional forms of nonqualified executive compensation to cover the Executive. (b) To the maximum extent permitted by applicable state and federal law, the Executive shall be eligible, at no cost to the Executive, to participate in all of the Company's benefit plans, including fringe benefits available to the Company's senior executives and use of an automobile suitable for a senior executive of a public company. -2- 3 (c) The Executive shall be entitled to (i) time off for all public holidays observed by the Company and (ii) vacation days in accordance with the applicable policies for the Company's senior executives. (d) The Company shall reimburse the Executive for all reasonable expenses the Executive incurs in accordance with the guidelines adopted from time to time by the Company. 5. Confidential Information. (a) The Executive covenants and agrees that the Executive will not at any time, without the prior written consent of the Board or a person authorized by the Board, publish or disclose to any third party, use for the Executive's own benefit or advantage, or make available for others to use, any confidential information with respect to any of the Company's products, services, subscribers, suppliers, marketing techniques, methods, or future plans disclosed to the Executive as a result of the Executive's employment with the Company, to the extent such information has heretofore remained confidential (except for unauthorized disclosures) and except as otherwise ordered by a court of competent jurisdiction. (b) The Executive acknowledges that the restrictions contained in Section 5(a) are reasonable and necessary, in view of the nature of the Company's business, in order to protect the legitimate interests of the Company, and that any violation thereof would result in irreparable injury to the Company. Therefore, the Executive agrees that in the event of a breach or threatened breach by the Executive of the provisions of Section 5(a), the Company shall be entitled to obtain from any court of competent jurisdiction, preliminary or permanent injunctive relief restraining the Executive from disclosing or using any such confidential information. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including, without limitation, recovery of damages from the Executive. 6. Covenant Not to Compete. The Executive agrees that, through the position of Chief Operating Officer, the Executive has established valuable and recognized expertise in the -3- 4 paging business and has had and will have access to the trade secrets and confidential information of the Company. The Executive hereby enters into a covenant restricting the Executive from soliciting employees of the Company and from competing against the Company (the "Covenant Not to Compete") upon the terms and conditions described below: (a) During the Executive's employment and for twelve (12) months thereafter, the Executive agrees that the Executive will not, without the prior written consent of the Company: (i) induce or attempt to induce any of the Company's employees to terminate their employment with the Company in order to become an director, officer, employee, consultant, or independent contractor to or for any enterprise with which the Executive has an interest, whether as a proprietor, partner, shareholder, employee, agent, director, or officer; (ii) at any time and in any state or other jurisdiction in the United States in which the Company is engaged in business or, during the Executive's employment, has developed plans to engage in business: (1) engage in, including as a director, agent, or representative, or have any direct or indirect financial interest (whether as a partner, shareholder, or owner) in any enterprise that engages in, the business of owning and operating one-way paging and wireless messaging networks, voice mail services or data transmitting services (the "Business"); or (2) participate as an employee or officer in any enterprise in which the Executive's responsibility relates to the Business. The ownership by the Executive of less than five percent (5%) of the outstanding equity securities of any corporation, partnership, limited liability company, trust, or other entity shall not be deemed a violation of this Section 6(a)(ii). (iii) solicit or cause or encourage any person to solicit any Business in competition with the Company from any person who is a client of the Company during the Executive's employment hereunder. -4- 5 (b) The Executive agrees that the restrictions set forth in this Section 6 are reasonable, proper, and necessitated by legitimate business interests of the Company and do not constitute an unlawful or unreasonable restraint upon the Executive' ability to earn a livelihood. The parties agree that in the event any of the restrictions in this Agreement, interpreted in accordance with the Agreement as a whole, are found to be unreasonable a court of competent jurisdiction, such court shall determine the limits allowable by law and shall enforce the same. (c) The Executive further acknowledges that it may be impossible to assess the monetary damages incurred by the Executive's violation of this Agreement, and that violation of this Agreement will cause irreparable injury to the Company. Accordingly, the Executive agrees that the Company will be entitled, in addition to all other rights and remedies that may be available, to an injunction enjoining and restraining the Executive and any other involved party from committing a violation of this Agreement. In addition, the Company will be entitled to such damages as it can demonstrate it has sustained by reason of the violation of this Agreement by the Executive and/or others. However, recourse to any remedy hereunder shall not constitute an exclusive remedy for the Company, but rather the Company may resort to other remedies or a combination of remedies as it may choose. The Executive and the Company also agree in the event that either party is successful in whole or in part in any legal action against the other party under this Agreement, that the successful party will be entitled to payment of all costs, including reasonable attorney's fees, from the other party. 7. Termination. Notwithstanding any other provision of this Agreement, this Agreement shall terminate upon the death of the Executive, or it may be terminated with thirty (30) days' written notice as follows: (a) The Company may terminate this Agreement under the following circumstances: (i) if the Executive is unable to perform any services by reason of illness, physical, or mental disability, or other similar incapacity ("Disability") that continues for more than six (6) consecutive months; -5- 6 (ii) or for "Cause." For purposes of this Agreement, "Cause" means (A) dishonesty of a material nature that relates to the performance of services under this Agreement, (B) criminal conduct (other than minor infractions and traffic violations) that relates to the performance of services under this Agreement, or (C) the Executive's willfully breaching or failing to perform his duties as described in Section 2 hereof, which act or omission results in a material adverse effect on the Company. No act or failure to act on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive has engaged in the conduct set forth in this paragraph and specifying the particulars thereof in detail. (b) The Executive may terminate this Agreement at any time upon sixty (60) days' prior written notice. (c) Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. -6- 7 8. Compensation Upon Termination. (a) Death. If the Executive's employment is terminated by the Executive's death, the Company shall pay to the Executive's estate, or as may be directed by the legal representatives to such estate, (i) the Executive's full Base Salary through the Executive's date of death and all other unpaid amounts, if any, to which the Executive is entitled as of the Executive's date of death, under any Company fringe benefit or incentive compensation plan or program, at the time such payments would otherwise ordinarily be due; and (ii) the Executive's full Base Salary that would have been payable to the Executive from the Executive's date of death through the Expiration Date, in a lump sum within forty-five (45) days after his death. (b) Disability. During any period that the Executive fails to perform the Executive's duties hereunder as a result of incapacity due to Disability (the "Disability Period"), the Executive shall continue to receive (i) the Executive's full Base Salary through the Executive's date of disability and all other unpaid amounts, if any, to which the Executive is entitled as of the Executive's date of disability, under any Company fringe benefit or incentive compensation plan or program, at the time such payments are due; and (ii) the Executive's full Base Salary that would have been payable to the Executive from the Executive's date of disability through the Expiration Date, at the time such payments would otherwise ordinarily be due; provided, however, that any payments made to the Executive during the Disability Period shall be reduced by any amounts paid or payable to the Executive under any Company disability benefit plans. (c) For Cause. If the Company terminates the Executive's employment for Cause, the Company shall pay the Executive's full Base Salary through the date specified in the Notice of Termination and the Company shall have no further obligations to the Executive under this Agreement. (d) Voluntary. If the Executive terminates his employment for other than Good Reason, the Company shall pay the Executive the Executive's full Base Salary through the date specified in the Notice of Termination and from the date of termination through the earlier of (I) one (1) year from the date of termination or -7- 8 (ii) the Expiration Date, at the time such payments would otherwise ordinarily be due. "Good Reason" means the occurrence, without the Executive's express written consent, of any of the following circumstances: (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement or of the Metrocall, Inc. Change of Control Agreement for Chief Operating Officer dated of even date herewith (the "Change of Control Agreement"), and the continued failure of the Company to cure such default within fifteen (15) days after the Executive gives a written demand for performance to the Company, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) the assignment to the Executive of any duties inconsistent with, or any substantial diminution in, such Executive's status or responsibilities as in effect on the date hereof, including imposition of travel obligations that differ materially from required business travel as of the date hereof; (iii) any diminution in the status or responsibilities of the Executive's position from that which existed as of the date hereof, whether by reason of the Company's ceasing to be a public company under the Securities Exchange Act of 1934, becoming a subsidiary of a successor public company, or otherwise; (iv) (I) a reduction in the Executive's Base Salary as in effect on the date hereof, as that amount may be increased from time to time; or (II) the failure to pay a bonus award to which the Executive is otherwise entitled under any short-term incentive plan in which the Executive then participates, at the time such awards are usually paid; -8- 9 (v) the termination of employment of William L. Collins, III or Vincent D. Kelly (other than a termination (I) by the Company for "Cause" or (II) because of death or "Disability" as those terms are defined in their respective employment agreements), including a termination that results from a failure by the Company and Collins or Kelly to reach agreement to continue Collins' or Kelly's employment on terms at least as favorable to him, in the aggregate, as those in effect when his then existing employment agreement expired; (vi) a change in the principal place of the Executive's employment, as in effect on the date hereof, or as in effect after any subsequent change to which the Executive consented in writing, to a location more than thirty-five (35) miles distant from the location of such principal place; (vii) (I) the Company's failure to continue in effect any incentive compensation plan or stock option plan in which the Executive participates, unless the Company has provided an equivalent alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) to the Executive, or (II) the Company's failure to continue the Executive's participation in any such incentive or stock option plan on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as of the date hereof or as of any succeeding December 31; (viii) the Company's violation of any applicable criminal law not due to the Executive's gross negligence or willful misconduct; (ix) the failure of the Company or any successor to obtain a satisfactory written agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 12 below; or -9- 10 (x) any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Sections 7(a)(ii) and 7(c) as applicable. For purposes of this Agreement, no such purported termination shall be effective except as constituting Good Reason. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (e) Other. Except as otherwise provided in Section 8(f) for terminations after a Change in Control, if the Company terminates the Executive's employment other than for Cause or Disability (under Section 8(b) hereof), or if the Executive terminates employment with the Company for Good Reason, the Company shall pay the Executive (i) the Executive's full Base Salary through the date specified in the Notice of Termination within two (2) days after such date and all other unpaid amounts, if any, to which the Executive is entitled as of the date specified in the Notice of Termination, under any Company fringe benefit or incentive compensation plan or program, at the time such payments are due; (ii) the full Base Salary and any other amounts that would have been payable to the Executive hereunder from the date specified in the Notice of Termination through the Expiration Date within forty-five (45) days after such date; and (iii) in lieu of exercising or retaining any rights the Executive may have to exercise some or all of the outstanding stock options that he then holds (including any rights to exercise stock options that arise during the Term if he were to remain employed and including any that would otherwise terminate as result of his termination of employment), the Executive may elect within sixty (60) days after termination of employment to surrender such rights to the Company and receive in exchange therefor a cash payment equal to the aggregate difference, if positive, between (a) the -10- 11 "fair market value" (determined as of the date of termination using the higher of the "fair market value" (i) as defined in the terms of the applicable option plan or option agreement as of the date of termination and (ii) as defined in the plan or agreement on the date of grant) of the shares of common stock subject to the options and (b) the option prices of the shares subject to such surrendered options; and the Company shall make such payment within forty-five (45) days after the Executive notifies the Company of his election to surrender all or a portion of his options. (f) Termination of Employment after a Change in Control. If, after a Change of Control (as defined in the Change of Control Agreement), the Company terminates the Executive's employment other than for Cause or Disability, or if the Executive terminates employment with the Company for Good Reason after a Change of Control, Executive's compensation and benefits shall be exclusively determined by the terms of the Change of Control Agreement as then in effect. (g) Mitigation. The Executive shall not be required to mitigate amounts payable pursuant to this section by seeking other employment or otherwise. 9. Notices. All notices, demands, requests, or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied, or mailed by first class registered or certified mail, postage prepaid, addressed as follows: (a) if to the Company: Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Telecopier: (703) 768-5407 Attention: Francis A. Martin, III -11- 12 with a copy (which shall not constitute notice) to Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037-1420 Telecopier: (202) 663-6363 Attention: George P. Stamas and John B. Watkins (a) if to the Executive: Steven D. Jacoby 4303 Kimbrelee Court Alexandria, VA 22309 or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request, or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 10. Severability. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement, which shall remain in full force and effect. 11. Survival. It is the express intention and agreement of the parties that the provisions of Section 5 shall survive three (3) years after the termination of this Agreement. 12. Assignment; Successors. The rights and obligations of the parties to this Agreement shall not be assignable, except that the rights and obligations of the Company hereunder shall be assignable in connection with any subsequent merger, consolidation, sale of substantially all of the assets of the Company, or similar reorganization of a successor. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure -12- 13 of the Company to obtain such assumption and agreement before the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company as provided in Section 6 of the Change of Control Agreement. 13. Binding Effect. Subject to any provisions restricting assignment, this Agreement shall be binding upon the parties and shall inure to the benefit of the parties and their respective heirs, devisees, executors, administrators, legal representatives, successors, and assigns. 14. Amendment; Waiver. This Agreement shall not be amended, altered or modified except by an instrument in writing duly executed by the both parties. Neither the waiver by either of the parties of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights, or privileges. 15. Headings. Section headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction, or scope of any of the provisions of this Agreement. 16. Governing Law. This Agreement, the rights and obligations of the parties, and any claims or disputes arising from this Agreement, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia (but not including the choice of law rules thereof). 17. Entire Agreement. This Agreement and the Change of Control Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, and supersede all prior oral or written agreements, commitments, or understandings with respect to the matters provided for in this Agreement and the Change of Control Agreement. 18. Arbitration. The Executive may designate in writing to the Company (in which case this Section 18 shall have effect but not otherwise) that any dispute that may arise directly or -13- 14 indirectly in connection with this Agreement, the Executive's employment, or the termination of the Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, or other legal theory, shall be determined solely by arbitration in Washington, D.C. under the rules of the American Arbitration Association (the "AAA"). The only legal claims between the Executive, on the one hand, and the Company or any Subsidiary, on the other, that would not be included in this agreement to arbitration are claims by the Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by the Executive that seek judicial relief in the form of specific performance of the right to be paid until the termination date during the pendency of any dispute or controversy arising under Section 7(a)(ii). If this Section 18 is in effect, any claim with respect to this Agreement, the Executive's employment, or the termination of the Executive's employment must be established by a preponderance of the evidence submitted to the impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the then current procedures of the AAA and under the AAA's then current Model Employment Arbitration Rules. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Section 18 is in effect, the decision of the arbitrator (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. Section Section 1-15, not state law, shall govern the arbitrability of all claims. 19. Cancellation of Previous Agreements. In consideration of this Agreement, the Executive hereby waives any and all rights under and releases, and indemnifies and holds the Company and its successors and assigns, harmless from any damage, loss, liability, judgment, fine, penalty, assessment, settlement, cost, or expense including, without limitation, reasonable expenses of investigation, reasonable attorneys' fees and other reasonable legal costs and expenses incident to any of the foregoing or to the enforcement of this Section, whether or not suit is brought or, if brought, whether or not such suit is successful, in whole or in part arising out of or relating to any and all employment, consulting, non-competition, bonus, or other compensatory plan, program, -14- 15 arrangement, or contract relating to the employment of the Executive, written or oral, between the Executive and the Company or any person affiliated with the Company, and the Executive consents to the termination of each such agreement and arrangement effective as of the date of this Agreement; provided, however, that nothing herein shall constitute a termination or waiver of the Change of Control Agreement. 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or have caused this Agreement to be duly executed, on their behalf as of the day and year first hereinabove written. METROCALL, INC. Date: May 15, 1996 By:/s/ Richard D. Johnston ------------ ----------------------- Richard D. Johnston Chairman of the Board Date: May 15, 1996 /s/ Steven D. Jacoby ------------ -------------------- Steven D. Jacoby | | Executive's Copy -- | | Company's Copy --
-15- EX-10.16 10 CONTROL AGREEMENT (COLLINS). 1 EXHIBIT 10.16 METROCALL, INC. CHANGE OF CONTROL AGREEMENT FOR CHIEF EXECUTIVE OFFICER May 15, 1996 William L. Collins, III 314 River Bend Road Great Falls, Virginia 22066 Dear Mr. Collins: Metrocall, Inc. (the "Company"), on behalf of itself, its subsidiaries, and its shareholders, wishes to encourage your continued service and dedication in the performance of your duties, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined in Section 1(b) below) of the Company. The Board of Directors of the Company (the "Board") believes that the prospect of a pending or threatened Change of Control inevitably creates distractions and personal risks and uncertainties for a company's executives and that it is in the best interests of the Company to minimize such distractions to certain executives and the Company. The Board further believes that it is in the best interests of the Company to encourage its executives' full attention and dedication to their duties, both currently and in the event of any threatened or pending Change of Control. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued retention of you and certain members of the Company's management and the attention and dedication of management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change of Control of the Company. To induce you (the "Executive") to remain in the Company's employ and in consideration of your continued service to the Company, the Company agrees that you shall receive the benefits set forth in this letter agreement (the "Agreement") if your employment with the Company is terminated for any reason after a Change of Control of the Company and has, of even date herewith, entered into a revised employment agreement relating to your services as President and Chief Executive Officer (the "Employment Agreement"). For purposes of this Agreement, references to employment with the Company shall include employment with a Subsidiary of the Company. Section 1. DEFINITIONS The following terms shall have the meanings set forth below for purposes of this Agreement. (a) CAUSE. Under this Agreement, "Cause" shall mean (1) dishonesty of a material nature relating to performing services under the Employment Agreement, (2) criminal conduct (other than minor infractions and traffic violations) that relates 2 to the performance of services under the Employment Agreement, or (3) the Executive's willfully breaching or failing to perform his employment duties as set forth in his Employment Agreement, which act or omission results in a material adverse effect on the Company. For purposes of this Section 1(a), no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive has engaged in the conduct set forth in this subsection and specifying the particulars thereof in detail. (b) CHANGE OF CONTROL. For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if there is a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor provision of similar import, whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, of securities representing twenty-five percent (25%) or more of the total voting power of all of the Company's then outstanding voting securities, unless through a transaction consummated with the Board's prior approval; provided, however, that for purposes of this paragraph, persons acting in concert under the terms of that certain Voting Agreement dated as of August 31, 1994 shall not, solely as a result of actions provided under such agreement, be treated as a "person"; (ii) during any period of two consecutive calendar years, individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board; -2- 3 (iii) the Company becomes a party to a merger, plan of reorganization, consolidation, or share exchange in which either (x) the Company will not be the surviving corporation or (y) the Company will be the surviving corporation and any outstanding shares of the Company's common stock will be converted into shares of any other company (other than a reincorporation or the establishment of a holding company involving no change of ownership of the Company) or other securities or cash or other property (excluding payments made solely for fractional shares); (iv) the shareholders of the Company approve a merger, plan of reorganization, consolidation, or share exchange with any other corporation, and immediately following such merger, plan of reorganization, consolidation, or share exchange the holders of the voting securities of the Company outstanding immediately prior thereto hold securities representing fifty percent (50%) or less of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger, plan of reorganization, consolidation, or share exchange; provided, however, that notwithstanding the foregoing, no Change of Control for purposes of this Section 1(b)(iv) shall be deemed to have occurred if seventy-five percent (75%) or more of the members of the Board of the Company or such surviving entity immediately after such merger, plan of reorganization, consolidation, or share exchange is comprised of persons who served as directors of the Company immediately before such merger, plan of reorganization, consolidation, or share exchange or who are otherwise designees of the Company; or (v) any other event occurs that a majority of the Board, in its sole discretion, shall determine constitutes a Change of Control. (c) CONTROLLED GROUP. For purposes of this Agreement, "Controlled Group" shall mean the Company and all of the Company's Subsidiaries. (d) DISABILITY. "Disability" shall have the meaning set forth in the Employment Agreement. (e) EMPLOYER. For purposes of this Agreement, "Employer" shall mean the Company or the Subsidiary, as the case may be, with which the Executive has an employment relationship. (f) GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean the occurrence, without the Executive's express written consent, of any of the following circumstances: -3- 4 (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement or the Employment Agreement, and the continued failure of the Company to cure such default within fifteen (15) days after the Executive gives a written demand for performance to the Company, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) the assignment to the Executive of any duties inconsistent with, or any substantial diminution in, such Executive's status or responsibilities as in effect immediately before a Change of Control of the Company, including imposition of travel obligations that differ materially from required business travel immediately before the Change of Control; (iii) any diminution in the status or responsibilities of the Executive's position from that which existed immediately before the Change of Control, whether by reason of the Company's ceasing to be a public company under the Exchange Act, becoming a subsidiary of a successor public company, or otherwise; (iv) (I) a reduction in the Executive's Base Salary (as defined in the Employment Agreement), as that amount may be increased from time to time and as in effect immediately before the Change of Control; or (II) the failure to pay a bonus award to which the Executive is otherwise entitled under any short-term incentive plan in which the Executive then participates, or any successor incentive compensation plans at the time such awards are usually paid; (v) the termination of employment of Steven D. Jacoby or Vincent D. Kelly (other than a termination (I) by the Company for "Cause" or (II) because of death or "Disability" as those terms are defined and applied in their respective employment agreements), including a termination that results from a failure by the Company and Jacoby or Kelly to reach agreement to continue Jacoby's or Kelly's employment on terms at least as favorable to him, in the aggregate, as those in effect before the Change in Control of the Company; (vi) a change in the principal place of the Executive's employment, as in effect immediately before the Change of Control of the Company, to a location more than thirty-five (35) miles distant from the location of such principal place at such time; (vi) (A) the Company's failure to continue in effect any incentive compensation plan or stock option plan in which the Executive participates immediately before the Change in Control, unless an -4- 5 equivalent alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) has been provided to the Executive, or (B) the Company's failure to continue the Executive's participation in any such incentive or stock option plan on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed immediately before the time of the Change of Control; (viii) the Company's violation of any applicable criminal law not due to the Executive's gross negligence or willful misconduct; (ix) the failure of the Company or any successor to obtain a satisfactory written agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6(a) below; or (x) any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(b) or, if applicable, Section 1(a). For purposes of this Agreement, no such purported termination shall be effective except as constituting Good Reason. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (g) SUBSIDIARY. For purposes of this Agreement, "Subsidiary" shall mean any corporation of whose voting stock the Company directly or indirectly owns more than fifty percent (50%). (h) TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean: (i) if the Executive's employment is terminated for Disability pursuant to the Employment Agreement, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of his duties during such thirty-day period); and (ii) if the Executive's employment is terminated for Cause or Good Reason or for any reason other than death or Disability, the date specified in the Notice of Termination (which in the case of a termination for Cause shall not be less than thirty (30) days and in the case of a termination for Good Reason shall not be less than thirty (30) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). Section 2. TERM OF AGREEMENT (a) GENERAL. Upon execution by the Executive, this Agreement shall commence as of May ___, 1996. This Agreement shall continue in effect on December 31, -5- 6 1999; provided, however, that the term shall be automatically extended for additional one (1) year periods on each anniversary date of this Agreement, unless and until either party notifies the other party not less than ninety (90) days before such anniversary date that such party is terminating this Agreement, which termination shall be effective as of the end of such initial term or extended term, as the case may be (the "Expiration Date"); and provided further, however, that if a Change of Control of the Company occurs before the Expiration Date, this Agreement shall continue in effect for a period of thirty-six months beyond the month in which the Change of Control occurred. (b) DISPOSITION OF EMPLOYER. If the Executive is employed by a Subsidiary, the terms of this Agreement shall expire if such Subsidiary is sold or otherwise disposed of before a Change of Control unless the Executive continues in employment with the Controlled Group after such sale or other disposition. If the Executive's Employer is sold or disposed of following a Change of Control, this Agreement shall continue through its original term or any extended term then in effect. (c) DEEMED CHANGE OF CONTROL. If the Executive's employment with the Employer is terminated before the date on which a Change of Control occurs, and such termination was at the request of a third party who has taken steps to effect a Change of Control or the termination was otherwise caused by the Change of Control, then for all purposes of this Agreement, a Change of Control shall be deemed to have occurred before such termination. (d) EXPIRATION OF AGREEMENT. No termination or expiration of this Agreement shall affect any rights, obligations, or liabilities of either party that shall have accrued on or before the date of such termination or expiration. Section 3. TERMINATION FOLLOWING CHANGE OF CONTROL (a) ENTITLEMENT TO BENEFITS. If a Change of Control of the Company occurs, the Executive shall be entitled to the benefits provided in Section 4 hereof upon his termination of employment with the Company within three years after the date of the Change of Control, unless such termination is (i) a result of the Executive's death, (ii) for Cause, (iii) a result of the Executive's Disability(pursuant to the terms of the Employment Agreement that provide for termination as a result of Disability), or (iv) by the Executive other than for Good Reason. A termination of the Executive's employment that entitles the Executive to the payment of benefits under Section 4 hereof shall be referred to hereinafter as a "Termination." (b) NOTICE OF TERMINATION. Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by -6- 7 written Notice of Termination to the other party hereto in accordance with Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. If, following a Change of Control, the Executive's employment shall be terminated for Cause or by the Executive for other than Good Reason, the Company shall pay the Executive any amounts to be paid to the Executive pursuant to the Employment Agreement and any other compensation plans, programs, or employment agreements then in effect, and the Company shall have no further obligations to the Executive under this Agreement. If within thirty (30) days after any Notice of Termination is given, the party receiving such Notice notifies the other party that a dispute exists concerning the grounds for termination, then, notwithstanding the meaning of "Termination Date" set forth in Section 1(h), the Termination Date shall be the date on which the dispute is finally resolved, whether by mutual written agreement of the parties or by a decision rendered pursuant to Section 11; provided that the Termination Date shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given, and continue the Executive as a participant in all benefits, plans, or perquisites in which the Executive was participating or which he was enjoying when the Notice of Termination giving rise to the dispute was given (to the extent such continued participation is not prohibited by law or the generally applicable terms of those arrangements), until the dispute is finally resolved. Amounts paid under this Section 3(b) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. Section 4. COMPENSATION UPON A TERMINATION Following a Change of Control of the Company, upon a Termination of the Executive's employment by the Company without "Cause" or by the Executive for "Good Reason," the Executive shall be entitled to the following benefits, provided that the Termination occurs during the three-year period immediately following the date of the Change of Control: (a) STANDARD BENEFITS. The Company shall pay the Executive his full Base Salary through the Termination Date, at the rate in effect at the time the Notice of Termination is given, no later than the second day following the Termination Date, plus all other amounts to which the Executive is entitled under any -7- 8 compensation plan of the Company applicable to the Executive at the time such payments are due. Without limitation, amounts payable pursuant to this Section 4(a) shall include, pursuant to the express terms of the short-term incentive plan in which the Executive participates or otherwise, the Executive's annual bonus under such short-term incentive plan, pro-rated to the Termination Date. (b) ADDITIONAL BENEFITS. The Company shall pay to the Executive as additional pay ("Additional Pay"), the product of (i) three (3) and (ii) the sum of (x) the Executive's annual Base Salary rate in effect immediately before the Termination Date and (y) the Executive's annual bonus amount under the short-term incentive plan in which the Executive participates, such bonus amount to be calculated on the basis of the extent to which the performance factors targeted by the Compensation Committee of the Board have been achieved (for this purpose, the Company's performance through the Termination Date shall be annualized based upon the actual number of days elapsed from the beginning of the fiscal year in which the Termination occurs through the Termination Date over a year of 360 days), which shall be deemed to be 100% unless the performance actually achieved is greater than 100%, in which case the actual performance levels shall be utilized. The Company shall pay to the Executive the Additional Pay in a lump sum, in cash, not later than the thirtieth (30th) day following the Termination Date. (c) RETIREMENT PLAN BENEFITS. If not already vested, the Executive shall be deemed fully vested in all Company retirement plans and/or other written agreements relating to pay upon retirement in which the Executive was a participant, party, or beneficiary immediately preceding a Change of Control, and any additional plans and/or agreements in which such Executive became a participant, party, or beneficiary thereafter. In addition to the foregoing, for purposes of determining the amounts to be paid to the Executive under such plans and/or agreements, the years of service with the Company and the age of the Executive under all such plans and agreements shall be deemed increased by the lesser of thirty-six (36) months or such shorter period of time as would render the Executive sixty-five (65) years of age. For purposes of this Section 4(c), "plans" include, without limitation, any long-term incentive plan, or non-qualified and mid-career retirement plans but does not include any plans intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). If the terms of the plans referenced in this Section 4(c) do not for any reason coincide with the provisions of this Section 4(c), the Executive shall be entitled to receive from the Company under the terms of this Agreement an amount equivalent to all amounts he would have received had all such plans continued in existence as in effect on the date of this Agreement after being amended to coincide with the terms of this Section 4(c). -8- 9 (d) OPTION PAYMENTS. In lieu of exercising or retaining any rights the Executive may have to exercise some or all of the outstanding stock options that he then holds (including any rights to exercise stock options that arise during the Term if he were to remain employed and including any that would otherwise terminate as result of his termination of employment), the Executive may elect within sixty (60) days after termination of employment to surrender such rights to the Company and receive in exchange therefor a cash payment equal to the aggregate difference, if positive, between (a) the "fair market value" (determined as of the date of termination using the higher of the "fair market value" (i) as defined in the terms of the applicable option plan or option agreement as of the date of termination and (ii) as defined in the plan or agreement on the date of grant) of the shares of common stock subject to the options and (b) the option prices of the shares subject to such surrendered options; and the Company shall make such payment within forty-five (45) days after the Executive notifies the Company of his election to surrender all or a portion of his options. (e) HEALTH AND LIFE BENEFITS. Following the Termination Date, the Company shall provide, at its own expense, the continued health coverage required by Section 4980B of the Code and shall continue to pay the premiums on his whole life policy (as set forth in Section 4(c) of the Employment Agreement) for the lesser of the remainder of the time during the insurance policy during which premiums are due or three years. (f) GROSS-UP PAYMENTS. (i) If any payment or the value of any benefit received or to be received by the Executive in connection with the Executive's Termination or contingent upon a Change of Control of the Company (whether received or to be received pursuant to the terms of this Agreement (the "Agreement Payments") or of any other plan, arrangement, or agreement of the Company, its successors, any person whose actions result in a Change of Control of the Company, or any person affiliated with any of them (or which, as a result of the completion of the transactions causing a Change of Control, will become affiliated with any of them ("Other Payments" and, together with the Agreement Payments, the "Payments")) would be subject to the excise tax imposed by Section 4999 of the Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), as determined as provided below, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount the Executive retains, after deduction of the Excise Tax on Agreement Payments and Other Payments and any federal, state, and local income tax and Excise Tax upon the payment provided for by this Section 4(f)(i), and any interest, penalties, or additions to tax payable -9- 10 by the Executive with respect thereto shall be equal to the total present value of the Agreement Payments and Other Payments at the time such Payments are to be made. The intent of the parties is that the Company shall be solely responsible for and shall pay, any Excise Tax on any Payments and Gross-Up Payment and any income and employment taxes (including, without limitation, penalties and interest) imposed on any Gross-Up Payments as well as any loss of deduction caused by the Gross-Up Payment. (ii) All determinations required to be made under this Section 4(f), including, without limitation, whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, shall be made by tax counsel (either a law firm or a nationally recognized public accounting firm) selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"). The Company shall cause the Tax Counsel to provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days after notice is given by the Executive to the Company that any or all of the Payments have occurred, or such earlier time as is requested by the Company. Within two (2) business days after such notice is given to the Company, the Company shall instruct the Tax Counsel to timely provide the data required by this Section 4(f) to the Executive. The Company shall pay all fees and expenses of the Tax Counsel. The Company shall pay any Excise Tax determined pursuant to this Section 4(f) to the Internal Revenue Service ("IRS") and/or other appropriate taxing authority on the Executive's behalf within five (5) days after receipt of the Tax Counsel's determination. If the Tax Counsel determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive, the Tax Counsel shall furnish the Executive with a written opinion that failure to disclose or report the Excise Tax on the Executive's federal income tax return will not constitute a substantial understatement of tax or be reasonably likely to result in the imposition of a negligence or similar penalty. Any determination by the Tax Counsel shall be binding upon the Company and the Executive in the absence of material mathematical or legal error. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Tax Counsel hereunder, it is possible that the Company will not have made Gross-Up Payments that should have been made or that it will have made Gross-Up Payments that should not have been made, in each case, consistent with the calculations required to be made hereunder. If the Company exhausts its remedies pursuant to Section 4(f)(iii) below and the Executive is - 10 - 11 thereafter required to pay any Excise Tax, the Tax Counsel shall determine the amount of underpayment of Excise Taxes that has occurred and the Company shall promptly pay any such underpayment to the IRS or other appropriate taxing authority on the Executive's behalf or, if the Executive has previously paid such underpayment, to the Executive. If the Tax Counsel determines that an overpayment of Gross-Up Payments has occurred, any such overpayment shall be treated for all purposes as a loan to the Executive with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code, due and payable within ninety (90) days after written demand to the Executive by the Company; provided, however, that the Executive shall have no duty or obligation whatsoever to repay such loan if the Executive's receipt of the overpayment, or any portion thereof, is includible in the Executive's income and the Executive's repayment of the same is not deductible by the Executive for federal and state income tax purposes. (iii) The Executive shall notify the Company in writing of any claim by the IRS or state or local taxing authority, that, if successful, would result in any Excise Tax or an underpayment of Gross-Up Payments. Such notice shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of the claim and shall inform the Company of the nature of the claim, the administrative or judicial appeal period, and the date on which any payment of the claim must be paid. The Executive shall not pay any portion of the claim before the expiration of the thirty (30) day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any amount under the claim is due). If the Company notifies the Executive in writing before the expiration of such thirty (30) day period that it desires to contest the claim, the Executive shall: (A) give the Company any information reasonably requested by the Company relating to the claim; (B) take such action in connection with contesting the claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation concerning the claim by an attorney selected by the Company who is reasonably acceptable to the Executive; and (C) cooperate with the Company in good faith in order to effectively contest the claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, without limitation, additional interest and penalties and attorneys' fees) - 11 - 12 incurred in such contests and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed as a result of such representation. Without limitation upon the foregoing provisions of this Section 4(f)(iii), except as provided below, the Company shall control all proceedings concerning such contest and, in its sole opinion, may pursue or forego any and all administrative appeal, proceedings, hearings, and conferences with the taxing authority pertaining to the claim. At the Company's written request and upon payment to the Executive of an amount at least equal to the claim plus any additional amount necessary to obtain the jurisdiction of the appropriate tribunal and/or court, the Executive shall pay the same and sue for a refund. The Executive agrees to prosecute any contest of a claim to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company requests the Executive to pay the claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless on an after-tax basis, from any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed on such advance or for any imputed income on such advance. Any extension of the statute of limitations relating to assessment of any Excise Tax for the taxable year of the Executive that is the subject of the claim is to be limited solely to the claim. Furthermore, the