exv10w1



 



Exhibit 10.1



RESTATED EMPLOYMENT AGREEMENT


     This Restated Employment Agreement, dated as of February 5, 2003 (the
“Agreement”) is made by and between Metrocall Holdings, Inc., a Delaware
corporation (the “Company”), Metrocall, Inc., a Delaware corporation (“OPCO”)
and Vincent D. Kelly (the “Executive”).


     WHEREAS, the Company, OPCO and the Executive entered into an Employment
Agreement dated as of October 8, 2002 pursuant to which the Company has
employed the Executive as, among other things, its Executive Vice President,
Chief Operating Officer, Chief Financial Officer and Treasurer (the “Existing
Employment Agreement”);


     WHEREAS, the Board of Directors of the Company (the “Board”) has appointed
the Executive as the Chief Executive Officer and President of the Company,
effective as of the date of this Agreement, and the Company, OPCO and the
Executive desire to amend and restate the Existing Employment Agreement as set
forth in this Agreement; and


     WHEREAS, the term “Company” contained herein shall also include OPCO,
except as otherwise set forth herein so that the obligations under this
Agreement of the Company shall also be obligations of which OPCO is jointly and
severally liable with the Company.


     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 that the Existing Employment Agreement is hereby amended and
restated in its entirety as follows:



	1.	 	Employment. The Company shall employ the Executive as the Chief
Executive Officer and President 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.
	 
	2.	 	Duties and Authority. During the term of this Agreement, as the Chief
Executive Officer and President 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, and shall
perform such other duties for the Company as the Board may determine from
time to time. During the term of this Agreement, if so



 






 







	 	 	elected, the Executive will also serve as Chairman of the Company, for no
additional compensation. The Executive shall devote the Executive’s
reasonable best efforts and full business time, energies and talents 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 (the “Agreement Term”) shall commence
on the date of this Agreement and shall end on October 8, 2005, unless
earlier terminated pursuant to Section 7 herein; provided, however, that
the Agreement Term shall be automatically extended for additional one (1)
year periods on each anniversary of October 8, 2002, unless and until
either party provides non-renewal Notice to 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 Agreement Term or extended term, as the case may be
(the “Expiration Date”), or until sooner terminated as hereinafter set
forth.
	 
	4.	 	Compensation and Expenses.




	 	(a)	 	In consideration for the Executive’s services and subject to
the terms and conditions of this Agreement, the Company shall pay to
the Executive an annual base salary (the “Base Salary”) equal to
Five Hundred Thirty Thousand Dollars ($530,000), commencing as of
February 5, 2003. 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, in its
discretion, increase, but not decrease, his Base Salary in any
renewal, extension or replacement of this Agreement. The Board
shall also 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, as such plans or programs are in effect from time to
time, and use of an automobile.
	 
	 	(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 as in effect from time to time.



 






 







	 	(d)	 	The Company shall reimburse the Executive for all reasonable
expenses the Executive incurs in accordance with the reasonable
policies and procedures adopted from time to time by the Company.
	 
	 	(e)	 	Until the one-year anniversary of the date on which the
redemption of the Company’s 15% Senior Preferred Voting Stock (the
“Preferred Stock”) occurs, the Executive shall be entitled to
receive a cash performance bonus in addition to his Base Salary for
each annual period during the Agreement Term. The amount of the
cash performance bonus in any annual period will depend upon
attaining established paydown targets (the “Target Paydowns”) as
contained in (i) that certain Credit Agreement dated as of October
8, 2002 by and among OPCO, the Agent and the Lenders (both as
defined therein) (the “Senior Secured Credit Agreement”), and (ii)
that certain Senior Secured PIK Credit Agreement dated as of October
8, 2002 by and among the Company, the Agent and the Lenders (both as
defined therein) (the “PIK Credit Agreement”), as follows:




	 	 	 	 	 	 	 	 	 	 
	Percentage of Target	 	Percentage of Base Salary
	Paydowns Attained
	 	as Cash Performance Bonus