Company's control of the contest shall be limited to issues for which a Gross-Up Payment would be payable hereunder. The Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority. (iv) If, after the Executive receives an amount the Company advanced pursuant to Section 4(f)(iii) above, the Executive receives any refund of a claim and/or any additional amount that was necessary to obtain jurisdiction, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the Executive receives an amount the Company advanced pursuant to Section 4(f)(iii) above, a determination is made that the Executive shall not be entitled to any refund of the claim, and the Company does not notify the Executive in writing of its intent to contest such denial of refund of a claim before the expiration of thirty (30) days after such determination, then the portion of such advance attributable to a claim shall be forgiven and shall not be required to be - 12 - 13 repaid. The amount of such advance attributable to a claim shall offset, to the extent thereof, the amount of the underpayment required to be paid by the Company to the Executive. (v) If, after the Company advances an additional amount necessary to obtain jurisdiction, there is a final determination made by the taxing authority that the Executive is not entitled to any refund of such amount, or any portion thereof, then the Executive shall repay such nonrefundable amount to the Company within thirty (30) days after the Executive receives notice of such final determination. A final determination shall occur when the period to contest or otherwise appeal any decision by an administrative tribunal or court of initial jurisdiction has been waived or the time for contesting or appealing the same has expired. (g) LEGAL FEES AND EXPENSES. The Company shall pay to the Executive all legal fees and expenses as and when incurred by the Executive in connection with this Agreement, including all such fees and expenses, if any, incurred in contesting or disputing any Termination or in seeking to obtain or enforce any right or benefit provided by this Agreement, regardless of the outcome, unless, in the case of a legal action brought by or in the name of the Executive, a decision is rendered pursuant to Section 10 that such action was not brought by the Executive in good faith, in which event the Executive shall be liable to the Company for its legal fees and expenses. (h) NO MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation the Executive earns as the result of employment by another employer or by retirement or other benefits received after the Termination Date or otherwise, except as specifically provided in this Section 4. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action that the Company or Employer may have against the Executive or other parties. Section 5. DEATH AND DISABILITY BENEFITS In the event of the death or Disability of the Executive after a Change of Control of the Company, the Executive, or in the case of death, the Executive's beneficiaries, shall receive the benefits to which they are entitled under the the Employment Agreement, the retirement plans, disability policies, and other applicable plans or agreements of the Company. - 13 - 14 Section 6. SUCCESSORS; BINDING AGREEMENT (a) OBLIGATIONS OF SUCCESSORS. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement before the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive had terminated his employment following a Change of Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Termination Date. As used in this Agreement, the "Company" shall mean the Company as hereinabove defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) ENFORCEABLE BY BENEFICIARIES. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees (the "Beneficiaries"). If the Executive dies while any amount would still be payable hereunder if he had not then died, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiaries. (c) EMPLOYMENT. Except in the event of a Change of Control and, thereafter, only as specifically set forth in this Agreement, nothing in this Agreement shall be construed to (i) limit in any way the right of the Company or a Subsidiary to terminate the Executive's employment at any time for any reason or for no reason; or (ii) be evidence of any agreement or understanding, expressed or implied, that the Company or a Subsidiary will employ the Executive in any particular position, on any particular terms, or at any particular rate of remuneration. Section 7. CONFIDENTIAL INFORMATION. The Executive shall hold in fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge, or data relating to the Company, the Subsidiaries, and their respective businesses, that shall have been obtained during the Executive's employment by the Employer and that shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Company or any Employer within the Controlled Group, the Executive shall not, without prior written consent of the Company or the Employer, communicate or divulge any such information, knowledge, or data to anyone other than the Company, the - 14 - 15 Employer, or those designated by them. In no event shall an asserted violation of this Section 7 or comparable provisions in any applicable employment agreement constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. Section 8. NOTICE All notices, demands, requests. or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied, or mailed by first class registered or certified mail, postage prepaid, addressed as follows: (a) if to the Company: Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Telecopier: (703) 768-5407 Attention: Francis A. Martin, III with a copy (which shall not constitute notice) to Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037-1420 Telecopier: (202) 663-6363 Attention: George P. Stamas and John B. Watkins (a) if to the Executive: William L. Collins, III 314 River Bend Road Great Falls, Virginia 22066 or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request, or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back, or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. Section 9. MISCELLANEOUS No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and the - 15 - 16 Chairman of the Compensation Committee of the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any conditions or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any earlier or later time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not expressly set forth in this Agreement. validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. All references to sections of the Code or the Exchange Act shall be deemed also to refer to any successor provisions of such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Sections 4 and 5 shall survive the expiration of the term of this Agreement. Section 10. VALIDITY The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Section 11. ARBITRATION The Executive may designate in writing to the Company (in which case this Section 11 shall have effect but not otherwise) that any dispute that may arise directly or indirectly in connection with this Agreement, the Executive's employment, or the termination of the Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, or other legal theory, shall be determined solely by arbitration in Washington, D.C. under the rules of the American Arbitration Association (the "AAA"). The only legal claims between the Executive, on the one hand, and the Company or any Subsidiary, on the other, that would not be included in this agreement to arbitration are claims by the Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by the Executive that seek judicial relief in the form of specific performance of the right to be paid until the Termination Date during the pendency of any dispute or controversy arising under Section 3(b). If this Section 11 is in effect, any claim with respect to this Agreement, the Executive's employment, or the termination of the Executive's employment must be established by a preponderance of the evidence submitted to the impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the then current procedures of the AAA and under the AAA's then current Model Employment Arbitration Rules. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Section 11 is in effect, the decision of the arbitrator (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The - 16 - 17 arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. Section Section 1-15, not state law, shall govern the arbitrability of all claims. If this letter sets forth our agreement on the subject matter hereof, kindly sign both originals of this letter and return to the Assistant Secretary of the Company one of the fully executed originals of this letter, which will then constitute our agreement on this subject. Sincerely, METROCALL, INC. By: /s/ Richard D. Johnston ----------------------- Richard D. Johnston Chairman of the Board of Directors Acknowledged and Agreed: /s/ William L. Collins, III ---------------------------- William L. Collins, III May 15, 1996 ------------ Date - 17 - EX-10.17 11 CONTROL AGREEMENT (KELLY). 1 EXHIBIT 10.17 METROCALL, INC. CHANGE OF CONTROL AGREEMENT FOR CHIEF FINANCIAL OFFICER May 15, 1996 Vincent D. Kelly 11807 Chapel Road Clifton, VA 22024 Dear Mr. Kelly: Metrocall, Inc. (the "Company"), on behalf of itself, its subsidiaries, and its shareholders, wishes to encourage your continued service and dedication in the performance of your duties, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined in Section 1(b) below) of the Company. The Board of Directors of the Company (the "Board") believes that the prospect of a pending or threatened Change of Control inevitably creates distractions and personal risks and uncertainties for a company's executives and that it is in the best interests of the Company to minimize such distractions to certain executives and the Company. The Board further believes that it is in the best interests of the Company to encourage its executives' full attention and dedication to their duties, both currently and in the event of any threatened or pending Change of Control. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued retention of you and certain members of the Company's management and the attention and dedication of management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change of Control of the Company. To induce you (the "Executive") to remain in the Company's employ and in consideration of your continued service to the Company, the Company agrees that you shall receive the benefits set forth in this letter agreement (the "Agreement") if your employment with the Company is terminated for any reason after a Change of Control of the Company and has, of even date herewith, entered into a revised employment agreement relating to your services as Chief Financial Officer (the "Employment Agreement"). For purposes of this Agreement, references to employment with the Company shall include employment with a Subsidiary of the Company. Section 1. DEFINITIONS The following terms shall have the meanings set forth below for purposes of this Agreement. (a) CAUSE. Under this Agreement, "Cause" shall mean (1) dishonesty of a material nature relating to performing services under the Employment Agreement, (2) criminal conduct (other than minor infractions and traffic violations) that relates 2 to the performance of services under the Employment Agreement, or (3) the Executive's willfully breaching or failing to perform his employment duties as set forth in his Employment Agreement, which act or omission results in a material adverse effect on the Company. For purposes of this Section 1(a), no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive has engaged in the conduct set forth in this subsection and specifying the particulars thereof in detail. (b) CHANGE OF CONTROL. For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if there is a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor provision of similar import, whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, of securities representing twenty-five percent (25%) or more of the total voting power of all of the Company's then outstanding voting securities, unless through a transaction consummated with the Board's prior approval; provided, however, that for purposes of this paragraph, persons acting in concert under the terms of that certain Voting Agreement dated as of August 31, 1994 shall not, solely as a result of actions provided under such agreement, be treated as a "person"; (ii) during any period of two consecutive calendar years, individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board; -2- 3 (iii) the Company becomes a party to a merger, plan of reorganization, consolidation, or share exchange in which either (x) the Company will not be the surviving corporation or (y) the Company will be the surviving corporation and any outstanding shares of the Company's common stock will be converted into shares of any other company (other than a reincorporation or the establishment of a holding company involving no change of ownership of the Company) or other securities or cash or other property (excluding payments made solely for fractional shares); (iv) the shareholders of the Company approve a merger, plan of reorganization, consolidation, or share exchange with any other corporation, and immediately following such merger, plan of reorganization, consolidation, or share exchange the holders of the voting securities of the Company outstanding immediately prior thereto hold securities representing fifty percent (50%) or less of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger, plan of reorganization, consolidation, or share exchange; provided, however, that notwithstanding the foregoing, no Change of Control for purposes of this Section 1(b)(iv) shall be deemed to have occurred if seventy-five percent (75%) or more of the members of the Board of the Company or such surviving entity immediately after such merger, plan of reorganization, consolidation, or share exchange is comprised of persons who served as directors of the Company immediately before such merger, plan of reorganization, consolidation, or share exchange or who are otherwise designees of the Company; or (v) any other event occurs that a majority of the Board, in its sole discretion, shall determine constitutes a Change of Control. (c) CONTROLLED GROUP. For purposes of this Agreement, "Controlled Group" shall mean the Company and all of the Company's Subsidiaries. (d) DISABILITY. "Disability" shall have the meaning set forth in the Employment Agreement. (e) EMPLOYER. For purposes of this Agreement, "Employer" shall mean the Company or the Subsidiary, as the case may be, with which the Executive has an employment relationship. -3- 4 (f) GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean the occurrence, without the Executive's express written consent, of any of the following circumstances: (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement or the Employment Agreement, and the continued failure of the Company to cure such default within fifteen (15) days after the Executive gives a written demand for performance to the Company, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) the assignment to the Executive of any duties inconsistent with, or any substantial diminution in, such Executive's status or responsibilities as in effect immediately before a Change of Control of the Company, including imposition of travel obligations that differ materially from required business travel immediately before the Change of Control; (iii) any diminution in the status or responsibilities of the Executive's position from that which existed immediately before the Change of Control, whether by reason of the Company's ceasing to be a public company under the Exchange Act, becoming a subsidiary of a successor public company, or otherwise; (iv) (I) a reduction in the Executive's Base Salary (as defined in the Employment Agreement), as that amount may be increased from time to time and as in effect immediately before the Change of Control; or (II) the failure to pay a bonus award to which the Executive is otherwise entitled under any short-term incentive plan in which the Executive then participates, or any successor incentive compensation plans at the time such awards are usually paid; (v) the termination of employment of William L. Collins, III or Steven D. Jacoby (other than a termination (I) by the Company for "Cause" or (II) because of death or "Disability" as those terms are defined and applied in their respective employment agreements), including a termination that results from a failure by the Company and Collins or Jacoby to reach agreement to continue Collins' or Jacoby's employment on terms at least as favorable to him, in the aggregate, as those in effect before the Change in Control of the Company; (vi) a change in the principal place of the Executive's employment, as in effect immediately before the Change of Control of the Company, to a location more than thirty-five (35) miles distant from the location of such principal place at such time; -4- 5 (vi) (A) the Company's failure to continue in effect any incentive compensation plan or stock option plan in which the Executive participates immediately before the Change in Control, unless an equivalent alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) has been provided to the Executive, or (B) the Company's failure to continue the Executive's participation in any such incentive or stock option plan on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed immediately before the time of the Change of Control; (viii) the Company's violation of any applicable criminal law not due to the Executive's gross negligence or willful misconduct; (ix) the failure of the Company or any successor to obtain a satisfactory written agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6(a) below; or (x) any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(b) or, if applicable, Section 1(a). For purposes of this Agreement, no such purported termination shall be effective except as constituting Good Reason. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (g) SUBSIDIARY. For purposes of this Agreement, "Subsidiary" shall mean any corporation of whose voting stock the Company directly or indirectly owns more than fifty percent (50%). (h) TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean: (i) if the Executive's employment is terminated for Disability pursuant to the Employment Agreement, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of his duties during such thirty-day period); and (ii) if the Executive's employment is terminated for Cause or Good Reason or for any reason other than death or Disability, the date specified in the Notice of Termination (which in the case of a termination for Cause shall not be less than thirty (30) days and in the case of a termination for Good Reason shall not be less than thirty (30) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). -5- 6 Section 2. TERM OF AGREEMENT (a) GENERAL. Upon execution by the Executive, this Agreement shall commence as of May ___, 1996. This Agreement shall continue in effect on December 31, 1999; provided, however, that the term shall be automatically extended for additional one (1) year periods on each anniversary date of this Agreement, unless and until either party notifies the other party not less than ninety (90) days before such anniversary date that such party is terminating this Agreement, which termination shall be effective as of the end of such initial term or extended term, as the case may be (the "Expiration Date"); and provided further, however, that if a Change of Control of the Company occurs before the Expiration Date, this Agreement shall continue in effect for a period of thirty-six months beyond the month in which the Change of Control occurred. (b) DISPOSITION OF EMPLOYER. If the Executive is employed by a Subsidiary, the terms of this Agreement shall expire if such Subsidiary is sold or otherwise disposed of before a Change of Control unless the Executive continues in employment with the Controlled Group after such sale or other disposition. If the Executive's Employer is sold or disposed of following a Change of Control, this Agreement shall continue through its original term or any extended term then in effect. (c) DEEMED CHANGE OF CONTROL. If the Executive's employment with the Employer is terminated before the date on which a Change of Control occurs, and such termination was at the request of a third party who has taken steps to effect a Change of Control or the termination was otherwise caused by the Change of Control, then for all purposes of this Agreement, a Change of Control shall be deemed to have occurred before such termination. (d) EXPIRATION OF AGREEMENT. No termination or expiration of this Agreement shall affect any rights, obligations, or liabilities of either party that shall have accrued on or before the date of such termination or expiration. Section 3. TERMINATION FOLLOWING CHANGE OF CONTROL (a) ENTITLEMENT TO BENEFITS. If a Change of Control of the Company occurs, the Executive shall be entitled to the benefits provided in Section 4 hereof upon his termination of employment with the Company within three years after the date of the Change of Control, unless such termination is (i) a result of the Executive's death, (ii) for Cause, (iii) a result of the Executive's Disability (pursuant to the terms of the Employment Agreement that provide for termination as a result of Disability), or (iv) by the Executive other than for Good Reason. A termination of the Executive's employment that entitles the Executive to the -6- 7 payment of benefits under Section 4 hereof shall be referred to hereinafter as a "Termination." (b) NOTICE OF TERMINATION. Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. If, following a Change of Control, the Executive's employment shall be terminated for Cause or by the Executive for other than Good Reason, the Company shall pay the Executive any amounts to be paid to the Executive pursuant to the Employment Agreement and any other compensation plans, programs, or employment agreements then in effect, and the Company shall have no further obligations to the Executive under this Agreement. If within thirty (30) days after any Notice of Termination is given, the party receiving such Notice notifies the other party that a dispute exists concerning the grounds for termination, then, notwithstanding the meaning of "Termination Date" set forth in Section 1(h), the Termination Date shall be the date on which the dispute is finally resolved, whether by mutual written agreement of the parties or by a decision rendered pursuant to Section 11; provided that the Termination Date shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given, and continue the Executive as a participant in all benefits, plans, or perquisites in which the Executive was participating or which he was enjoying when the Notice of Termination giving rise to the dispute was given (to the extent such continued participation is not prohibited by law or the generally applicable terms of those arrangements), until the dispute is finally resolved. Amounts paid under this Section 3(b) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. Section 4. COMPENSATION UPON A TERMINATION Following a Change of Control of the Company, upon a Termination of the Executive's employment by the Company without "Cause" or by the Executive for "Good Reason," the Executive shall be entitled to the following benefits, provided that the Termination occurs during the three-year period immediately following the date of the Change of Control: -7- 8 (a) STANDARD BENEFITS. The Company shall pay the Executive his full Base Salary through the Termination Date, at the rate in effect at the time the Notice of Termination is given, no later than the second day following the Termination Date, plus all other amounts to which the Executive is entitled under any compensation plan of the Company applicable to the Executive at the time such payments are due. Without limitation, amounts payable pursuant to this Section 4(a) shall include, pursuant to the express terms of the short-term incentive plan in which the Executive participates or otherwise, the Executive's annual bonus under such short-term incentive plan, pro-rated to the Termination Date. (b) ADDITIONAL BENEFITS. The Company shall pay to the Executive as additional pay ("Additional Pay"), the product of (i) three (3) and (ii) the sum of (x) the Executive's annual Base Salary rate in effect immediately before the Termination Date and (y) the Executive's annual bonus amount under the short-term incentive plan in which the Executive participates, such bonus amount to be calculated on the basis of the extent to which the performance factors targeted by the Compensation Committee of the Board have been achieved (for this purpose, the Company's performance through the Termination Date shall be annualized based upon the actual number of days elapsed from the beginning of the fiscal year in which the Termination occurs through the Termination Date over a year of 360 days), which shall be deemed to be 100% unless the performance actually achieved is greater than 100%, in which case the actual performance levels shall be utilized. The Company shall pay to the Executive the Additional Pay in a lump sum, in cash, not later than the thirtieth (30th) day following the Termination Date. (c) RETIREMENT PLAN BENEFITS. If not already vested, the Executive shall be deemed fully vested in all Company retirement plans and/or other written agreements relating to pay upon retirement in which the Executive was a participant, party, or beneficiary immediately preceding a Change of Control, and any additional plans and/or agreements in which such Executive became a participant, party, or beneficiary thereafter. In addition to the foregoing, for purposes of determining the amounts to be paid to the Executive under such plans and/or agreements, the years of service with the Company and the age of the Executive under all such plans and agreements shall be deemed increased by the lesser of thirty-six (36) months or such shorter period of time as would render the Executive sixty-five (65) years of age. For purposes of this Section 4(c), "plans" include, without limitation, any long-term incentive plan, or non-qualified and mid-career retirement plans but does not include any plans intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). If the terms of the plans referenced in this Section 4(c) do not for any reason coincide with the provisions of this Section 4(c), the Executive shall be entitled to receive from the Company under the terms of this Agreement an -8- 9 amount equivalent to all amounts he would have received had all such plans continued in existence as in effect on the date of this Agreement after being amended to coincide with the terms of this Section 4(c). (d) OPTION PAYMENTS. In lieu of exercising or retaining any rights the Executive may have to exercise some or all of the outstanding stock options that he then holds (including any rights to exercise stock options that arise during the Term if he were to remain employed and including any that would otherwise terminate as result of his termination of employment), the Executive may elect within sixty (60) days after termination of employment to surrender such rights to the Company and receive in exchange therefor a cash payment equal to the aggregate difference, if positive, between (a) the "fair market value" (determined as of the date of termination using the higher of the "fair market value" (i) as defined in the terms of the applicable option plan or option agreement as of the date of termination and (ii) as defined in the plan or agreement on the date of grant) of the shares of common stock subject to the options and (b) the option prices of the shares subject to such surrendered options; and the Company shall make such payment within forty-five (45) days after the Executive notifies the Company of his election to surrender all or a portion of his options. (e) HEALTH BENEFITS. Following the Termination Date, the Company shall provide, at its own expense, the continued health coverage required by Section 4980B of the Code. (f) GROSS-UP PAYMENTS. (i) If any payment or the value of any benefit received or to be received by the Executive in connection with the Executive's Termination or contingent upon a Change of Control of the Company (whether received or to be received pursuant to the terms of this Agreement (the "Agreement Payments") or of any other plan, arrangement, or agreement of the Company, its successors, any person whose actions result in a Change of Control of the Company, or any person affiliated with any of them (or which, as a result of the completion of the transactions causing a Change of Control, will become affiliated with any of them ("Other Payments" and, together with the Agreement Payments, the "Payments")) would be subject to the excise tax imposed by Section 4999 of the Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), as determined as provided below, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount the Executive retains, after deduction of the Excise Tax on Agreement Payments and Other Payments and any federal, state, and local income tax and Excise Tax upon the payment provided for by -9- 10 this Section 4(f)(i), and any interest, penalties, or additions to tax payable by the Executive with respect thereto shall be equal to the total present value of the Agreement Payments and Other Payments at the time such Payments are to be made. The intent of the parties is that the Company shall be solely responsible for and shall pay, any Excise Tax on any Payments and Gross-Up Payment and any income and employment taxes (including, without limitation, penalties and interest) imposed on any Gross-Up Payments as well as any loss of deduction caused by the Gross-Up Payment. (ii) All determinations required to be made under this Section 4(f), including, without limitation, whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, shall be made by tax counsel (either a law firm or a nationally recognized public accounting firm) selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"). The Company shall cause the Tax Counsel to provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days after notice is given by the Executive to the Company that any or all of the Payments have occurred, or such earlier time as is requested by the Company. Within two (2) business days after such notice is given to the Company, the Company shall instruct the Tax Counsel to timely provide the data required by this Section 4(f) to the Executive. The Company shall pay all fees and expenses of the Tax Counsel. The Company shall pay any Excise Tax determined pursuant to this Section 4(f) to the Internal Revenue Service ("IRS") and/or other appropriate taxing authority on the Executive's behalf within five (5) days after receipt of the Tax Counsel's determination. If the Tax Counsel determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive, the Tax Counsel shall furnish the Executive with a written opinion that failure to disclose or report the Excise Tax on the Executive's federal income tax return will not constitute a substantial understatement of tax or be reasonably likely to result in the imposition of a negligence or similar penalty. Any determination by the Tax Counsel shall be binding upon the Company and the Executive in the absence of material mathematical or legal error. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Tax Counsel hereunder, it is possible that the Company will not have made Gross-Up Payments that should have been made or that it will have made Gross-Up Payments that should not have been made, in each case, consistent with the calculations required to be made hereunder. If the Company exhausts - 10 - 11 its remedies pursuant to Section 4(f)(iii) below and the Executive is thereafter required to pay any Excise Tax, the Tax Counsel shall determine the amount of underpayment of Excise Taxes that has occurred and the Company shall promptly pay any such underpayment to the IRS or other appropriate taxing authority on the Executive's behalf or, if the Executive has previously paid such underpayment, to the Executive. If the Tax Counsel determines that an overpayment of Gross-Up Payments has occurred, any such overpayment shall be treated for all purposes as a loan to the Executive with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code, due and payable within ninety (90) days after written demand to the Executive by the Company; provided, however, that the Executive shall have no duty or obligation whatsoever to repay such loan if the Executive's receipt of the overpayment, or any portion thereof, is includible in the Executive's income and the Executive's repayment of the same is not deductible by the Executive for federal and state income tax purposes. (iii) The Executive shall notify the Company in writing of any claim by the IRS or state or local taxing authority, that, if successful, would result in any Excise Tax or an underpayment of Gross-Up Payments. Such notice shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of the claim and shall inform the Company of the nature of the claim, the administrative or judicial appeal period, and the date on which any payment of the claim must be paid. The Executive shall not pay any portion of the claim before the expiration of the thirty (30) day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any amount under the claim is due). If the Company notifies the Executive in writing before the expiration of such thirty (30) day period that it desires to contest the claim, the Executive shall: (A) give the Company any information reasonably requested by the Company relating to the claim; (B) take such action in connection with contesting the claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation concerning the claim by an attorney selected by the Company who is reasonably acceptable to the Executive; and (C) cooperate with the Company in good faith in order to effectively contest the claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, without - 11 - 12 limitation, additional interest and penalties and attorneys' fees) incurred in such contests and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed as a result of such representation. Without limitation upon the foregoing provisions of this Section 4(f)(iii), except as provided below, the Company shall control all proceedings concerning such contest and, in its sole opinion, may pursue or forego any and all administrative appeal, proceedings, hearings, and conferences with the taxing authority pertaining to the claim. At the Company's written request and upon payment to the Executive of an amount at least equal to the claim plus any additional amount necessary to obtain the jurisdiction of the appropriate tribunal and/or court, the Executive shall pay the same and sue for a refund. The Executive agrees to prosecute any contest of a claim to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company requests the Executive to pay the claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless on an after-tax basis, from any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed on such advance or for any imputed income on such advance. Any extension of the statute of limitations relating to assessment of any Excise Tax for the taxable year of the Executive that is the subject of the claim is to be limited solely to the claim. Furthermore, the Company's control of the contest shall be limited to issues for which a Gross-Up Payment would be payable hereunder. The Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority. (iv) If, after the Executive receives an amount the Company advanced pursuant to Section 4(f)(iii) above, the Executive receives any refund of a claim and/or any additional amount that was necessary to obtain jurisdiction, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the Executive receives an amount the Company advanced pursuant to Section 4(f)(iii) above, a determination is made that the Executive shall not be entitled to any refund of the claim, and the Company does not notify the Executive in writing of its intent to contest such denial of refund of a claim before the expiration of thirty (30) days after such determination, then the portion of such advance - 12 - 13 attributable to a claim shall be forgiven and shall not be required to be repaid. The amount of such advance attributable to a claim shall offset, to the extent thereof, the amount of the underpayment required to be paid by the Company to the Executive. (v) If, after the Company advances an additional amount necessary to obtain jurisdiction, there is a final determination made by the taxing authority that the Executive is not entitled to any refund of such amount, or any portion thereof, then the Executive shall repay such nonrefundable amount to the Company within thirty (30) days after the Executive receives notice of such final determination. A final determination shall occur when the period to contest or otherwise appeal any decision by an administrative tribunal or court of initial jurisdiction has been waived or the time for contesting or appealing the same has expired. (g) LEGAL FEES AND EXPENSES. The Company shall pay to the Executive all legal fees and expenses as and when incurred by the Executive in connection with this Agreement, including all such fees and expenses, if any, incurred in contesting or disputing any Termination or in seeking to obtain or enforce any right or benefit provided by this Agreement, regardless of the outcome, unless, in the case of a legal action brought by or in the name of the Executive, a decision is rendered pursuant to Section 10 that such action was not brought by the Executive in good faith, in which event the Executive shall be liable to the Company for its legal fees and expenses. (h) NO MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation the Executive earns as the result of employment by another employer or by retirement or other benefits received after the Termination Date or otherwise, except as specifically provided in this Section 4. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action that the Company or Employer may have against the Executive or other parties. Section 5. DEATH AND DISABILITY BENEFITS In the event of the death or Disability of the Executive after a Change of Control of the Company, the Executive, or in the case of death, the Executive's beneficiaries, shall receive the benefits to which they are entitled under the the Employment Agreement, the retirement plans, disability policies, and other applicable plans or agreements of the Company. - 13 - 14 Section 6. SUCCESSORS; BINDING AGREEMENT (a) OBLIGATIONS OF SUCCESSORS. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement before the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive had terminated his employment following a Change of Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Termination Date. As used in this Agreement, the "Company" shall mean the Company as hereinabove defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) ENFORCEABLE BY BENEFICIARIES. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees (the "Beneficiaries"). If the Executive dies while any amount would still be payable hereunder if he had not then died, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiaries. (c) EMPLOYMENT. Except in the event of a Change of Control and, thereafter, only as specifically set forth in this Agreement, nothing in this Agreement shall be construed to (i) limit in any way the right of the Company or a Subsidiary to terminate the Executive's employment at any time for any reason or for no reason; or (ii) be evidence of any agreement or understanding, expressed or implied, that the Company or a Subsidiary will employ the Executive in any particular position, on any particular terms, or at any particular rate of remuneration. Section 7. CONFIDENTIAL INFORMATION. The Executive shall hold in fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge, or data relating to the Company, the Subsidiaries, and their respective businesses, that shall have been obtained during the Executive's employment by the Employer and that shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Company or any Employer within the Controlled Group, the Executive shall not, without prior written consent of the Company or the Employer, communicate or divulge any such information, knowledge, or data to anyone other than the Company, the - 14 - 15 Employer, or those designated by them. In no event shall an asserted violation of this Section 7 or comparable provisions in any applicable employment agreement constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. Section 8. NOTICE All notices, demands, requests. or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied, or mailed by first class registered or certified mail, postage prepaid, addressed as follows: (a) if to the Company: Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Telecopier: (703) 768-5407 Attention: Francis A. Martin, III with a copy (which shall not constitute notice) to Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037-1420 Telecopier: (202) 663-6363 Attention: George P. Stamas and John B. Watkins (a) if to the Executive: Vincent D. Kelly 11807 Chapel Road Clifton, VA 22024 or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request, or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back, or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. Section 9. MISCELLANEOUS No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and the - 15 - 16 Chairman of the Compensation Committee of the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any conditions or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any earlier or later time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not expressly set forth in this Agreement. validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. All references to sections of the Code or the Exchange Act shall be deemed also to refer to any successor provisions of such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Sections 4 and 5 shall survive the expiration of the term of this Agreement. Section 10. VALIDITY The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Section 11. ARBITRATION The Executive may designate in writing to the Company (in which case this Section 11 shall have effect but not otherwise) that any dispute that may arise directly or indirectly in connection with this Agreement, the Executive's employment, or the termination of the Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, or other legal theory, shall be determined solely by arbitration in Washington, D.C. under the rules of the American Arbitration Association (the "AAA"). The only legal claims between the Executive, on the one hand, and the Company or any Subsidiary, on the other, that would not be included in this agreement to arbitration are claims by the Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by the Executive that seek judicial relief in the form of specific performance of the right to be paid until the Termination Date during the pendency of any dispute or controversy arising under Section 3(b). If this Section 11 is in effect, any claim with respect to this Agreement, the Executive's employment, or the termination of the Executive's employment must be established by a preponderance of the evidence submitted to the impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the then current procedures of the AAA and under the AAA's then current Model Employment Arbitration Rules. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Section 11 is in effect, the decision of the arbitrator (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The - 16 - 17 arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. Section Section 1-15, not state law, shall govern the arbitrability of all claims. If this letter sets forth our agreement on the subject matter hereof, kindly sign both originals of this letter and return to the Assistant Secretary of the Company one of the fully executed originals of this letter, which will then constitute our agreement on this subject. Sincerely, METROCALL, INC. By: /s/ Richard D. Johnston ----------------------- Richard D. Johnston Chairman of the Board of Directors Acknowledged and Agreed: /s/ Vincent D. Kelly - -------------------- Vincent D. Kelly May 15, 1996 - ------------ Date - 17 - EX-10.18 12 CONTROL AGREEMENT (JACOBY). 1 EXHIBIT 10.18 METROCALL, INC. CHANGE OF CONTROL AGREEMENT FOR CHIEF OPERATING OFFICER May 15, 1996 Steven D. Jacoby 4203 Kimbrelee Court Alexandria, VA 22309 Dear Mr. Jacoby: Metrocall, Inc. (the "Company"), on behalf of itself, its subsidiaries, and its shareholders, wishes to encourage your continued service and dedication in the performance of your duties, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined in Section 1(b) below) of the Company. The Board of Directors of the Company (the "Board") believes that the prospect of a pending or threatened Change of Control inevitably creates distractions and personal risks and uncertainties for a company's executives and that it is in the best interests of the Company to minimize such distractions to certain executives and the Company. The Board further believes that it is in the best interests of the Company to encourage its executives' full attention and dedication to their duties, both currently and in the event of any threatened or pending Change of Control. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued retention of you and certain members of the Company's management and the attention and dedication of management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change of Control of the Company. To induce you (the "Executive") to remain in the Company's employ and in consideration of your continued service to the Company, the Company agrees that you shall receive the benefits set forth in this letter agreement (the "Agreement") if your employment with the Company is terminated for any reason after a Change of Control of the Company and has, of even date herewith, entered into a revised employment agreement relating to your services as Chief Operating Officer (the "Employment Agreement"). For purposes of this Agreement, references to employment with the Company shall include employment with a Subsidiary of the Company. Section 1. DEFINITIONS The following terms shall have the meanings set forth below for purposes of this Agreement. (a) CAUSE. Under this Agreement, "Cause" shall mean (1) dishonesty of a material nature relating to performing services under the Employment Agreement, (2) criminal conduct (other than minor infractions and traffic violations) that relates 2 to the performance of services under the Employment Agreement, or (3) the Executive's willfully breaching or failing to perform his employment duties as set forth in his Employment Agreement, which act or omission results in a material adverse effect on the Company. For purposes of this Section 1(a), no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive has engaged in the conduct set forth in this subsection and specifying the particulars thereof in detail. (b) CHANGE OF CONTROL. For purposes of this Agreement, a "Change of Control" shall be deemed to have occurred if there is a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any successor provision of similar import, whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, of securities representing twenty-five percent (25%) or more of the total voting power of all of the Company's then outstanding voting securities, unless through a transaction consummated with the Board's prior approval; provided, however, that for purposes of this paragraph, persons acting in concert under the terms of that certain Voting Agreement dated as of August 31, 1994 shall not, solely as a result of actions provided under such agreement, be treated as a "person"; (ii) during any period of two consecutive calendar years, individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board; - 2 - 3 (iii) the Company becomes a party to a merger, plan of reorganization, consolidation, or share exchange in which either (x) the Company will not be the surviving corporation or (y) the Company will be the surviving corporation and any outstanding shares of the Company's common stock will be converted into shares of any other company (other than a reincorporation or the establishment of a holding company involving no change of ownership of the Company) or other securities or cash or other property (excluding payments made solely for fractional shares); (iv) the shareholders of the Company approve a merger, plan of reorganization, consolidation, or