	 	80%
	 	 	 	80	%	 	 	 
	 	90%
	 	 	 	90	%	 	 	 
	100%
	 	 	 	100	%	 	 	 
	115%
	 	 	 	115	%	 	 	 
	120%
	 	 	 	120	%	 	 	 
	125%
	 	 	 	125	%	 	 	 
	130%
	 	 	 	150	%	 	(subject to a maximum of
	 
	 	 	 	 	 	 	200%, upon approval of
	 
	 	 	 	 	 	 	the Board)



     The following are the Target Paydowns (Mandatory Prepayments under the
Senior Secured Credit Agreement and the PIK Credit Agreement) (“FYE” means
fiscal year end):



	 	 	 	 	 
	FYE December 31, 2002
	 	$	26,500,000	 
	FYE December 31, 2003
	 	$	24,300,000	 
	FYE December 31, 2004
	 	$	10,000,000	 



     The cash performance bonus, if any, pursuant to this Section 4(e) shall be
paid to the Executive within ten (10) business days after the determination of
the applicable Target Paydown attained. After the annual period in which the
redemption of the Preferred Stock of the Company occurs, the Executive shall be
entitled to an annual cash bonus, if any, in an amount determined by the Board,
in its sole discretion. With respect to 2003, any bonus under this Section
4(e) shall reflect a pro rata amount based on a “Base Salary” of $400,000 from
January 1, 2003 through February 4, 2003 and a “Base Salary” of $530,000 from
February 5, 2003 through December 31, 2003.


 






 



	 	(f)	 	On October 8, 2002, the Executive was granted 100,000 shares
of Preferred Stock of the Company, representing one and sixty seven
one hundredths percent (1.67%) of the Preferred Stock shares of the
Company, subject to restrictions established as of such date
(“Restricted Stock”) on the transferability of such Restricted Stock
and the forfeiture of such Restricted Stock upon a termination of
employment for Cause or without Good Reason as set forth in Section
8 of this Agreement. The restrictions shall lapse as to one-third
(1/3) of the shares of Preferred Stock on the first, second and
third anniversaries of October 8, 2002.
	 
	 	(g)	 	Upon the consummation of a transaction described in the
definition of “Change of Control” contained in Section 8 of this
Agreement, the Executive shall be entitled to a payment equal to
     .20% of the new capital invested in the Company in connection with
the Change of Control (the “New Capital Infusion”), paid in a lump
sum cash payment within ten (10) days after the consummation date of
the transaction.




	5.	 	Confidential Information.




	 	(a)	 	“Confidential Information” means any and all Company and
Company subsidiary proprietary information, technical data, patent
applications, inventions or discoveries (whether patentable or not),
know-how and trade secrets, as well as operating, design and
manufacturing procedures disclosed to the Executive, including
before the date of this Agreement. “Confidential Information”
further means, without limitation, research, product development
activities, processes, products, specifications, designs, diagrams,
illustrations, programs, concepts, ideas, marketing plans,
proposals, financial information, confidential reports,
communications and customer lists and data, as well as the nature
and results of the Company’s and its subsidiaries’ research and
development activities, and all other materials and information
related to the business or activities of the Company and its
subsidiaries that are not generally known to the public; provided,
however, that the term “Confidential Information” excludes
information that (i) is or becomes generally available to the public
other than through acts by the Executive in violation of this
Agreement, (i) was legally within the Executive’s possession prior
to disclosure to the Executive by or on behalf of the Company, which
prior possession can be evidenced by the Executive’s written records
in existence prior to the effective date of any Prior Employment
Document, or (ii) becomes available to the Executive on a
non-confidential basis from a source other than the Company or a
subsidiary of the Company, provided that such source is not bound by
a confidentiality agreement with the Company or any of its
subsidiaries, or by any other contractual, legal or fiduciary
obligation of confidentiality to the Company or any of its
subsidiaries, or any other party with respect to such information.



 






 







	 	(b)	 	Except as may be required by the lawful order of a court or
agency of competent jurisdiction, the Executive covenants and agrees
that, during the Agreement Term and at all times thereafter, the
Executive will keep secret and confidential all Confidential
Information, and will not at any time, without the prior written
consent of the Board or a person authorized by the Board, publish or
disclose any Confidential Information, either directly or
indirectly, to any third party, use for the Executive’s own benefit
or advantage, or make available for others to use (except to third
parties in connection with possible transactions or business with
the Company).
	 
	 	(c)	 	To the extent that any court or agency seeks to have the
Executive disclose Confidential Information, the Executive shall
promptly inform the Company, and shall take all reasonable steps
necessary to prevent disclosure of any Confidential Information
until the Company has been informed of such requested disclosure,
and the Company has an opportunity to respond to such court or
agency. To the extent that the Executive obtains information on
behalf of the Company or any of its subsidiaries that may be subject
to attorney-client privilege as to the Company’s attorneys, the
Executive shall take reasonable steps necessary to maintain the
confidentiality of such information and to preserve such privilege.
	 
	 	(d)	 	The Executive acknowledges that the restrictions contained in
Section 5(b) and 5(c) 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(b) and (c), 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. The Executive also acknowledges that nothing in this
Section 5 shall be construed as limiting the Executive’s duty of
loyalty to the Company, or any other duty he may otherwise have to
the Company, while he is employed by the Company.




	6.	 	Covenant Not to Compete. The Executive agrees that, through his position
as Chief Executive Officer and President of the Company and the various
other positions with the Company that he has held from time to time, the
Executive has established and will continue to establish valuable and
recognized expertise in the paging business and has had and will have
access to the Company’s Confidential Information. The Executive hereby
enters into a covenant restricting the Executive from soliciting employees
of the Company and its subsidiaries and from competing against the Company
upon the terms and conditions described below:



 






 







	 	(a)	 	During the Executive’s employment and for a period of two (2)
years after the Date of Termination for any reason, the Executive
shall not:




	 	(i)	 	induce or attempt to induce any employees of
the Company or those of any of its subsidiaries to terminate
their employment, or refrain from renewing or extending such
employment, with the Company or such subsidiary in order to
become an director, officer, employee, consultant or
independent contractor to or for any other individual or
entity other than the Company or its subsidiaries;
	 
	 	(ii)	 	at any time and in any state or other
jurisdiction in the United States in which the Company is
engaged in business or has developed plans to engage in
business: (1) engage or be a part of any Person (including
as a director, consultant, employee, agent, or
representative), or have any direct or indirect financial
interest (whether as a partner, shareholder, or owner) in any
Person that engages in the business of owning and operating
narrowband 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;
	 
	 	(iii)	 	directly or indirectly own an equity interest
in any Competitor (other than ownership of 1% or less of the
outstanding stock of any corporation listed on a national
stock exchange or included in the NASDAQ System). The term
“Competitor” means any Person a portion of the business of
which (and during any period in which it intends to enter
into business activities that would be) is materially
competitive in any way with the Business of the Company; or
	 
	 	(iv)	 	solicit or cause or encourage any person to
solicit any Business in competition with the Company or a
subsidiary from any Person who is a client of the Company or
of a subsidiary 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. The parties further
agree that nothing in this Section 6 shall be construed as limiting
the Executive’s duty of loyalty to the Company, or any other duty he
may otherwise have to the Company, while he is employed by the
Company.



 






 







	 	(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.




	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:




	 	(i)	 	at any time if the Executive is Disabled (as
defined below) for a period of six (6) months or more;
	 
	 	(ii)	 	at any time with “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, (C) the Executive’s willfully
breaching or failing to perform his duties as described in
Section 2 hereof (other than any such failure resulting from
the Executive’s being Disabled), within a reasonable period
of time after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board
believes that the Executive has not substantially performed
his duties; or (D) the willful engaging by the Executive in
conduct that is demonstrably and materially injurious to the
Company, monetarily or otherwise. 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; or
	 
	 	(iii)	 	at any time without Cause upon Notice from the
Company to the Executive, which Notice shall be effective
immediately or such later time as is specified in such
Notice.