share exchange with any other corporation, and immediately following such merger, plan of reorganization, consolidation, or share exchange the holders of the voting securities of the Company outstanding immediately prior thereto hold securities representing fifty percent (50%) or less of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger, plan of reorganization, consolidation, or share exchange; provided, however, that notwithstanding the foregoing, no Change of Control for purposes of this Section 1(b)(iv) shall be deemed to have occurred if seventy-five percent (75%) or more of the members of the Board of the Company or such surviving entity immediately after such merger, plan of reorganization, consolidation, or share exchange is comprised of persons who served as directors of the Company immediately before such merger, plan of reorganization, consolidation, or share exchange or who are otherwise designees of the Company; or (v) any other event occurs that a majority of the Board, in its sole discretion, shall determine constitutes a Change of Control. (c) CONTROLLED GROUP. For purposes of this Agreement, "Controlled Group" shall mean the Company and all of the Company's Subsidiaries. (d) DISABILITY. "Disability" shall have the meaning set forth in the Employment Agreement. (e) EMPLOYER. For purposes of this Agreement, "Employer" shall mean the Company or the Subsidiary, as the case may be, with which the Executive has an employment relationship. (f) GOOD REASON. For purposes of this Agreement, "Good Reason" shall mean the occurrence, without the Executive's express written consent, of any of the following circumstances: - 3 - 4 (i) the Company's failure to perform or observe any of the material terms or provisions of this Agreement or the Employment Agreement, and the continued failure of the Company to cure such default within fifteen (15) days after the Executive gives a written demand for performance to the Company, which demand shall describe specifically the nature of such alleged failure to perform or observe such material terms or provisions; (ii) the assignment to the Executive of any duties inconsistent with, or any substantial diminution in, such Executive's status or responsibilities as in effect immediately before a Change of Control of the Company, including imposition of travel obligations that differ materially from required business travel immediately before the Change of Control; (iii) any diminution in the status or responsibilities of the Executive's position from that which existed immediately before the Change of Control, whether by reason of the Company's ceasing to be a public company under the Exchange Act, becoming a subsidiary of a successor public company, or otherwise; (iv) (I) a reduction in the Executive's Base Salary (as defined in the Employment Agreement), as that amount may be increased from time to time and as in effect immediately before the Change of Control; or (II) the failure to pay a bonus award to which the Executive is otherwise entitled under any short-term incentive plan in which the Executive then participates, or any successor incentive compensation plans at the time such awards are usually paid; (v) the termination of employment of William L. Collins, III or Vincent D. Kelly (other than a termination (I) by the Company for "Cause" or (II) because of death or "Disability" as those terms are defined and applied in their respective employment agreements), including a termination that results from a failure by the Company and Collins or Kelly to reach agreement to continue Collins' or Kelly's employment on terms at least as favorable to him, in the aggregate, as those in effect before the Change in Control of the Company; (vi) a change in the principal place of the Executive's employment, as in effect immediately before the Change of Control of the Company, to a location more than thirty-five (35) miles distant from the location of such principal place at such time; (vi) (A) the Company's failure to continue in effect any incentive compensation plan or stock option plan in which the Executive participates immediately before the Change in Control, unless an - 4 - 5 equivalent alternative compensation arrangement (embodied in an ongoing substitute or alternative plan) has been provided to the Executive, or (B) the Company's failure to continue the Executive's participation in any such incentive or stock option plan on substantially the same basis, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed immediately before the time of the Change of Control; (viii) the Company's violation of any applicable criminal law not due to the Executive's gross negligence or willful misconduct; (ix) the failure of the Company or any successor to obtain a satisfactory written agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6(a) below; or (x) any purported termination of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3(b) or, if applicable, Section 1(a). For purposes of this Agreement, no such purported termination shall be effective except as constituting Good Reason. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. (g) SUBSIDIARY. For purposes of this Agreement, "Subsidiary" shall mean any corporation of whose voting stock the Company directly or indirectly owns more than fifty percent (50%). (h) TERMINATION DATE. For purposes of this Agreement, "Termination Date" shall mean: (i) if the Executive's employment is terminated for Disability pursuant to the Employment Agreement, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of his duties during such thirty-day period); and (ii) if the Executive's employment is terminated for Cause or Good Reason or for any reason other than death or Disability, the date specified in the Notice of Termination (which in the case of a termination for Cause shall not be less than thirty (30) days and in the case of a termination for Good Reason shall not be less than thirty (30) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). Section 2. TERM OF AGREEMENT (a) GENERAL. Upon execution by the Executive, this Agreement shall commence as of May ___, 1996. This Agreement shall continue in effect on December 31, - 5 - 6 1999; provided, however, that the term shall be automatically extended for additional one (1) year periods on each anniversary date of this Agreement, unless and until either party notifies the other party not less than ninety (90) days before such anniversary date that such party is terminating this Agreement, which termination shall be effective as of the end of such initial term or extended term, as the case may be (the "Expiration Date"); and provided further, however, that if a Change of Control of the Company occurs before the Expiration Date, this Agreement shall continue in effect for a period of thirty-six months beyond the month in which the Change of Control occurred. (b) DISPOSITION OF EMPLOYER. If the Executive is employed by a Subsidiary, the terms of this Agreement shall expire if such Subsidiary is sold or otherwise disposed of before a Change of Control unless the Executive continues in employment with the Controlled Group after such sale or other disposition. If the Executive's Employer is sold or disposed of following a Change of Control, this Agreement shall continue through its original term or any extended term then in effect. (c) DEEMED CHANGE OF CONTROL. If the Executive's employment with the Employer is terminated before the date on which a Change of Control occurs, and such termination was at the request of a third party who has taken steps to effect a Change of Control or the termination was otherwise caused by the Change of Control, then for all purposes of this Agreement, a Change of Control shall be deemed to have occurred before such termination. (d) EXPIRATION OF AGREEMENT. No termination or expiration of this Agreement shall affect any rights, obligations, or liabilities of either party that shall have accrued on or before the date of such termination or expiration. Section 3. TERMINATION FOLLOWING CHANGE OF CONTROL (a) ENTITLEMENT TO BENEFITS. If a Change of Control of the Company occurs, the Executive shall be entitled to the benefits provided in Section 4 hereof upon his termination of employment with the Company within three years after the date of the Change of Control, unless such termination is (i) a result of the Executive's death, (ii) for Cause, (iii) a result of the Executive's Disability (pursuant to the terms of the Employment Agreement that provide for termination as a result of Disability), or (iv) by the Executive other than for Good Reason. A termination of the Executive's employment that entitles the Executive to the payment of benefits under Section 4 hereof shall be referred to hereinafter as a "Termination." (b) NOTICE OF TERMINATION. Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by - 6 - 7 written Notice of Termination to the other party hereto in accordance with Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. If, following a Change of Control, the Executive's employment shall be terminated for Cause or by the Executive for other than Good Reason, the Company shall pay the Executive any amounts to be paid to the Executive pursuant to the Employment Agreement and any other compensation plans, programs, or employment agreements then in effect, and the Company shall have no further obligations to the Executive under this Agreement. If within thirty (30) days after any Notice of Termination is given, the party receiving such Notice notifies the other party that a dispute exists concerning the grounds for termination, then, notwithstanding the meaning of "Termination Date" set forth in Section 1(h), the Termination Date shall be the date on which the dispute is finally resolved, whether by mutual written agreement of the parties or by a decision rendered pursuant to Section 11; provided that the Termination Date shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given, and continue the Executive as a participant in all benefits, plans, or perquisites in which the Executive was participating or which he was enjoying when the Notice of Termination giving rise to the dispute was given (to the extent such continued participation is not prohibited by law or the generally applicable terms of those arrangements), until the dispute is finally resolved. Amounts paid under this Section 3(b) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. Section 4. COMPENSATION UPON A TERMINATION Following a Change of Control of the Company, upon a Termination of the Executive's employment by the Company without "Cause" or by the Executive for "Good Reason," the Executive shall be entitled to the following benefits, provided that the Termination occurs during the three-year period immediately following the date of the Change of Control: (a) STANDARD BENEFITS. The Company shall pay the Executive his full Base Salary through the Termination Date, at the rate in effect at the time the Notice of Termination is given, no later than the second day following the Termination Date, plus all other amounts to which the Executive is entitled under any - 7 - 8 compensation plan of the Company applicable to the Executive at the time such payments are due. Without limitation, amounts payable pursuant to this Section 4(a) shall include, pursuant to the express terms of the short-term incentive plan in which the Executive participates or otherwise, the Executive's annual bonus under such short-term incentive plan, pro-rated to the Termination Date. (b) ADDITIONAL BENEFITS. The Company shall pay to the Executive as additional pay ("Additional Pay"), the product of (i) three (3) and (ii) the sum of (x) the Executive's annual Base Salary rate in effect immediately before the Termination Date and (y) the Executive's annual bonus amount under the short-term incentive plan in which the Executive participates, such bonus amount to be calculated on the basis of the extent to which the performance factors targeted by the Compensation Committee of the Board have been achieved (for this purpose, the Company's performance through the Termination Date shall be annualized based upon the actual number of days elapsed from the beginning of the fiscal year in which the Termination occurs through the Termination Date over a year of 360 days), which shall be deemed to be 100% unless the performance actually achieved is greater than 100%, in which case the actual performance levels shall be utilized. The Company shall pay to the Executive the Additional Pay in a lump sum, in cash, not later than the thirtieth (30th) day following the Termination Date. (c) RETIREMENT PLAN BENEFITS. If not already vested, the Executive shall be deemed fully vested in all Company retirement plans and/or other written agreements relating to pay upon retirement in which the Executive was a participant, party, or beneficiary immediately preceding a Change of Control, and any additional plans and/or agreements in which such Executive became a participant, party, or beneficiary thereafter. In addition to the foregoing, for purposes of determining the amounts to be paid to the Executive under such plans and/or agreements, the years of service with the Company and the age of the Executive under all such plans and agreements shall be deemed increased by the lesser of thirty-six (36) months or such shorter period of time as would render the Executive sixty-five (65) years of age. For purposes of this Section 4(c), "plans" include, without limitation, any long-term incentive plan, or non-qualified and mid-career retirement plans but does not include any plans intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). If the terms of the plans referenced in this Section 4(c) do not for any reason coincide with the provisions of this Section 4(c), the Executive shall be entitled to receive from the Company under the terms of this Agreement an amount equivalent to all amounts he would have received had all such plans continued in existence as in effect on the date of this Agreement after being amended to coincide with the terms of this Section 4(c). - 8 - 9 (d) OPTION PAYMENTS. In lieu of exercising or retaining any rights the Executive may have to exercise some or all of the outstanding stock options that he then holds (including any rights to exercise stock options that arise during the Term if he were to remain employed and including any that would otherwise terminate as result of his termination of employment), the Executive may elect within sixty (60) days after termination of employment to surrender such rights to the Company and receive in exchange therefor a cash payment equal to the aggregate difference, if positive, between (a) the "fair market value" (determined as of the date of termination using the higher of the "fair market value" (i) as defined in the terms of the applicable option plan or option agreement as of the date of termination and (ii) as defined in the plan or agreement on the date of grant) of the shares of common stock subject to the options and (b) the option prices of the shares subject to such surrendered options; and the Company shall make such payment within forty-five (45) days after the Executive notifies the Company of his election to surrender all or a portion of his options. (e) HEALTH BENEFITS. Following the Termination Date, the Company shall provide, at its own expense, the continued health coverage required by Section 4980B of the Code. (f) GROSS-UP PAYMENTS. (i) If any payment or the value of any benefit received or to be received by the Executive in connection with the Executive's Termination or contingent upon a Change of Control of the Company (whether received or to be received pursuant to the terms of this Agreement (the "Agreement Payments") or of any other plan, arrangement, or agreement of the Company, its successors, any person whose actions result in a Change of Control of the Company, or any person affiliated with any of them (or which, as a result of the completion of the transactions causing a Change of Control, will become affiliated with any of them ("Other Payments" and, together with the Agreement Payments, the "Payments")) would be subject to the excise tax imposed by Section 4999 of the Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), as determined as provided below, the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount the Executive retains, after deduction of the Excise Tax on Agreement Payments and Other Payments and any federal, state, and local income tax and Excise Tax upon the payment provided for by this Section 4(f)(i), and any interest, penalties, or additions to tax payable by the Executive with respect thereto shall be equal to the total present value of the Agreement Payments and Other Payments at the time such Payments are to be made. The intent of the parties is that the Company - 9 - 10 shall be solely responsible for and shall pay, any Excise Tax on any Payments and Gross-Up Payment and any income and employment taxes (including, without limitation, penalties and interest) imposed on any Gross-Up Payments as well as any loss of deduction caused by the Gross-Up Payment. (ii) All determinations required to be made under this Section 4(f), including, without limitation, whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, shall be made by tax counsel (either a law firm or a nationally recognized public accounting firm) selected by the Company and reasonably acceptable to the Executive ("Tax Counsel"). The Company shall cause the Tax Counsel to provide detailed supporting calculations to the Company and the Executive within fifteen (15) business days after notice is given by the Executive to the Company that any or all of the Payments have occurred, or such earlier time as is requested by the Company. Within two (2) business days after such notice is given to the Company, the Company shall instruct the Tax Counsel to timely provide the data required by this Section 4(f) to the Executive. The Company shall pay all fees and expenses of the Tax Counsel. The Company shall pay any Excise Tax determined pursuant to this Section 4(f) to the Internal Revenue Service ("IRS") and/or other appropriate taxing authority on the Executive's behalf within five (5) days after receipt of the Tax Counsel's determination. If the Tax Counsel determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive, the Tax Counsel shall furnish the Executive with a written opinion that failure to disclose or report the Excise Tax on the Executive's federal income tax return will not constitute a substantial understatement of tax or be reasonably likely to result in the imposition of a negligence or similar penalty. Any determination by the Tax Counsel shall be binding upon the Company and the Executive in the absence of material mathematical or legal error. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Tax Counsel hereunder, it is possible that the Company will not have made Gross-Up Payments that should have been made or that it will have made Gross-Up Payments that should not have been made, in each case, consistent with the calculations required to be made hereunder. If the Company exhausts its remedies pursuant to Section 4(f)(iii) below and the Executive is thereafter required to pay any Excise Tax, the Tax Counsel shall determine the amount of underpayment of Excise Taxes that has occurred and the Company shall promptly pay any such underpayment to the IRS or - 10 - 11 other appropriate taxing authority on the Executive's behalf or, if the Executive has previously paid such underpayment, to the Executive. If the Tax Counsel determines that an overpayment of Gross-Up Payments has occurred, any such overpayment shall be treated for all purposes as a loan to the Executive with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code, due and payable within ninety (90) days after written demand to the Executive by the Company; provided, however, that the Executive shall have no duty or obligation whatsoever to repay such loan if the Executive's receipt of the overpayment, or any portion thereof, is includible in the Executive's income and the Executive's repayment of the same is not deductible by the Executive for federal and state income tax purposes. (iii) The Executive shall notify the Company in writing of any claim by the IRS or state or local taxing authority, that, if successful, would result in any Excise Tax or an underpayment of Gross-Up Payments. Such notice shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of the claim and shall inform the Company of the nature of the claim, the administrative or judicial appeal period, and the date on which any payment of the claim must be paid. The Executive shall not pay any portion of the claim before the expiration of the thirty (30) day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any amount under the claim is due). If the Company notifies the Executive in writing before the expiration of such thirty (30) day period that it desires to contest the claim, the Executive shall: (A) give the Company any information reasonably requested by the Company relating to the claim; (B) take such action in connection with contesting the claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation concerning the claim by an attorney selected by the Company who is reasonably acceptable to the Executive; and (C) cooperate with the Company in good faith in order to effectively contest the claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, without limitation, additional interest and penalties and attorneys' fees) incurred in such contests and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including, without limitation, interest and penalties - 11 - 12 thereon) imposed as a result of such representation. Without limitation upon the foregoing provisions of this Section 4(f)(iii), except as provided below, the Company shall control all proceedings concerning such contest and, in its sole opinion, may pursue or forego any and all administrative appeal, proceedings, hearings, and conferences with the taxing authority pertaining to the claim. At the Company's written request and upon payment to the Executive of an amount at least equal to the claim plus any additional amount necessary to obtain the jurisdiction of the appropriate tribunal and/or court, the Executive shall pay the same and sue for a refund. The Executive agrees to prosecute any contest of a claim to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company requests the Executive to pay the claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless on an after-tax basis, from any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed on such advance or for any imputed income on such advance. Any extension of the statute of limitations relating to assessment of any Excise Tax for the taxable year of the Executive that is the subject of the claim is to be limited solely to the claim. Furthermore, the Company's control of the contest shall be limited to issues for which a Gross-Up Payment would be payable hereunder. The Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority. (iv) If, after the Executive receives an amount the Company advanced pursuant to Section 4(f)(iii) above, the Executive receives any refund of a claim and/or any additional amount that was necessary to obtain jurisdiction, the Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the Executive receives an amount the Company advanced pursuant to Section 4(f)(iii) above, a determination is made that the Executive shall not be entitled to any refund of the claim, and the Company does not notify the Executive in writing of its intent to contest such denial of refund of a claim before the expiration of thirty (30) days after such determination, then the portion of such advance attributable to a claim shall be forgiven and shall not be required to be repaid. The amount of such advance attributable to a claim shall offset, to the extent thereof, the amount of the underpayment required to be paid by the Company to the Executive. - 12 - 13 (v) If, after the Company advances an additional amount necessary to obtain jurisdiction, there is a final determination made by the taxing authority that the Executive is not entitled to any refund of such amount, or any portion thereof, then the Executive shall repay such nonrefundable amount to the Company within thirty (30) days after the Executive receives notice of such final determination. A final determination shall occur when the period to contest or otherwise appeal any decision by an administrative tribunal or court of initial jurisdiction has been waived or the time for contesting or appealing the same has expired. (g) LEGAL FEES AND EXPENSES. The Company shall pay to the Executive all legal fees and expenses as and when incurred by the Executive in connection with this Agreement, including all such fees and expenses, if any, incurred in contesting or disputing any Termination or in seeking to obtain or enforce any right or benefit provided by this Agreement, regardless of the outcome, unless, in the case of a legal action brought by or in the name of the Executive, a decision is rendered pursuant to Section 10 that such action was not brought by the Executive in good faith, in which event the Executive shall be liable to the Company for its legal fees and expenses. (h) NO MITIGATION. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation the Executive earns as the result of employment by another employer or by retirement or other benefits received after the Termination Date or otherwise, except as specifically provided in this Section 4. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action that the Company or Employer may have against the Executive or other parties. Section 5. DEATH AND DISABILITY BENEFITS In the event of the death or Disability of the Executive after a Change of Control of the Company, the Executive, or in the case of death, the Executive's beneficiaries, shall receive the benefits to which they are entitled under the the Employment Agreement, the retirement plans, disability policies, and other applicable plans or agreements of the Company. Section 6. SUCCESSORS; BINDING AGREEMENT (a) OBLIGATIONS OF SUCCESSORS. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly - 13 - 14 assume and agree to perform this Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement before the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive had terminated his employment following a Change of Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Termination Date. As used in this Agreement, the "Company" shall mean the Company as hereinabove defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise. (b) ENFORCEABLE BY BENEFICIARIES. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees (the "Beneficiaries"). If the Executive dies while any amount would still be payable hereunder if he had not then died, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's Beneficiaries. (c) EMPLOYMENT. Except in the event of a Change of Control and, thereafter, only as specifically set forth in this Agreement, nothing in this Agreement shall be construed to (i) limit in any way the right of the Company or a Subsidiary to terminate the Executive's employment at any time for any reason or for no reason; or (ii) be evidence of any agreement or understanding, expressed or implied, that the Company or a Subsidiary will employ the Executive in any particular position, on any particular terms, or at any particular rate of remuneration. Section 7. CONFIDENTIAL INFORMATION. The Executive shall hold in fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge, or data relating to the Company, the Subsidiaries, and their respective businesses, that shall have been obtained during the Executive's employment by the Employer and that shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Company or any Employer within the Controlled Group, the Executive shall not, without prior written consent of the Company or the Employer, communicate or divulge any such information, knowledge, or data to anyone other than the Company, the Employer, or those designated by them. In no event shall an asserted violation of this Section 7 or comparable provisions in any applicable employment agreement constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. - 14 - 15 Section 8. NOTICE All notices, demands, requests. or other communications required or permitted to be given or made hereunder shall be in writing and shall be delivered, telecopied, or mailed by first class registered or certified mail, postage prepaid, addressed as follows: (a) if to the Company: Metrocall, Inc. 6677 Richmond Highway Alexandria, Virginia 22306 Telecopier: (703) 768-5407 Attention: Francis A. Martin, III with a copy (which shall not constitute notice) to Wilmer, Cutler & Pickering 2445 M Street, NW Washington, DC 20037-1420 Telecopier: (202) 663-6363 Attention: George P. Stamas and John B. Watkins (a) if to the Executive: Steven D. Jacoby 4203 Kimbrelee Court Alexandria, VA 22309 or to such other address as may be designated by either party in a notice to the other. Each notice, demand, request, or other communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes three (3) days after it is deposited in the U.S. mail, postage prepaid, or at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the answer back, or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. Section 9. MISCELLANEOUS No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and the Chairman of the Compensation Committee of the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any conditions or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any earlier or later time. No - 15 - 16 agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not expressly set forth in this Agreement. validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia. All references to sections of the Code or the Exchange Act shall be deemed also to refer to any successor provisions of such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Sections 4 and 5 shall survive the expiration of the term of this Agreement. Section 10. VALIDITY The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Section 11. ARBITRATION The Executive may designate in writing to the Company (in which case this Section 11 shall have effect but not otherwise) that any dispute that may arise directly or indirectly in connection with this Agreement, the Executive's employment, or the termination of the Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, or other legal theory, shall be determined solely by arbitration in Washington, D.C. under the rules of the American Arbitration Association (the "AAA"). The only legal claims between the Executive, on the one hand, and the Company or any Subsidiary, on the other, that would not be included in this agreement to arbitration are claims by the Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by the Executive that seek judicial relief in the form of specific performance of the right to be paid until the Termination Date during the pendency of any dispute or controversy arising under Section 3(b). If this Section 11 is in effect, any claim with respect to this Agreement, the Executive's employment, or the termination of the Executive's employment must be established by a preponderance of the evidence submitted to the impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the then current procedures of the AAA and under the AAA's then current Model Employment Arbitration Rules. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Section 11 is in effect, the decision of the arbitrator (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. Section Section 1-15, not state law, shall govern the arbitrability of all claims. - 16 - 17 If this letter sets forth our agreement on the subject matter hereof, kindly sign both originals of this letter and return to the Assistant Secretary of the Company one of the fully executed originals of this letter, which will then constitute our agreement on this subject. Sincerely, METROCALL, INC. By: /s/ Richard D. Johnston ----------------------- Richard D. Johnston Chairman of the Board of Directors Acknowledged and Agreed: /s/ Steven D. Jacoby -------------------- Steven D. Jacoby May 15, 1996 ------------ Date
- 17 - EX-27 13 FINANCIAL DATA SCHEDULE.
5 1,000 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 49,377 0 11,705 917 0 62,186 155,836 62,461 374,880 72,653 153,934 0 0 146 136,447 374,880 6,969 32,048 5,910 20,624 13,607 763 4,191 (11,127) 172 (10,955) 0 0 0 (10,955) (0.75) (0.75)
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