	 	(b)	 	The Executive may terminate this Agreement at any time upon
sixty (60) days’ Notice to the Company.
	 
	 	(c)	 	At any time by the mutual agreement of the parties. Any
termination of the Executive’s employment by mutual agreement of the
parties shall be memorialized by written agreement signed by the
Executive and duly-appointed officers of the Company and OPCO.
	 
	 	(d)	 	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 11. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice that shall indicate the Date of
Termination (which shall not be earlier than the date on which such
Notice is sent), the specific provision of this Agreement relied
upon and that shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment. The “Date of Termination” means the last
day the Executive is employed by the Company hereunder (including
any successor to the Company as determined in accordance with
Section 14). If the Executive becomes employed by the entity into
which the Company is merged, or the purchaser of substantially all
of the assets of the Company, or a successor to such entity or
purchaser, the Executive shall not be treated as having terminated
employment for purposes of this Agreement until such time as the
Executive terminates employment with the successor (including,
without limitation, the merged entity or purchaser).




	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 Base Salary in effect on the date immediately
prior to the Executive’s death, through the Executive’s date of
death; (ii) all other unpaid amounts, if any, to which the Executive
is entitled as of the date of the Executive’s death, under any
Company fringe benefit or incentive compensation plan or program, at
the time such payments would otherwise ordinarily be due; and (iii)
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. Following the use of all sick days to which the
Executive is entitled under the policies applicable to the Company’s
senior executives, while he is Disabled, the Company shall, in lieu
of payment of his Base Salary, (i) pay the Executive a disability
benefit equal to 50% of the Base Salary that he would otherwise be
entitled to receive for the period in which he is Disabled; (ii) 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 (iii) the Executive’s full Base Salary that
would have been payable to the Executive from the Executive’s Date
of Termination through the Expiration Date, in a lump sum within
forty-five (45) days after such Date of Termination; 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. Subject
to the terms of this Agreement, the Executive shall not be required
to perform services under this Agreement during any period that he
is Disabled. The Executive shall be considered “Disabled” during
any period in which he has an illness, or a physical or mental
disability, or similar incapacity, that renders him incapable, after
reasonable accommodation, of performing his duties under this
Agreement. In the event of a dispute as to whether the Executive is
Disabled, the Company may refer the same to a licensed practicing
physician of the Company’s choice, and the Executive agrees to
submit to such tests and examinations as such physician shall deem
appropriate. During the period in which the Executive is Disabled,
the Company may appoint a temporary replacement to assume the
Executive’s responsibilities.
	 
	 	(c)	 	For Cause. If the Company terminates the Executive’s
employment for Cause, the Company shall pay the Executive’s Base
Salary in effect on the date immediately prior to such termination,
through the date specified in the Notice of Termination and the
Company shall have no further obligations to the Executive under
this Agreement. Upon a termination for Cause, the Executive shall
forfeit all shares of Restricted Stock that remain restricted on the
date of termination.
	 
	 	(d)	 	Voluntary. If the Executive terminates his employment for
other than Good Reason, the Company shall pay the Executive the
Executive’s Base Salary in effect on the date immediately prior to
such termination, through the date specified in the Notice of
Termination. Upon a termination for other than Good Reason, the
Executive shall forfeit all shares of Restricted Stock that remain
restricted on the date of termination. The Company shall have no
further obligations to the Executive under this Agreement.
	 
	 	 	 	“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 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
are materially greater than is reasonably required by the
Company’s business;
	 
	 	(iii)	 	(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, at
the time such bonuses are usually paid;
	 
	 	(iv)	 	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;
	 
	 	(v)	 	(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;
	 
	 	(vi)	 	the Company’s violation of any applicable
criminal law not due to the Executive’s gross negligence or
willful misconduct;
	 
	 	(vii)	 	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 14 below; or
	 
	 	(viii)	 	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) or 7(d), 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. If 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, the Company shall pay
the Executive:




	 	(i)	 	the Executive’s Base Salary through the date
specified in the Notice of Termination within ten (10)
business 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)	 	an amount equal to the product of (a) two times
(b) the full Base Salary then in effect within forty-five
(45) days after such date specified in the Notice of
Termination;
	 
	 	(iii)	 	an amount equal to the cash performance bonus
paid or payable to the Executive with respect to the annual
period prior to the year in which the termination of the
Executive’s employment occurs;
	 
	 	(iv)	 	the lapse of all restrictions with respect to
the Restricted Stock.
	 
	 	(v)	 	Gross-Up Payments. (1) 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 Tax 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 Section 8 hereof, 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.




	 	(1)	 	All determinations required to be
made under this Section 8(e)(v), 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 reasonable
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 8(e)(v) 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 8(e)(v) to the Internal Revenue
Service (the “IRS”) and/or other appropriate taxing
authority on behalf of the Executive 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 Tax Code) that no Excise Tax is payable by
the Executive, the Tax Counsel shall furnish the
Executive with a written opinion that the 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 Tax 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 8(e)(v)(3) below and the
Executive is thereafter required to pay an 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 in Section 7872(f)(2) of the Tax 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.
	 
	 	(2)	 	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 thereon) imposed as a result of such
representation. Without limitation upon the
foregoing provisions of this Section
8(e)(v)(3)(C), except as provided below, the
Company shall control all proceedings concerning
such contest and, in its sole opinion, may
pursue or forgo 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 the assessment of any Excise Tax for the
taxable year of the Executive that is subject of
the claim is to be limited



 






 







	 	 	 	solely to the claim. Furthermore, the
Company’s control of the contest shall be
limited to the 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.




	 	(3)	 	If, after the Executive receives
an amount the Company advanced pursuant to Section
8(e)(v)(3) 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 8(e)(v)(3) 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 or refund of a claim before the
expiration of the 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.
	 
	 	(4)	 	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.




	 	 	 	“Change of Control” means the first to occur of the
following: (i) any Person or group of Persons acting in
concert, in a transaction or a series of transactions, is
or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s
then outstanding securities that have the right to vote for
the election of directors generally (not including in such



 






 







	 	 	 	securities beneficially owned by such Person any securities
acquired directly from or received through an exchange
offer with the Company); or (ii) there is consummated a
merger, consolidation or other business combination
(including an exchange of securities with the security
holder’s of a corporation that is a constituent in such
business combination) of the Company or any direct or
indirect subsidiary of the Company with any other
corporation, other than a merger, consolidation or business
combination which would result in the voting securities of
the Company outstanding immediately prior to such merger,
consolidation or business combination continuing to
represent at least a majority of the combined voting power
of the securities having the right to vote for the election
of directors generally of the Company or the surviving
entity or any parent thereof outstanding immediately after
such merger, consolidation or business combination (either
by remaining outstanding or by being converted into or
exchanged for voting securities of the surviving entity or
parent thereof) or (iii) there is consummated an agreement
for the sale, lease or other disposition by the Company of
all or substantially all of the Company’s assets, other
than a sale, lease or other disposition by the Company of
all or substantially all of the Company’s assets to an
entity, at least a majority of the combined voting power of
the outstanding securities of which are owned by
stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately
prior to such sale.
	 
	 	(vi)	 	Notwithstanding the foregoing, a “Change of
Control” shall not be deemed to have occurred by virtue of
the consummation of any transaction or series of integrated
transactions immediately following which the record holders
of the stock (entitled to vote for directors) of the Company
immediately prior to such transaction or series of
transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions;
provided, that, a transaction with Arch Wireless, Inc. and/or
its affiliates shall not be subject to the provisions of this
paragraph and shall be subject to the other provisions
contained in the definition of “Change of Control.”




	 	(f)	 	Mitigation. The Executive shall not be required to mitigate
amounts payable pursuant to this section by seeking other employment
or otherwise.




	9.	 	Effect of Termination. If the Executive (a) is a member of the Board or
that of any of the Company’s subsidiaries or (b) holds any other position
with the



 






 







	 	 	Company and the Company’s subsidiaries on the Date of Termination, the
Executive shall resign from all such positions as of such date.
	 
	10.	 	Termination of Other Agreements. By their execution of this Agreement,
each of the Company and the Executive confirm the termination, as of the
date of the Existing Employment Agreement, of all rights and obligations
that each of the parties may have had under (a) that certain Employment
Agreement between the Executive and the Company, dated as of May 15, 1996,
together with all amendments thereto (the “1996 Agreement”); (b) that
certain Change of Control Agreement between the Executive and the Company,
dated as of May 15, 1996, together with all amendments thereto (the
“Change of Control Agreement”); (c) that certain Retention Agreement
between the Executive and the Company, dated as of April 1, 2001, together
with all amendments thereto (the “Retention Agreement”); and (d) any other
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 (any such arrangement, collectively
with the 1996 Agreement, the Change of Control Agreement, and the
Retention Agreement, the “Prior Employment Documents”).
	 
	11.	 	Notices. All notices, demands, requests, or other communications
required or permitted to be given or made hereunder (collectively,
“Notice”) 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) 768-9625
	 
	with a copy (which shall not constitute notice) to:
	 
	Schulte Roth & Zabel LLP
	919 Third Avenue
	New York, New York 10022
	Telecopier: (212) 593-5955
 
	Attention: Jeffrey S. Sabin, Esq.




	 	(b)	 	if to the Executive:




	 
	Vincent D. Kelly
	11807 Chapel Road
	Clifton, VA 20124



 






 




	 	 	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.
	 
	12.	 	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. The parties agree that in the event any
of the provisions in this Agreement, interpreted in accordance with the
Agreement as a whole, are found to be unenforceable by a court of
competent jurisdiction, such court shall determine the limits allowable by
law and shall enforce the same.
	 
	13.	 	Survival. It is the express intention and agreement of the parties that
the provisions of Section 5 shall survive the termination of this
Agreement, and that the provisions of Section 6 shall survive for two (2)
years following the termination of this Agreement.
	 
	14.	 	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 in direct, 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 8(e)
herein.
	 
	15.	 	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.
	 
	16.	 	Amendment Waiver. This Agreement shall not be amended, altered or
modified except by an instrument in writing duly executed by all parties.
Neither the waiver by any 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.
	 
	17.	 	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.
	 
	18.	 	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).
	 
	19.	 	Entire Agreement. This Employment Agreement contains the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, with respect
thereto, including, but not limited to, the Prior Employment Documents.
	 
	20.	 	Indemnification. In consideration of this Agreement, the Executive
hereby waives any and all rights under and releases, and indemnifies and
holds the Company (and its officers, directors, employees and agents) 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 20,
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, including, without limitation, the
Prior Employment Documents.
	 
	21.	 	Arbitration. Either party may designate in writing to the other (in
which case this Section 21 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 National Rules for the
Resolution of Employment Disputes 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 21 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
shall conduct any arbitration. 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 21 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. §§ 1-15,
not state law, shall govern the arbitrability of all claims.
	 
	22.	 	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 HOLDINGS, INC.
	 	 	 	 	 
	 	 	 	 	 
	Date: April 4, 2003	 	
By:
	 	     


	 	 	
Its:
	 	     
	 	 	 	 	 
	 	 	 
	Date: April 4, 2003	 	
Vincent D. Kelly
	 	 	 	 	 
	 	 	 	 	 
	 	 	METROCALL, INC.
	 	 	 	 	 
	 	 	 	 	 
	Date: April 4, 2003	 	
By:	 	 

	 	 	
Its: