<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
CROWN CASTLE INTERNATIONAL CORP.
(Exact name of Registrant as specified in its charter)
Delaware 4899 76-0470458
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Number) Identification Number)
incorporation or
organization) ---------------
Mr. Charles C. Green, III
510 Bering Drive
Suite 500
Houston, Texas 77057
(713) 570-3000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Copies to:
Stephen L. Burns, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
<CAPTION>
Proposed
Proposed Maximum
Title of Each Class of Amount Maximum Aggregate Amount of
Securities to be to be Offering Price Offering Registration
Registered Registered Per Unit Price(1) Fee
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 3/4% Senior
Exchangeable Preferred
Stock due 2010(1).... 200,000 $1,000 $200,000,000 $55,600.00
- ----------------------------------------------------------------------------------
12 3/4% Senior
Exchangeable Preferred
Stock due 2010....... 174,604(2) $1,000 $174,604,480 $48,540.05
- ----------------------------------------------------------------------------------
12 3/4% Senior
Subordinated Exchange
Debentures due 2010.. $200,000,000 100% $200,000,000 $0.00(3)
- ----------------------------------------------------------------------------------
12 3/4% Senior
Subordinated Exchange
Debentures due 2010.. $171,044,268(4) 100% $171,044,268 $0.00(3)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Represents shares of the Company's 12 3/4% Senior Exchangeable Preferred
Stock due 2010 (the "Exchangeable Preferred Stock") as may be issued and
delivered to holders of the Exchangeable Preferred Stock as in-kind
dividend payments on the Exchangeable Preferred Stock.
(3) The registration statement covers the Company's 12 3/4% Senior
Subordinated Exchange Debentures due 2010 (the "Exchange Debentures") to
be issued to holders of Exchangeable Preferred Stock when and if the
Company exchanges the Exchange Debentures for the Exchangeable Preferred
Stock. Pursuant to Rule 457(i), no registration fee is required with
respect to the Exchange Debentures.
(4) Represents the aggregate principal amount of Exchange Debentures that may
be issued as in-kind interest payments on the Exchange Debentures.
Pursuant to Rule 457(i), no registration fee is required with respect to
the Exchange Debentures.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine. Information contained
herein is subject to completion or amendment. A Registration Statement
relating to these securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to buy be accepted
prior to the time the Registration Statement becomes effective. This
prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any state in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statements filed with the +
+Securities and Exchange Commission relating to these securities is effective. +
+This Prospectus is not an offer to sell these securities and it is not +
+soliciting an offer to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
February , 1999
Prospectus
CROWN CASTLE INTERNATIONAL CORP.
Offer to Exchange all Outstanding 12 3/4% Senior Exchangeable Preferred Stock
due 2010 for
12 3/4% Senior Exchangeable Preferred Stock due 2010, which have been
Registered under the Securities Act of 1933
-------------
This Prospectus (and accompanying Letter of Transmittal) relates to our
proposed offer to exchange up to $200,000,000 of our new 12 3/4% Senior
Exchangeable Preferred Stock due 2010 (the "new preferred stock"), which will
be freely transferable, for any and all outstanding 12 3/4% Senior Exchangeable
Preferred Stock due 2010 issued in a private offering on December 16, 1998 (the
"old preferred stock"), which have certain transfer restrictions (the new
preferred stock and the old preferred stock are collectively referred to as the
"exchangeable preferred stock").
. The Exchange Offer expires at 5:00 p.m., New York City time, on [ ], 1999,
unless extended.
. All old preferred stock that is validly tendered and not validly withdrawn
will be exchanged.
. Tenders of old preferred stock may be withdrawn at any time prior to the
expiration of the Exchange Offer.
. ""Affiliates'' of the company (within the meaning of the Securities Act) may
not participate in the Exchange Offer.
. All broker-dealers must comply with the registration and prospectus delivery
requirements of the Securities Act. See "Plan of Distribution" beginning on
page 203.
. The Company does not intend to apply for listing of the new preferred stock
on any securities exchange or to arrange for them to be quoted on any
quotation system.
The New Preferred Stock:
. The terms of the new preferred stock are substantially identical to the terms
of the old preferred stock, except that the new preferred stock will be
freely tradeable.
The Exchange Debentures:
. The terms of the exchange debentures are substantially identical to the terms
of the restricted exchange debentures, except that the exchange debentures
will be freely tradeable.
-------------
Please see "Risk Factors" beginning on page 23 for a discussion of certain
factors you should consider in connection with the Exchange Offer.
-------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the new preferred stock or determined
if this Prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
We may amend or supplement this Prospectus from time to time by filing
amendments or supplements as required. You should read this entire Prospectus
(and accompanying Letter of Transmittal and related documents) and any
amendments or supplements carefully before making your investment decision.
-------------
The date of this Prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 1
Risk Factors........................ 23
Use of Proceeds..................... 34
Dividend Policy..................... 34
Capitalization...................... 35
Unaudited Pro Forma Condensed
Consolidated Financial Statements.. 36
Selected Financial and Other Data of
CCIC............................... 46
Selected Financial and Other Data of
Crown.............................. 49
Selected Financial and Other Data of
CTI................................ 50
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 52
The Exchange Offer.................. 68
Industry Background................. 75
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business....................... 82
Management..................... 112
Certain Relationships and
Related Transactions.......... 122
Principal Stockholders......... 131
Description of Securities...... 134
Description of Capital Stock... 191
Description of Certain
Indebtedness.................. 198
Certain U.S. Federal Income
Tax Considerations............ 203
Plan of Distribution........... 203
Legal Matters.................. 204
Independent Auditors........... 204
Available Information.......... 204
Index to Financial Statements.. F-1
</TABLE>
----------------
Forward-Looking Statements
This document includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included in this document, including, without limitation, the statements under
"Prospectus Summary", "Management's Discussion and Analysis of Financial
Condition and Results of Operations", "Industry Background" and "Business" and
located elsewhere in this document regarding industry prospects, our prospects
and our financial position are forward-looking statements. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from our expectations are disclosed in this document, including,
without limitation, in conjunction with the forward-looking statements
included under "Risk Factors". All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements included in this
document. We undertake no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this document might not occur.
----------------
When we use the terms "we", "us", "CCIC" and the "Company", we are referring
to the business conducted by Crown Castle International Corp. and its
subsidiaries (including CCI and CTI). "CCI" refers to the business we conduct
through Crown Communication Inc. The terms "Crown Business" and "Crown" each
refer to the business conducted by Crown Communications, Crown Network
Systems, Inc., Crown Mobile Systems, Inc. and their affiliates prior to the
time we acquired them. "CTI" refers to the business we conduct through Castle
Transmission Services (Holdings) Ltd. ("CTSH") and its subsidiary, Castle
Transmission International Ltd.
CTSH publishes its consolidated financial statements in pounds sterling. In
this document, references to "pounds sterling", "(Pounds)", "pence" or "p" are
to U.K. currency and references to "U.S. dollars", "U.S.$" or "$" are to U.S.
currency. For the convenience of the reader, this document contains
translations of certain pound sterling amounts into U.S. dollars at specified
rates, or, if not so specified, at the noon buying rate in New York City for
cable transfers in pounds sterling as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") on September 30,
1998, of (Pounds)1.00 = $1.6995. No representation is made that the pound
sterling amounts have been, could have been or could be converted into U.S.
dollars at the rates indicated or any other rates. On December 31, 1998, the
Noon Buying Rate was (Pounds)1.00 = 1.6628.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary contains basic information about this Offering. It may
not contain all the information that is important to you. We encourage you to
read this entire document for an understanding of this Offering.
The Company
We are a leading domestic and international provider of wireless
communications and broadcast transmission infrastructure and related services.
Our business is to own, operate and manage wireless communications sites and
broadcast transmission networks. In addition, we provide a full range of
complementary services to our customers including (1) network design and site
selection, (2) site acquisition, (3) site development and construction, (4)
antenna installation and (5) network management and maintenance.
As of September 30, 1998, we owned or managed 1,302 towers, including 548
towers in the United States and 754 towers in the United Kingdom. In addition,
on October 8, 1998, we added 102 towers in the United Kingdom through our
acquisition of Millennium Communications Limited. Assuming we had formed the
proposed joint venture with Bell Atlantic Mobile (as described below under
"Proposed Joint Venture"), as of September 30, 1998, we would have owned an
additional 1,427 towers, including 117 towers that we currently manage. These
1,427 towers form a significant portion of Bell Atlantic Mobile's 850 MHz
wireless communications network in the eastern and southwestern United States.
<TABLE>
<CAPTION>
As of September 30, 1998
---------------------------------
Total After
Proposed Proposed
CCIC Joint Venture Joint Venture
----- ------------- -------------
<S> <C> <C> <C>
United States
Towers...................................... 548 1,427(a) 1,858
Rooftops.................................... 81 -- 81
United Kingdom
Towers...................................... 754 -- 754
Rooftops(b)................................. 54 -- 54
----- ----- -----
1,437 1,427(a) 2,747
===== ===== =====
</TABLE>
- --------
(a) Includes 117 towers we currently manage. See "Business--U.S. Operations--
Significant Contracts--Bell Atlantic Mobile".
(b) The 54 revenue producing rooftop sites in the United Kingdom are occupied
by our transmitters but are not available for leasing to our customers.
Based on our industry position and experience, we believe that we are well
positioned to continue to capitalize on global growth opportunities arising
from:
. the expansion of existing networks and the introduction of new networks
in the wireless communications industry;
. the consolidation of tower ownership generally, including the transfer
of infrastructure ownership from major wireless communications carriers
to independent infrastructure providers;
. the ongoing privatization of state-run broadcast transmission networks
around the world; and
. the widespread introduction of digital transmission technology in the
broadcasting industry.
1
<PAGE>
Our Site Rental Business
Our site rental business involves leasing antenna space to customers on
towers and rooftops that we own or manage. We generally receive fees for
installing a customer's equipment and antennas and also receive monthly rental
payments under site leases that typically range in term from three to five
years. The following is a list of our major site rental customers in the United
States and the United Kingdom:
<TABLE>
<CAPTION>
United States United Kingdom
------------- --------------
<S> <C>
Aerial Communications Cellnet
AT&T Wireless National Transcommunications Limited
Bell Atlantic Mobile One2One
BellSouth Mobility Orange Personal Communications
Motorola Vodafone
Nextel
PageNet
Sprint PCS
</TABLE>
Our Broadcast Transmission Business
Our broadcast transmission business includes both (1) the transmission of
analog and digital television and radio broadcasts and (2) the construction of
new broadcast towers that can hold multiple tenants. In the United Kingdom, we
provide analog transmission services for two national television services,
seven national radio services and 37 local radio stations through our network
of 3,465 transmitters. We provide these services under long-term contracts with
the British Broadcasting Corporation (the "BBC") and two national commercial
radio companies. We also provide both the BBC and ONdigital (formerly known as
British Digital Broadcasting Limited) with digital transmission services under
long-term contracts. These two companies are the holders of 67% of the
multiplexes for digital terrestrial television broadcasting throughout the
United Kingdom. In the United States, we plan to build new multiple tenant
broadcast towers in locations where the introduction of digital terrestrial
television broadcasting will necessitate additional tower capacity to
accommodate new digital and displaced analog transmission equipment.
Our Expertise
We have developed extensive expertise in our core site rental and broadcast
transmission businesses. Further, our team of more than 300 engineers has
substantial experience in providing end-to-end services, including (1) design
of wireless communications and broadcast transmission networks, (2) radio
frequency engineering, (3) site acquisition, (4) site development and
construction and (5) antenna installation. We plan to leverage our technical
expertise and operational experience to take advantage of the fundamental shift
in strategy that is occurring among established wireless communications
carriers relating to infrastructure ownership. Such carriers are beginning to
seek to sell their wireless communications infrastructure to, or establish
joint ventures with, experienced infrastructure providers that have the ability
to manage networks. We believe that infrastructure providers with a proven
track record of providing end-to-end services will be best positioned to
successfully acquire access to such wireless communications infrastructure.
Business Strategy
Our objective is to become the premier global provider of wireless
communications and broadcast transmission infrastructure and related services.
Our experience in establishing and expanding our existing tower footprints, our
experience in owning and operating both analog and digital transmission
networks, our significant relationships with wireless communications carriers
and broadcasters and our ability to offer customers our
2
<PAGE>
in-house technical and operational expertise, uniquely position us to
capitalize on global growth opportunities. The key elements of our business
strategy are to:
Maximize Utilization of Tower Capacity. We are seeking to increase the number
of antenna leases on the towers and rooftops that we own or manage. We believe
that many of our towers have significant capacity for additional antennas and
that we can increase the number of tenants on these towers at a low incremental
cost.
Leverage Expertise of CCI and CTI Personnel to Implement Global Growth
Strategy. We believe that our ability to manage wireless communications and
broadcast transmission networks, including the transmission of signals, is an
important competitive advantage in our pursuit of global growth opportunities.
Partner with Wireless Communications Carriers to Assume Ownership of their
Existing Towers. In addition to our proposed joint venture with Bell Atlantic
Mobile, we will continue to seek to partner with other major wireless
communications carriers in order to assume ownership of their towers directly
or through joint ventures.
Provide Build-to-Suit Towers for Wireless Communications Carriers and
Broadcasters. As wireless communications carriers continue to expand and fill-
in their service areas, they will require additional communications sites and
will have to build new towers where co-location is not available. Similarly,
the introduction of digital terrestrial television broadcasting in the United
States will require the construction of new broadcast towers to accommodate new
digital transmission equipment and analog transmission equipment displaced from
existing towers. We are aggressively pursuing these build-to-suit
opportunities.
Acquire Existing Transmission Networks. Based on our experience with CTI, we
are well positioned to acquire other state-owned analog and digital
transmission networks when opportunities arise. We will consider acquiring
wireless transmission networks as well as the associated wireless
communications infrastructure.
Capitalize on Management Experience. We have assembled and will continue to
build a strong management team that has extensive experience in the tower
industry and in the management of broadcast transmission networks.
Proposed Joint Venture
On December 8, 1998, we entered into an agreement (the "Formation Agreement")
with Bell Atlantic Mobile ("BAM") to form a joint venture to own and operate a
significant majority of BAM's towers. We would own approximately 62.3% of the
joint venture and BAM and certain of its affiliates would own the other 37.7%
along with a 0.001% interest in the joint venture's operating subsidiary. We
intend to consolidate the joint venture's results of operations and financial
condition with ours for financial reporting purposes.
To form the proposed joint venture, we would contribute $250.0 million in
cash and approximately 15.6 million shares of our common stock (valued at
$197.0 million) to the joint venture. BAM and its affiliates would transfer
approximately 1,427 towers along with related assets and liabilities to the
joint venture. The joint venture would borrow $180.0 million under a committed
$250.0 million revolving credit facility. The joint venture would also make a
$380.0 million cash distribution to BAM. After making this distribution and
paying fees and expenses related to its formation, the joint venture initially
would have approximately $45.9 million of cash to fund its operations and pay
costs and expenses associated with building new towers.
3
<PAGE>
LOGO
Upon the dissolution of the proposed joint venture, we would receive all the
assets and liabilities of the joint venture other than the approximately 15.6
million shares of our common stock held by the joint venture. BAM would receive
(1) the shares of our common stock and (2) a payment from us, equal to 14.0% of
the fair market value of the assets and liabilities of the proposed joint
venture other than our common stock, to be made in cash or shares of our common
stock (as elected by us). BAM would continue to retain its 0.001% interest in
the joint venture's operating subsidiary and would maintain most of its
governance rights with respect to the operating subsidiary. See "Business--
Proposed Joint Venture--Operating Agreement". BAM may trigger the dissolution
of the proposed joint venture at any time following the third anniversary of
its formation and we may trigger the dissolution at any time following the
fourth anniversary; however, if we trigger the dissolution prior to the seventh
anniversary we may be required to make additional cash payments to BAM.
We will manage the day-to-day operations of the proposed joint venture. The
proposed joint venture will construct and own certain new towers that are
needed by BAM's wireless communications business. In addition, the proposed
joint venture will actively seek to add additional tenants, including wireless
communications carriers other than BAM, to its towers in order to increase its
revenues. The proposed joint venture will have regional offices that will be
staffed primarily with our employees to perform marketing, operations and
maintenance functions. A board of representatives, initially to be comprised of
four representatives selected by us and two representatives selected by BAM,
will oversee the proposed joint venture. Significant actions to be taken by the
proposed joint venture will require the approval of the board of
representatives including, in certain circumstances, the approval of
representatives of both BAM and us. See "Business--The Proposed Joint Venture--
Operating Agreements".
Concurrently with the formation of the proposed joint venture, BAM and the
joint venture will enter into a master build-to-suit agreement (the "Build-to-
Suit Agreement"). The proposed joint venture will be required to pay for and
construct 500 new towers, and will have the right to pay for and construct an
additional 200 new towers, in the general vicinity of locations selected by
BAM. The selected locations are to be in areas where, in the judgment of BAM,
no structures suitable for BAM's antennas exist. BAM would be the anchor tenant
on these towers. Pursuant to a global lease agreement (the "Global Lease") with
the proposed joint venture, BAM will lease antenna space on the towers
transferred to the joint venture at an average monthly rent per tower of $1,850
and on each tower constructed under the Build-to-Suit Agreement at minimum
rental rates ranging from $1,250 to $1,833 per month depending on the tower's
location. See "Business--Proposed Joint Venture--Build-to-Suit Agreement" and
"--Global Lease".
Although we expect the proposed joint venture to be formed during the first
quarter of 1999, the Formation Agreement is subject to a number of significant
conditions. Therefore, we cannot guarantee you that we will form the proposed
joint venture on the terms described in this document or at all. See "Risk
Factors--The Proposed Joint Venture May Not Occur".
Background
Founded in 1994, we acquired 127 towers located in Texas, Colorado, New
Mexico, Arizona, Oklahoma and Nevada from Pittencrieff Communications, Inc. in
1995. We subsequently continued to build our business through a variety of
transactions, including the acquisition in 1996 of Motorola's SMR and microwave
system in Puerto Rico, which included 15 communication sites; the purchase
through a series of transactions in 1996 and
4
<PAGE>
1997 of TEA Group Incorporated, a leading domestic and international site
acquisition firm (the "TEA Acquisition"); and the purchase in February 1997 of
a 34.3% ownership interest in CTI (the "CTI Investment"). In August 1997, we
acquired the assets of Crown Communications (the "Crown Merger"), which
included 61 owned towers and the exclusive right to lease antenna space on 147
other towers and rooftop sites, most of which were located in and around the
greater Pittsburgh area.
On October 31, 1997, we borrowed approximately $94.7 million (the "October
Bank Financing") and privately placed $36.5 million of senior convertible
preferred stock (the "Senior Convertible Preferred Stock") and warrants to
purchase shares of our common stock. The proceeds of the October Bank Financing
and the private placement of Senior Convertible Preferred Stock were used to
repay a seller note issued in connection with the acquisition of the assets of
Crown Communications, to repay loans outstanding under a credit agreement at
Crown Communications and to pay related fees and expenses. We refer to the
October Bank Financing, the private placement of the Senior Convertible
Preferred Stock and the application of the proceeds collectively as the
"October Refinancing".
On November 20, 1997, we privately placed (the "1997 Notes Offering") $251.0
million principal amount at maturity ($150,010,150 initial accreted value) of
our 10 5/8% Senior Discount Notes due 2007 (the "Notes"). The net proceeds to
us from the 1997 Notes Offering were used to repay substantially all our
outstanding indebtedness, including our borrowings in the October Bank
Financing, to pay related fees and expenses and for general corporate purposes.
We refer to the October Refinancing, the 1997 Notes Offering and the
application of the net proceeds from the 1997 Notes Offering collectively as
the "1997 Refinancing".
On August 21, 1998, we increased our ownership interest in CTI to 80.0% by
consummating a share exchange with certain shareholders of CTSH (the
"Exchange"). The remaining 20.0% of CTSH's shares are owned by TdF (whose
ultimate parent is France Telecom). Immediately prior to the Exchange, we
converted all shares of our then existing preferred stock into shares of our
common stock and reclassified our then existing common stock into shares of our
common stock (the "Conversions"). We refer to the Exchange and the Conversions
collectively as the "Roll-Up". At that time, we also raised $151,043,200 in an
initial public offering of our Common Stock (the "IPO"). We intend to use the
proceeds of the IPO to finance a portion of our investment in the proposed
joint venture with BAM.
----------------
Our principal executive offices are located at 510 Bering Drive, Suite 500,
Houston, Texas 77057, telephone (713) 570-3000.
5
<PAGE>
Corporate Structure
The following chart illustrates, assuming the proposed joint venture had been
formed, (1) our organizational structure and (2) our debt obligations. See
"Capitalization" and "Business--Proposed Joint Venture".
LOGO
6
<PAGE>
The Offering
Summary of Terms of the Exchange Offer
The Exchange Offer relates to the exchange of up to $200,000,000 aggregate
liquidation preference of our outstanding 12 3/4 Senior Exchangeable Preferred
Stock due 2010 (the "old preferred stock") for up to an equal aggregate
liquidation preference of our 12 3/4 Senior Exchangeable Preferred Stock due
2010, which has been registered under the Securities Act of 1933 (the "new
preferred stock"). The shares of the new preferred stock will be our
obligations as governed by the terms of the Certificate of Designations we
filed on December 18, 1998 with the Secretary of State of the State of
Delaware. The form and terms of the shares of the new preferred stock are
identical in all material respects to the form and terms of the shares of the
old preferred stock except:
. that the shares of the new preferred stock have been registered under
the Securities Act,
. that the shares of the new preferred stock are not entitled to certain
registration rights which are applicable to the shares of the old
preferred stock under a registration rights agreement, and
. for certain liquidated damages provisions.
For more information, see "Description of Securities."
The Exchange Offer.......... We are offering to exchange $1,000 liquidation
preference of new preferred stock for each $1,000
liquidation preference of old preferred stock.
As of the date of this document, $200,000,000 in
aggregate liquidation preference of old preferred
stock is outstanding. The old preferred stock was
originally issued in a private placement. As a
condition to the purchase of the old preferred
stock, the initial purchasers required that we
make a registered offer to exchange the old
preferred stock for other securities
substantially similar to the old preferred stock.
We are making this Exchange Offer to satisfy this
contractual obligation.
Resale...................... Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties, we
believe that new preferred stock issued pursuant
to the Exchange Offer in exchange for old
preferred stock may be offered for resale, resold
and otherwise transferred by you (unless you are
an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act of 1933, or
a broker-dealer which acquired the old preferred
stock directly from us) without compliance with
the registration and prospectus delivery
provisions of the Securities Act of 1933,
provided that you are acquiring the new preferred
stock in the ordinary course of your business and
that you have not engaged in, do not intend to
engage in, and have no arrangement or
understanding with any person to participate in
the distribution of the new preferred stock. Each
participating broker-dealer that receives shares
of new preferred stock for its own account
pursuant to the Exchange Offer in exchange for
shares of old preferred stock that were acquired
as a result of market-making or other trading
activity must acknowledge that it will deliver a
prospectus in connection with any resale of the
shares of new preferred stock. See "Plan of
Distribution."
7
<PAGE>
Any holder of old preferred stock who (i) is an
affiliate of the Company, (ii) does not acquire
new preferred stock in the ordinary course of its
business, (iii) tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
new preferred stock or (iv) is a broker-dealer
that acquired the old preferred stock directly
from the Company, must comply with the
registration and prospectus delivery requirements
of the Securities Act of 1933 in connection with
the resale of the new preferred stock.
Expiration Date............. 5:00 p.m., New York City time, on , 1999, (20
business days after effectiveness of the
registration statement of which this Prospectus
is a part), unless we extend the Exchange Offer,
in which case the term "Expiration Date" means
the latest date and time to which the Exchange
Offer is extended.
Certain Conditions to the
Exchange Offer............. The Exchange Offer is subject to certain
customary conditions, which we may waive. For
more information, see "The Exchange Offer--
Conditions to the Exchange Offer".
Special Procedures for
Beneficial Holders......... If you are a beneficial owner whose shares of old
preferred stock are registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee and you wish to tender in the
Exchange Offer, you should contact the person in
whose name your shares of old preferred stock are
registered promptly and instruct such person to
tender on your behalf. If you wish to tender in
the Exchange Offer on your own behalf, you must,
prior to completing and executing the Letter of
Transmittal and delivering your shares of old
preferred stock, either make appropriate
arrangements to register ownership of the shares
of old preferred stock in your name or obtain a
properly completed bond power from the person
whose name your shares of old preferred stock are
registered. The transfer of registered ownership
may take considerable time.
Withdrawal Rights........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date pursuant to the procedures described under
"The Exchange Offer--Withdrawal of Tenders."
Acceptance of Old Preferred
Stock and Delivery of New
Preferred Stock............ We will accept for exchange any and all shares of
old preferred stock that are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The shares of
new preferred stock will be delivered promptly
after the Expiration Date. For more details, see
"The Exchange Offer--Terms of the Exchange."
Certain Tax Consequences.... The exchange pursuant to the Exchange Offer will
generally not be a taxable event for Federal
income tax purposes. For more details, see
"Certain U.S. Federal Income Tax Considerations."
8
<PAGE>
Use of Proceeds............. There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See "Use
of Proceeds".
Exchange Agent.............. ChaseMellon Shareholder Services, L.L.C. is
serving as exchange agent (the "Exchange Agent")
in connection with the Exchange Offer.
Summary Description of the Securities to be Registered
The New Preferred Stock:
Securities Offered.......... 200,000 shares of 12 3/4% Senior Exchangeable
Preferred Stock due 2010 with a liquidation
preference of $1,000 per share.
We have the option to exchange the Exchangeable
Preferred Stock, in whole but not in part, for 12
3/4% Senior Subordinated Exchange Debentures due
2010.
Dividends................... Annual fixed rate of 12 3/4%.
We will declare and pay dividends on March 15,
June 15, September 15 and December 15 of each
year, commencing on March 15, 1999.
On or before December 15, 2003, we have the
option to pay dividends in cash or in additional
fully paid and non-assessable shares of new
preferred stock having an aggregate liquidation
preference equal to the amount of such dividends.
After December 15, 2003, we will pay dividends
only in cash.
Mandatory Redemption........ We will be required to redeem all of the shares
of new preferred stock outstanding on December
15, 2010 at a redemption price equal to 100% of
the liquidation preference of such shares, plus
accumulated and unpaid dividends to the date of
redemption.
Optional Redemption......... On or after December 15, 2003, we may redeem some
or all of the shares of new preferred stock at
any time at the redemption prices (together with
accumulated and unpaid dividends, if any, to the
date of redemption) listed in the section
"Description of Securities--Description of Senior
Exchangeable Preferred Stock" under the heading
"Optional Redemption".
In addition, before December 15, 2001, we may
redeem up to 35% of the outstanding shares of new
preferred stock with the proceeds of certain
public equity offerings or strategic equity
investments at a redemption price equal to
112.750% of the liquidation preference of the new
preferred stock, together with accumulated and
unpaid dividends, if any, to the date of
redemption.
Change of Control........... If we experience specific kinds of changes in
control, we will be required to make an offer to
purchase any and all shares of new
9
<PAGE>
preferred stock for cash at a purchase price of
101% of the liquidation preference of such
shares, together with all accumulated and unpaid
dividends to the date of purchase. However, our
repurchase of new preferred stock under these
circumstances must comply with certain provisions
of the indenture governing our outstanding senior
notes. If we were unable to comply with those
provisions and fail to repurchase new preferred
stock, then holders of the new preferred stock
would be entitled to certain voting rights. In
addition, there can be no assurance that we will
have sufficient funds to repurchase the new
preferred stock in the event of a change of
control or that our creditors will otherwise
allow us to make the repurchase. See "Risk
Factors--Repurchase of the Exchangeable Preferred
Stock or the Exchange Debentures Upon a Change of
Control".
Ranking..................... The new preferred stock will rank (1) senior to
all other classes of capital stock of the Company
established after the issue date of the new
preferred stock that do not expressly provide
that they rank on a parity with the new preferred
stock as to dividends and distributions upon the
liquidation, winding up and dissolution of the
Company and (2) on a parity with any class of
capital stock established after the date of
issuance of the new preferred stock the terms of
which provide that such class or series will rank
on a parity with the new preferred stock as to
dividends and distributions upon the liquidation,
winding up and dissolution of the Company.
Our obligations with respect to the new preferred
stock are subordinate and junior in right of
payment to all our present and future
indebtedness, including the Notes, and are
effectively subordinate to all debt and
liabilities (including trade payables) of our
restricted and unrestricted subsidiaries.
If we had completed the offering of the new
preferred stock on September 30, 1998 and had
applied the proceeds as intended, we would have
had approximately $507.3 million of indebtedness
and other liabilities including $343.3 million of
indebtedness and other liabilities (including
trade payable) of our subsidiaries. In addition,
if we had also formed the proposed joint venture
as of that date, we would have had approximately
$687.3 million of indebtedness and other
liabilities including $523.3 million of
indebtedness and other liabilities (including
trade payable) of our subsidiaries.
Our creditors will have priority over the new
preferred stock with respect to claims on our
assets. See "Description of Securities--
Description of Senior Exchangeable Preferred
Stock--Ranking."
Certain Covenants........... We will issue the new preferred stock pursuant to
the terms of the certificate of designations that
we filed on December 18, 1998 and which became
part of our certificate of incorporation. The
10
<PAGE>
certificate of designations contains certain
covenants that, among other things, limit our
ability and the ability of certain of our
subsidiaries to:
. borrow money;
. pay dividends on stock or purchase our capital
stock;
. make investments; and
. sell assets or merge with or into other
companies.
These covenants are subject to important
exceptions and qualifications which are described
in "Description of Securities--Description of
Senior Exchangeable Preferred Stock" under the
heading "Certain Covenants."
Voting Rights............... The new preferred stock will have no voting
rights except as required by law and as specified
in the certificate of designations. If we fail to
meet our obligations under the covenants
contained in the certificate of designations, the
holders of the new preferred stock will be
entitled to elect two additional members of our
Board of Directors.
Exchange Feature............ On any scheduled dividend payment date, we have
the option to exchange all (but not less than
all) of the shares of new preferred stock then
outstanding for our 12 3/4% Senior Subordinated
Exchange Debentures due 2010 (the "exchange
debentures"). If we exercise our option to
exchange, we will issue exchange debentures in an
aggregate principal amount equal to the aggregate
liquidation preference of the outstanding new
preferred stock.
The indenture governing our outstanding senior
notes contains substantial restrictions on our
ability to exchange new preferred stock for
exchange debentures. See "Description of
Securities--Description of Senior Exchangeable
Preferred Stock--Exchange".
Registration Rights and
Liquidated Damages......... Holders of new preferred stock (except as
described below) are not entitled to any
registration rights with respect to the new
preferred stock. Pursuant to a registration
rights agreement, we agreed to file with the
Commission within 60 days following the
consummation of the offering a registration
statement with respect to an offer to exchange
the exchangeable preferred stock for a new series
of our exchangeable preferred stock registered
under the Securities Act, with terms
substantially identical to the exchangeable
preferred stock. We also agreed to use all
commercially reasonable efforts to cause the
registration statement to become effective within
150 days following consummation of the offering.
If the exchange offer is not permitted by
applicable law or is not consummated within the
time periods specified in the registration rights
agreement, we will be required to provide a shelf
registration statement to cover
11
<PAGE>
resales of shares of exchangeable preferred stock
by holders of such shares. If we fail to satisfy
these registration obligations, we will be
obligated to pay liquidated damages to holders of
the exchangeable preferred stock at the rates
listed in the section "Description of
Securities--Registration Rights and Liquidated
Damages".
The Exchange Debentures:
Securities Offered.......... 12 3/4% Senior Subordinated Exchange Debentures
due 2010 in an aggregate principal amount equal
to the aggregate liquidation preference of the
new preferred stock outstanding on the date of
the exchange, plus such principal amount of
additional exchange debentures as may be issued
in lieu of cash interest.
Maturity.................... December 15, 2010.
Interest.................... At an annual fixed rate of 12 3/4%.
We will pay interest on each June 15 and December
15 of each year, commencing on the first of these
dates that occurs after the date of the exchange.
On or before December 15, 2003, we have the
option to pay interest in cash or in additional
exchange debentures in an aggregate principal
amount equal to the amount of such interest.
After December 15, 2003, we will pay interest
only in cash.
Ranking..................... These exchange debentures are senior subordinated
debts.
They rank behind all of our current and future
indebtedness (excluding trade payables) other
than indebtedness that expressly provides that it
is on a parity with or subordinated in right of
payment to the exchange debentures.
If we had completed the offering of the new
preferred stock on September 30, 1998 and
assuming that we exchanged the new preferred
stock for exchange debentures on the same date,
the exchange debentures:
. would have been subordinate to $163.8 of
senior debt of the Company; and
. would have been effectively subordinate to the
creditors, including trade creditors, of the
Company's subsidiaries.
Optional Redemption......... On or after December 15, 2003, we may redeem some
or all of the exchange debentures at any time at
the redemption prices (together with accrued and
unpaid interest, if any, to the date of
redemption) listed in the section "Description of
Securities--Description of Senior Subordinated
Exchange Debentures" under the heading "Optional
Redemption".
12
<PAGE>
In addition, before December 15, 2001, we may
redeem up to 35% of the exchange debentures with
the proceeds of certain public equity offerings
or strategic equity investments at the price
listed in the section "Description of
Securities--Description of Senior Subordinated
Exchange Debentures" under the heading "Optional
Redemption". If we choose this option, we must
redeem the exchange debentures within 60 days of
receiving the proceeds.
Mandatory Offer to
Repurchase................. If we sell certain assets or experience specific
kinds of changes of control, we must offer to
repurchase the exchange debentures at the prices
listed in the section "Description of
Securities--Description of Senior Subordinated
Exchange Debentures" under the heading
"Repurchase at the Option of Holders".
Basic Covenants of the
Exchange Indenture......... If and when we issue the exchange debentures, we
will issue them under an indenture with United
States Trust Company of New York, as trustee. The
indenture will, among other things, restrict our
ability and the ability of certain of our
subsidiaries to:
.borrow money;
.pay dividends on stock or purchase stock;
.make investments; and
.sell certain assets or merge with or into other
companies.
For more details, see the section "Description of
Securities--Description of Senior Subordinated
Exchange Debentures" under the heading "Certain
Covenants".
Registration Rights;
Liquidated Damages......... If we exchange the old preferred stock into
exchange debentures before we consummate a
registered exchange offer for the old preferred
stock, we will be required to make a registered
exchange offer to all holders of exchange
debentures. This registered exchange offer will
give holders of exchange debentures the
opportunity to exchange their debentures for new
debentures that are substantially identical to
the original debentures but have been registered
under the Securities Act. If we fail to
consummate the registered exchange offer within
the required time frame, we will pay liquidated
damages at the rates listed in the section
"Description of Securities--Registration Rights
and Liquidated Damages". We will continue to pay
liquidated damages until we fulfill our
registration obligations.
13
<PAGE>
Summary Unaudited Pro Forma Financial and Other Data
The unaudited pro forma financial and other data set forth below have been
derived from the Pro Forma Financial Statements (as defined) included elsewhere
in this document. The pro forma statement of operations data and other data for
the year ended December 31, 1997, give effect to the Transactions (as defined
under "Unaudited Pro Forma Condensed Consolidated Financial Statements") as if
they had occurred on January 1, 1997. The pro forma statement of operations
data and other data for the nine months ended September 30, 1998, give effect
to the Roll-Up, the IPO, the conversion (the "Senior Preferred Conversion") of
the Senior Convertible Preferred Stock into Common Stock (all of which, as of
July 17, 1998, had converted), the offering of the old preferred stock (the
"Offering") and the Proposed JV as if they had occurred on January 1, 1998. The
pro forma balance sheet data give effect to the Offering and the Proposed JV as
if they had occurred on September 30, 1998. The unaudited pro forma financial
and other data for the Restricted Group (as defined) are not intended as
alternative measures of operating results, financial position or cash flow from
operations (as determined in accordance with generally accepted accounting
principles). The information set forth below should be read in conjunction with
"Unaudited Pro Forma Condensed Consolidated Financial Statements", "Selected
Financial and Other Data of CCIC", "Selected Financial and Other Data of
Crown", "Selected Financial and Other Data of CTI", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and the notes thereto of CCIC, Crown, CTI and
the Proposed JV included elsewhere in this document.
14
<PAGE>
<TABLE>
<CAPTION>
Company Pro Forma Restricted Group Pro Forma
-------------------------- --------------------------
Nine Months Nine Months
Year Ended Ended Year Ended Ended
December 31, September 30, December 31, September 30,
1997 1998 1997 1998
------------ ------------- ------------ -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues:
Site rental and
broadcast
transmission......... $ 160,774 $ 144,458 $ 15,560 $ 16,130
Network services and
other................ 54,454 36,054 40,896 21,598
--------- --------- --------- --------
Total net revenues.. 215,228 180,512 56,456 37,728
--------- --------- --------- --------
Costs of operations:
Site rental and
broadcast
transmission......... 72,571 56,584 3,634 4,074
Network services and
other................ 31,296 22,150 25,306 12,303
--------- --------- --------- --------
Total costs of
operations......... 103,867 78,734 28,940 16,377
--------- --------- --------- --------
General and
administrative......... 19,983 20,022 11,254 14,270
Corporate
development(a)......... 3,507 2,846 3,507 2,838
Non-cash compensation
charges................ -- 15,192 -- 9,384
Depreciation and
amortization........... 94,580 76,471 13,189 12,042
--------- --------- --------- --------
Operating income
(loss)................. (6,709) (12,753) (434) (17,183)
Other income (expense):
Interest and other
income (expense)..... 1,321 3,018 769 1,386
Interest expense and
amortization of
deferred financing
costs................ (56,019) (41,655) (17,835) (13,317)
--------- --------- --------- --------
Income (loss) before
income taxes and
minority interests..... (61,407) (51,390) (17,500) (29,114)
Provision for income
taxes.................. (50) (218) (50) (218)
Minority interests...... 5,885 2,137 -- --
--------- --------- --------- --------
Net income (loss)....... (55,572) (49,471) (17,550) (29,332)
Dividends on Preferred
Stock.................. (26,745) (19,741) (26,745) (19,741)
--------- --------- --------- --------
Net income (loss) after
deduction of dividends
on Preferred Stock..... $ (82,317) $ (69,212) $ (44,295) $(49,073)
========= ========= ========= ========
Other Data:
Site data(b):
Towers and revenue
producing rooftop
sites at end of
period............... 2,564 2,747 453 629
========= ========= ========= ========
EBITDA(c):
Site rental and
broadcast
transmission......... $ 79,246 $ 81,534 $ 10,625 $ 10,777
Network services and
other................ 12,132 222 5,637 (3,696)
Corporate development
expenses(a).......... (3,507) (2,846) (3,507) (2,838)
--------- --------- --------- --------
Total EBITDA........ $ 87,871 $ 78,910 $ 12,755 $ 4,243
========= ========= ========= ========
Adjusted EBITDA(c)...... -- -- $ 14,602 $ 6,848
Capital expenditures.... 74,104 140,009 30,496 65,494
Summary cash flow
information:
Net cash provided by
operating
activities........... 63,304 57,056 10,818 (1,084)
Net cash used for
investing
activities........... (251,935) (138,733) (123,945) (65,494)
Net cash provided by
financing
activities........... 268,528 242,006 168,425 210,814
Ratio of earnings to
fixed charges(d)....... -- -- -- --
Ratio of EBITDA to cash
interest expense(e).... 2.54x 2.87x 20.84x 13.26x
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Company Pro Forma Restricted Group Pro Forma
As of September 30, 1998 As of September 30, 1998
----------------------------------- -------------------------------------
Pro Forma
Pro Forma Pro Forma for Pro Forma for Offering
Historical for Offering and Historical for and
CCIC Offering Proposed JV CCIC Offering Proposed JV
---------- ---------- ------------- ---------- ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 201,349 $ 322,349 $ 113,974 $ 34,116 $ 49,935(f) $ 49,935(f)
Property and equipment,
net.................... 544,486 544,486 1,136,999 142,211 142,211 142,211
Total assets............ 1,369,939 1,490,939 1,879,750 999,787 1,120,787 1,317,787
Total debt.............. 494,324 425,324 605,324 232,803 163,803 163,803
Net debt(g)............. 292,975 102,975 491,350 198,687 113,868 113,868
Redeemable preferred
stock.................. -- 200,000 200,000 -- 200,000 200,000
Total stockholders'
equity................. 755,117 745,117 942,117 755,117 745,117 942,117
</TABLE>
- --------
(a) Corporate development expenses represent costs incurred in connection with
acquisitions and development of new business initiatives. These expenses
consist primarily of allocated compensation, benefits and overhead costs
that are not directly related to the administration or management of
existing towers.
(b) Represents the aggregate number of sites of CCIC and its acquired
businesses (including Crown), CTI and the Proposed JV for each period. As
of September 30, 1998, the Company had contracts with 1,367 buildings in
the United States to manage on behalf of such buildings the leasing of
space for antennas on the rooftops of such buildings. A revenue producing
rooftop represents a rooftop where the Company has arranged a lease of
space on such rooftop and, as such, is receiving payments in respect of its
management contract. The Company generally does not receive any payment for
rooftops under management unless the Company actually leases space on such
rooftops to third parties. As of September 30, 1998, the Company had 1,286
rooftop sites under management throughout the United States that were not
revenue producing rooftops but were available for leasing to customers and,
in the United Kingdom, the Company had 54 revenue producing rooftop sites
that were occupied by the Company's transmitters but were not available for
leasing to customers.
(c) EBITDA is defined as operating income (loss) plus depreciation and
amortization and non-cash compensation charges. Adjusted EBITDA is defined
as the sum of (i) annualized site rental and broadcast transmission EBITDA
before corporate development for the most recent calendar quarter and (ii)
EBITDA, less site rental and broadcast transmission EBITDA before corporate
development, for the most recent four calendar quarters. EBITDA and
Adjusted EBITDA are presented as additional information because management
believes them to be useful indicators of the Company's ability to meet debt
service and capital expenditure requirements. They are not, however,
intended as alternative measures of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles). Furthermore, the Company's measure of EBITDA may not be
comparable to similarly titled measures of other companies.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes, minority interests and fixed
charges. Fixed charges consist of interest expense, the interest component
of operating leases and amortization of deferred financing costs. For the
year ended December 31, 1997 and the nine months ended September 30, 1998,
earnings were insufficient to cover fixed charges of the Consolidated Group
by $61.4 million and $51.4 million, respectively. For the year ended
December 31, 1997 and the nine months ended September 30, 1998, earnings
were insufficient to cover fixed charges of the Restricted Group by $17.5
million and $29.1 million, respectively.
(e) Total interest expense for the nine months ended September 30, 1998
includes amortization of deferred financing costs and discount of $13.0
million for CCIC, $0.6 million for CTI and $0.5 million for the Proposed
JV.
(f) Pro forma balances of cash and cash equivalents for the Restricted Group
(i) exclude $105.2 million of proceeds from the Offering that are estimated
to be contributed to the Proposed JV and (ii) include $15.8 million of
proceeds from the Offering that the Company may elect to contribute to an
Unrestricted Subsidiary concurrent with the consummation of the Offering.
Upon consummation of the Offering in December 1998, the Company contributed
$100.00 million of proceeds from the Offering to an Unrestricted
Subsidiary.
(g) Net debt represents total debt less cash and cash equivalents.
16
<PAGE>
Summary Financial and Other Data of CCIC
The summary historical consolidated financial and other data for CCIC set
forth below for each of the three years in the period ended December 31, 1997,
and as of December 31, 1995, 1996 and 1997, have been derived from the
consolidated financial statements of CCIC, which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The summary historical
consolidated financial and other data for CCIC set forth below for the nine
months ended September 30, 1997 and 1998, and as of September 30, 1998, have
been derived from the unaudited consolidated financial statements of CCIC,
which include all adjustments that the Company considers necessary for a fair
presentation of the financial position and results of operations for those
periods. Operating results for the nine months ended September 30, 1997 and
1998 are not necessarily indicative of the results that may be expected for the
entire year. The summary historical financial and other data for the Restricted
Group (as defined) are not intended as alternative measures of operating
results or cash flows from operations (as determined in accordance with
generally accepted accounting principles). The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--CCIC" and
the consolidated financial statements and the notes thereto of CCIC included
elsewhere in this document.
<TABLE>
<CAPTION>
Nine Months
Ended September
Years Ended December 31, 30,
-------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- -------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Site rental and broadcast
transmission................. $ 4,052 $ 5,615 $ 11,010 $ 6,743 $ 28,456
Network services and other.... 6 592 20,395 11,503 23,805
------- ------- -------- ------- --------
Total net revenues.......... 4,058 6,207 31,405 18,246 52,261
======= ======= ======== ======= ========
Costs of operations:
Site rental and broadcast
transmission................. 1,226 1,292 2,213 1,422 8,398
Network services and other.... -- 8 13,137 7,187 14,234
------- ------- -------- ------- --------
Total costs of operations... 1,226 1,300 15,350 8,609 22,632
------- ------- -------- ------- --------
General and administrative...... 729 1,678 6,824 3,841 15,022
Corporate development(a)........ 204 1,324 5,731 4,654 2,838
Non-cash compensation charges... -- -- -- -- 11,361
Depreciation and amortization... 836 1,242 6,952 3,295 17,105
------- ------- -------- ------- --------
Operating income (loss)......... 1,063 663 (3,452) (2,153) (16,697)
Other income (expense):
Equity in earnings (losses) of
unconsolidated affiliate..... -- -- (1,138) (1,189) 2,055
Interest and other income
(expense)(b)................. 53 193 1,951 1,606 2,293
Interest expense and
amortization of deferred
financing costs.............. (1,137) (1,803) (9,254) (4,368) (17,581)
------- ------- -------- ------- --------
Income (loss) before income
taxes and minority interests... (21) (947) (11,893) (6,104) (29,930)
Provision for income taxes...... -- (10) (49) (46) (218)
Minority interests.............. -- -- -- -- (328)
------- ------- -------- ------- --------
Net income (loss)............... (21) (957) (11,942) (6,150) (30,476)
Dividends on Senior Convertible
Preferred Stock................ -- -- (2,199) (461) (4,348)
------- ------- -------- ------- --------
Net income (loss) after deduc-
tion of dividends on Senior
Convertible Preferred Stock.... $ (21) $ (957) $(14,141) $(6,611) $(34,824)
======= ======= ======== ======= ========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
----------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- --------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Other Data:
Site data (at period
end)(c):
Towers owned............ 126 155 240 1,173
Towers managed.......... 7 7 133 129
Rooftop sites managed
(revenue
producing)(d).......... 41 52 80 135
-------- -------- --------- -------- ----------
Total sites owned and
managed................ 174 214 453 1,437
======== ======== ========= ======== ==========
EBITDA(e):
Site rental............. $ 2,697 $ 3,555 $ 7,682 $ 4,564 $ 18,040
Network services and
other.................. (594) (326) 1,549 1,232 (3,433)
Corporate development
expenses(a)............ (204) (1,324) (5,731) (4,654) (2,838)
-------- -------- --------- -------- ----------
Total EBITDA............ $ 1,899 $ 1,905 $ 3,500 $ 1,142 $ 11,769
======== ======== ========= ======== ==========
Restricted Group EBITDA... $ 1,899 $ 1,905 $ 3,500 $ 1,142 $ 4,508
Capital expenditures...... 161 890 18,035 5,295 77,728
Summary cash flow
information:
Net cash provided by
(used for) operating
activities............. 1,672 (530) (624) (2,061) 3,352
Net cash used for
investing activities... (16,673) (13,916) (111,484) (97,242) (76,731)
Net cash provided by
financing activities... 15,597 21,193 159,843 105,055 219,226
Ratio of earnings to fixed
charges(f)............... -- -- -- -- --
Ratio of EBITDA to cash
interest expense......... 1.72x 0.92x 0.49x 0.27x 2.61x
Balance Sheet Data (at
period end):
Cash and cash
equivalents.............. $ 596 $ 7,343 $ 55,078 $ 201,349
Property and equipment,
net...................... 16,003 26,753 81,968 544,486
Total assets.............. 19,875 41,226 371,391 1,369,939
Total debt................ 11,182 22,052 156,293 494,324
Redeemable preferred
stock(g)................. 5,175 15,550 160,749 --
Total stockholders' equity
(deficit)................ 619 (210) 41,792 755,117
</TABLE>
- --------
(a) Corporate development expenses represent costs incurred in connection with
acquisitions and development of new business initiatives. These expenses
consist primarily of allocated compensation, benefits and overhead costs
that are not directly related to the administration or management of
existing towers. For the year ended December 31, 1997, such expenses
include (i) nonrecurring cash bonuses of $0.9 million paid to certain
executive officers in connection with the CTI Investment and (ii) a
nonrecurring cash charge of $1.3 million related to the purchase by CCIC of
shares of Common Stock from CCIC's former chief executive officer in
connection with the CTI Investment. See "Certain Relationships and Related
Transactions".
(b) Includes a $1.2 million fee received in March 1997 as compensation for
leading the investment consortium which provided the equity financing for
CTI in connection with the CTI Investment.
(c) Represents the aggregate number of sites of CCIC as of the end of each
period.
(d) As of September 30, 1998, CCIC had contracts with 1,367 buildings in the
United States to manage on behalf of such buildings the leasing of space
for antennas on the rooftops of such buildings. A revenue producing rooftop
represents a rooftop where CCIC has arranged a lease of space on such
rooftop and, as such, is receiving payments in respect of its management
contract. CCIC generally does not receive any payment for rooftops under
management unless CCIC actually leases space on such rooftops to third
parties. As of September 30, 1998, CCIC had 1,286 rooftop sites under
management throughout the United States
18
<PAGE>
that were not revenue producing but were available for leasing to customers
and, in the United Kingdom, the Company had 54 revenue producing rooftop
sites that were occupied by the Company's transmitters but were not
available for leasing to customers.
(e) EBITDA is defined as operating income (loss) plus depreciation and
amortization and non-cash compensation changes. EBITDA is presented as
additional information because management believes it to be a useful
indicator of CCIC's ability to meet debt service and capital expenditure
requirements. It is not, however, intended as an alternative measure of
operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles). Furthermore,
CCIC's measure of EBITDA may not be comparable to similarly titled
measures of other companies.
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes, fixed charges and equity in
earnings (losses) of unconsolidated affiliate. Fixed charges consist of
interest expense, the interest component of operating leases and
amortization of deferred financing costs. For the years ended December 31,
1995, 1996 and 1997 and the nine months ended September 30, 1997 and 1998,
earnings were insufficient to cover fixed charges by $21,000, $0.9
million, $10.8 million, $5,000 and $32.0 million, respectively.
(g) Represents (i) the Senior Convertible Preferred Stock privately placed by
CCIC in August 1997 and October 1997, all of which has been converted into
shares of Common Stock, and (ii) the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock and the Series C Convertible
Preferred Stock privately placed by CCIC in April 1995, July 1996 and
February 1997, respectively, all of which has been converted into shares
of Common Stock in connection with the consummation of the IPO.
19
<PAGE>
Summary Financial and Other Data of CTI
The summary historical financial data for CTI, which was 34.3% owned by CCIC
prior to the Roll-Up, presents (i) summary historical financial data of the BBC
Home Service Transmission Business prior to its acquisition by CTI (the
"Predecessor") for the year ended March 31, 1996 and the eleven and two months
ended February 27, 1997, (ii) summary historical consolidated financial data of
CTI after such acquisition for the one month ended March 31, 1997 and for the
nine months ended December 31, 1997, and (iii) summary historical consolidated
financial data of CTI for the eight months ended August 31, 1998. The summary
historical financial data for the year ended March 31, 1996 and the eleven
months ended February 27, 1997 have been derived from the financial statements
of the Predecessor, which have been audited by KPMG, Chartered Accountants. The
summary financial data for the one month ended March 31, 1997 and the nine
months ended December 31, 1997 have been derived from the consolidated
financial statements of CTI, which have been audited by KPMG, Chartered
Accountants. The summary historical financial data for the two months ended
February 27, 1997 have been derived from the unaudited financial statements of
the Predecessor, and the summary historical financial data for the eight months
ended August 31, 1998 have been derived from the unaudited consolidated
financial statements of CTI, which include all adjustments that CTI considers
necessary for a fair presentation of the financial position and results of
operations for that period. The results of operations for the one month ended
March 31, 1997, the nine months ended December 31, 1997 and the eight months
ended August 31, 1998 are not necessarily indicative of the results of
operations of CTI that may be expected for the entire year. CCIC acquired a
majority ownership interest in CTI upon consummation of the Roll-Up in August
1998 and, as a result, historical financial data of CTI for the nine months
ended September 30, 1998 is not presented. This information reflects financial
data for CTI as a whole, is not limited to that portion of the financial data
attributable to CCIC's percentage ownership of CTI prior to the Roll-Up and is
not indicative of any distributions or dividends that CCIC might receive in the
future. CTI is subject to significant restrictions on its ability to make
dividends and distributions to CCIC. See "Risk Factors--Holding Company
Structure; Dependence on Dividends to Meet Cash Requirements or Pay Dividends".
The information set forth below should be read in conjunction with "Selected
Financial and Other Data of CTI", "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--CTI" and
the consolidated financial statements and the notes thereto of CTI included
elsewhere in this document.
20
<PAGE>
<TABLE>
<CAPTION>
Predecessor Company CTI
---------------------------------------------- ----------------------------------------------
Two Months One Month Nine Months Eight Months One Month
Eleven Months Ended Ended Ended Ended Ended
Year Ended Ended February February 27, March 31, December 31, August 31, March 31,
March 31, 1996 27, 1997 1997 1997 1997 1998 1997(a)
--------------- --------------- -------------- ------------- --------------- -------------- ---------
(Pounds sterling in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
(under U.S.
GAAP):
Net revenues:
Site rental and
broadcast
transmission... (Pounds) 61,694 (Pounds) 65,183 (Pounds)11,761 (Pounds)5,510 (Pounds) 50,438 (Pounds)51,438 $ 9,364
Network services
and other...... 8,673 5,431 1,044 923 6,314 7,595 1,569
--------------- --------------- -------------- ------------- --------------- -------------- -------
Total net
revenues....... 70,367 70,614 12,805 6,433 56,752 59,033 10,933
--------------- --------------- -------------- ------------- --------------- -------------- -------
Costs of
operations:
Site rental and
broadcast
transmission... 34,577 36,200 5,851 2,483 24,516 21,794 4,220
Network services
and other...... 5,472 3,335 745 391 2,520 4,804 665
--------------- --------------- -------------- ------------- --------------- -------------- -------
Total costs of
operations..... 40,049 39,535 6,596 2,874 27,036 26,598 4,885
--------------- --------------- -------------- ------------- --------------- -------------- -------
General and
administrative.. 9,698 4,039 1,048 495 4,021 3,191 841
Corporate
development(b).. -- -- -- -- -- -- --
Non-cash
compensation
charges......... -- -- -- -- -- 2,330 --
Depreciation and
amortization.... 9,128 9,045 1,738 1,819 16,854 15,594 3,091
Operating
income.......... 11,492 17,995 3,423 1,245 8,841 11,320 2,116
Other income
(expense):
Interest and
other income... -- -- -- 49 288 440 83
Interest expense
and
amortization of
deferred
financing
costs.......... -- -- -- (891) (11,618) (8,122) (1,514)
--------------- --------------- -------------- ------------- --------------- -------------- -------
Income (loss)
before income
taxes........... 11,492 17,995 3,423 403 (2,489) 3,638 685
Provision for
income taxes.... -- -- -- -- -- -- --
--------------- --------------- -------------- ------------- --------------- -------------- -------
Net income
(loss).......... (Pounds) 11,492 (Pounds) 17,995 (Pounds) 3,423 (Pounds) 403 (Pounds) (2,489) (Pounds) 3,638 $ 685
=============== =============== ============== ============= =============== ============== =======
<CAPTION>
CTI
-----------------------
Eight
Nine Months Months
Ended Ended
December 31, August 31,
1997(a) 1998(a)
------------ ----------
(Dollars in thousands)
<S> <C> <C>
Statement of Operations Data
(under U.S.
GAAP):
Net revenues:
Site rental and
broadcast
transmission... $ 85,719 $ 87,419
Network services
and other...... 10,729 12,908
------------ ----------
Total net
revenues....... 96,448 100,327
------------ ----------
Costs of
operations:
Site rental and
broadcast
transmission... 41,665 37,039
Network services
and other...... 4,283 8,164
------------ ----------
Total costs of
operations..... 45,948 45,203
------------ ----------
General and
administrative.. 6,843 5,424
Corporate
development(b).. -- --
Non-cash
compensation
charges......... -- 3,960
Depreciation and
amortization.... 28,694 26,502
Operating
income.......... 14,963 19,238
Other income
(expense):
Interest and
other income... 489 748
Interest expense
and
amortization of
deferred
financing
costs.......... (19,743) (13,803)
------------ ----------
Income (loss)
before income
taxes........... (4,291) 6,183
Provision for
income taxes.... -- --
------------ ----------
Net income
(loss).......... $ (4,291) $ 6,183
============ ==========
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Predecessor Company CTI
------------------------------------------------ ------------------------------------------------
Two Months Nine Months One Month
Eleven Months Ended One Month Ended Eight Months Ended
Year Ended Ended February February 27, Ended December 31, Ended March 31,
March 31, 1996 27, 1997 1997 March 31, 1997 1997 August 31, 1998 1997(a)
--------------- --------------- -------------- -------------- --------------- --------------- ---------
(Pounds sterling in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data (under U.S. GAAP):
Site data(c):
Towers and
revenue
producing
rooftop sites
at end of
period.........
EBITDA(d):
Site rental and
broadcast
transmission... (Pounds) 19,359 (Pounds) 25,752 (Pounds) 4,941 (Pounds) 2,574 (Pounds) 22,428 (Pounds) 26,864 $ 4,374
Network services
and other...... 1,261 1,288 220 490 3,267 2,380 833
Corporate
development
expenses(b).... -- -- -- -- -- -- --
--------------- --------------- -------------- -------------- --------------- --------------- -------
Total EBITDA.... (Pounds) 20,620 (Pounds) 27,040 (Pounds) 5,161 (Pounds) 3,064 (Pounds) 25,695 (Pounds) 29,244 $ 5,207
=============== =============== ============== ============== =============== =============== =======
Capital
expenditures.... (Pounds) 18,079 (Pounds) 21,810 (Pounds) 711 (Pounds) 748 (Pounds) 14,361 (Pounds) 36,304 $ 1,271
Ratio of earnings
to fixed
charges(e)...... 1.44x
Ratio of EBITDA
to cash interest
expense......... 3.58x
Summary cash flow
information:
Net cash
provided by
operating
activities..... 24,311 28,146 5,161 4,871 25,555 27,226 8,278
Net cash used
for investing
activities..... (17,190) (21,811) (711) (52,889) (14,668) (36,135) (89,885)
Net cash
provided by
(used for)
financing
activities..... (7,121) (6,335) (4,450) 57,706 (12,423) 9,955 98,071
<CAPTION>
CTI
-----------------------
Eight
Nine Months Months
Ended Ended
December 31, August 31,
1997(a) 1998(a)
------------ ----------
(Dollars in thousands)
<S> <C> <C>
Other Data (under U.S. GAAP):
Site data(c):
Towers and
revenue
producing
rooftop sites
at end of
period......... 801 808
============ ==========
EBITDA(d):
Site rental and
broadcast
transmission... $ 38,116 $ 45,655
Network services
and other...... 5,540 4,045
Corporate
development
expenses(b).... -- --
------------ ----------
Total EBITDA.... $ 43,656 $ 49,700
============ ==========
Capital
expenditures.... $ 24,407 $ 61,699
Ratio of earnings
to fixed
charges(e)...... -- 1.44x
Ratio of EBITDA
to cash interest
expense......... 2.71x 3.76x
Summary cash flow
information:
Net cash
provided by
operating
activities..... 43,431 46,271
Net cash used
for investing
activities..... (24,928) (61,411)
Net cash
provided by
(used for)
financing
activities..... (21,113) 16,919
</TABLE>
- --------
(a) CTI publishes its consolidated financial statements in pounds sterling. For
the convenience of the reader, the information set forth above contains
translations of pound sterling amounts into U.S. dollars at the Noon Buying
Rate on September 30, 1998, of (Pounds)1.00 = $1.6995. No representation is
made that the pound sterling amounts have been, could have been or could be
converted into U.S. dollars at the rate indicated or any other rates. On
November 30, 1998, the Noon Buying Rate was (Pounds)1.00 = $1.6485.
(b) Corporate development expenses represent costs incurred in connection with
acquisitions and development of new business initiatives. These expenses
consist primarily of allocated compensation, benefits and overhead costs
that are not directly related to the administration or management of
existing towers.
(c) As of August 31, 1998, CTI's 54 revenue producing rooftop sites were
occupied by its transmitters but were not available for leasing to
customers.
(d) EBITDA is defined as operating income (loss) plus depreciation and
amortization and non-cash compensation charges. EBITDA is presented as
additional information because management believes it to be a useful
indicator of CTI's ability to meet debt service and capital expenditure
requirements. It is not, however, intended as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles). Furthermore, CTI's measure
of EBITDA may not be comparable to similarly titled measures of other
companies.
(e) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes and fixed charges. Fixed
charges consist of interest expense, the interest component of operating
leases and amortization of deferred financing costs. For the nine months
ended December 31, 1997, earnings were insufficient to cover fixed charges
by (Pounds)2.5 million ($4.2 million).
22
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements concerning our plans,
strategies and prospective future financial performance. While we believe that
the results of our plans, strategies and future financial performance are
reasonable, our actual results could be significantly different due to certain
risks. These risks are described below, and you should carefully consider
them, as well as the other information included in this Prospectus, when
evaluating your participation in the Exchange Offer.
Consequences of Failure to Exchange Old Preferred Stock
We will issue new preferred stock in exchange for the old preferred stock
pursuant to the Exchange Offer only following the satisfaction of the
procedures and conditions set forth in "The Exchange Offer--Procedures for
Tendering." Such procedures and conditions include timely receipt by the
Exchange Agent of such shares of old preferred stock, and of a properly
completed and duly executed Letter of Transmittal. Shares of old preferred
stock which you do not tender or we do not accept will, following the Exchange
Offer, continue to be restricted securities and you may not offer or sell them
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act of 1933 and applicable state securities law.
Any shares of old preferred stock tendered and exchanged in the Exchange
Offer will reduce the aggregate principal amount of the old preferred stock
outstanding. Following the Exchange Offer, if you did not tender your shares
of old preferred stock you generally will not have any further registration
rights, and such shares of old preferred stock will continue to be subject to
certain transfer restrictions. Accordingly, the liquidity of the market for
such shares of old preferred stock could be adversely affected. The shares of
old preferred stock are currently eligible for sale pursuant to Rule 144A and
Regulation S through the Private Offerings, Resale and Trading through
Automated Linkages ("PORTAL") market of the National Association of Securities
Dealers, Inc. Because we anticipate that most holders of old preferred stock
will elect to exchange such shares of old preferred stock, we anticipate that
the liquidity of the market for any shares of old preferred stock remaining
after the consummation of the Exchange Offer may be substantially limited.
Managing Integration and Growth
Our ability to implement our growth strategy depends, in part, on our
successes in integrating our acquisitions, investments, joint ventures and
strategic alliances into our operations. We have grown significantly over the
past two years through acquisitions and, as evidenced by our participation in
the proposed joint venture, such growth is an important part of our business
plan. The Crown Merger in August 1997 and the Roll-Up in August 1998 involved
acquisitions of businesses that were significantly larger than our then
existing business and represented a substantial increase in the scope of our
business. Crown's revenues for fiscal 1996 were $19.4 million. In contrast,
CCIC's revenues for fiscal 1996 were $6.2 million. Similarly, the Roll-Up
resulted in our having majority ownership of CTI, which had consolidated
revenues in the twelve months ended December 31, 1997 of (Pounds)76.0 million
($129.2 million). In addition, the acquisition of approximately 1,427 towers
through the proposed joint venture will increase our current business
considerably. Successful integration of these transactions will depend
primarily on our ability to manage our combined operations and to integrate
existing management with and into our management. We cannot guarantee that we
will be able to successfully integrate these acquired businesses and assets or
any future acquisitions into our business or implement our plans without
delay. If we fail to do so it could have a material adverse effect on our
financial condition and results of operations.
We regularly evaluate potential acquisition and joint venture opportunities.
Implementation of our acquisition strategy may impose significant strains on
our management, operating systems and financial resources. If we fail to
manage our growth or encounter unexpected difficulties during expansion it
could have a material adverse effect on our financial condition and results of
operations. The pursuit and integration of acquisitions, investments, joint
ventures and strategic alliances will require substantial attention from our
senior management, which will limit the amount of time available to devote to
our existing operations. If we are
23
<PAGE>
successful in consummating future acquisitions, we may have to incur
substantial amounts of debt and contingent liabilities and an increase in
amortization expenses related to goodwill and other intangible assets, all of
which could have a material adverse effect on our financial condition and
results of operations. We are currently evaluating potential acquisition and
joint venture transactions that could require us to make substantial
expenditures, possibly in the near term. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources".
Substantial Leverage; Restrictions Imposed by the Terms of Our Indebtedness
We are a highly leveraged company. The following chart lays out certain
important credit information and is presented as of September 30, 1998, (1)
assuming we had completed the Offering and (2) assuming we had completed both
the Offering and formed the Proposed Joint Venture.
<TABLE>
<CAPTION>
Pro Forma
for the
Pro Forma Offering
for the and the
Offering Proposed JV
--------- -----------
(Dollars in
thousands)
<S> <C> <C>
Total indebtedness...... $425,324 $605,324
Redeemable preferred
stock.................. 200,000 200,000
Stockholders' equity.... 745,117 942,117
Debt and redeemable
preferred stock to
equity ratio........... 0.84x 0.85x
</TABLE>
In addition, assuming we had completed the Offering and the Roll-Up on
January 1, 1998, for the nine months ended September 30, 1998, our earnings
would have been insufficient to cover fixed charges by $34.9 million. If we
had also completed the Proposed Joint Venture on January 1, 1998, for the nine
months ended September 30, 1998, our earnings would have been insufficient to
cover fixed charges by $51.4 million.
Given our substantial indebtedness, we could be affected in the following
ways:
. We could be more vulnerable to general adverse economic and industry
conditions.
. We may find it more difficult to obtain additional financing to fund
future working capital, capital expenditures and other general corporate
requirements.
. We will be required to dedicate a substantial portion of our cash flow
from operations to the payment of principal and interest on our debt,
reducing the available cash flow to fund other projects.
. We may have limited flexibility in planning for, or reacting to, changes
in our business and in the industry.
. We will have a competitive disadvantage relative to other less leveraged
companies in our industry.
Our ability to service our debt and to fund planned capital expenditures in
connection with our business strategy will depend, to a degree, on factors
beyond our control, including general economic, financial, competitive and
regulatory environments. We cannot guarantee that we will be able to generate
enough cash flow from operations or that we will be able to obtain enough
capital to service our debt or fund our planned capital expenditures.
Our current business plan contemplates substantial capital expenditures in
connection with the expansion of our tower footprints. We believe that cash
flow from operations and available cash from our credit facilities and the
Offering will be sufficient to fund our planned capital expenditures for the
foreseeable future. However, if the proposed joint venture is formed, these
funds will not be sufficient to fund any significant acquisitions other than
the proposed joint venture. We will therefore need additional equity or debt
financing to fund any other strategic acquisitions of communications sites or
transmission networks that we may pursue. We cannot guarantee, however, that
such funding will be available on commercially reasonable terms or at all. See
24
<PAGE>
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".
In addition, we may need to refinance some or all of our indebtedness on or
before maturity. We cannot guarantee, however, that we will be able to
refinance our indebtedness on commercially reasonable terms or at all.
Currently we have debt instruments in place which restrict our ability to do
certain things, including incurring more indebtedness, paying dividends,
creating liens, selling assets and engaging in certain mergers and
acquisitions. Certain of our subsidiaries, under the debt instruments, are
also required to maintain specific financial ratios. Our ability to comply
with the restrictions of these instruments and to satisfy our debt obligations
will depend on our future operating performance. If we are unable to meet the
debt restrictions, we will be in default under those instruments, which in
certain cases will cause the maturity of those instruments to be accelerated.
See "Description of Certain Indebtedness".
The Proposed Joint Venture May Not Occur
The Offering was not contingent on the consummation of the proposed joint
venture, and we cannot guarantee that we will form the proposed joint venture.
While we have signed a definitive agreement to establish the joint venture,
there are many conditions that must be satisfied before the proposed joint
venture will be formed, including:
. the receipt of bank financing by the proposed joint venture;
. the receipt of certain third party consents to the transfer of BAM's
towers to the proposed joint venture;
. absence of litigation; and
. absence of any material adverse effect with respect to our business,
assets, operations, conditions (financial or otherwise) or prospects.
We cannot guarantee that these conditions will be satisfied or waived. See
"Business--Proposed Joint Venture--Formation Agreement--Terms and Conditions."
In addition, we cannot assure you that the proposed joint venture will be
formed on the terms described in this document. For example, certain of the
partnerships affiliated with BAM that are to contribute towers to the proposed
joint venture (the "Transferring Partnerships") have not executed the
Formation Agreement. If such entities do not agree to contribute their towers
to the proposed joint venture, the number of towers to be held by the joint
venture could decrease by as many as 350 (with a corresponding reduction in
the amount of our investment). Further, BAM is permitted to sell up to 400 of
the towers to be contributed to the proposed joint venture in connection with
a sale by it of a cellular system prior to the formation of the proposed joint
venture. If BAM were to make such a sale, the number of towers to be
contributed to the proposed joint venture would be decreased by up to 400
(with a corresponding reduction in the amount of our investment). Furthermore,
if the number of towers to be contributed to the proposed joint venture were
to decrease by more than 200, the bank lender to the joint venture would not
be required to provide financing to the joint venture and, accordingly, the
joint venture might not be formed.
If the proposed joint venture is not consummated or is consummated on
significantly different terms than those described in this document, it could
substantially affect our business strategy. Further, we cannot guarantee that
we would be able to identify any other acquisition of comparable value to our
business or that any other acquisition that we did pursue would be on
substantially the same economic terms as the proposed joint venture. Moreover,
the net proceeds from the Offering would not be used to established the
proposed joint venture; we would therefore have substantial discretion in
applying the proceeds of the Offering to other uses. See "--Broad Discretion
in Application of Proceeds".
25
<PAGE>
Ability to Pay Dividends on the Exchangeable Preferred Stock
Our ability to pay any dividends is dependent on applicable provisions of
state law, and our ability to pay cash dividends on the exchangeable preferred
stock is subject to the terms of the Notes Indenture, which currently prohibit
us from paying cash dividends on any preferred stock, including the
exchangeable preferred stock. Our ability to pay dividends on the exchangeable
preferred stock in the future will depend on our meeting certain financial
criteria. See "Description of Certain Indebtedness". Moreover, under Delaware
law we are permitted to pay dividends on our capital stock, including the
exchangeable preferred stock, only out of surplus, or if there is no surplus,
out of net profits for the year in which a dividend is declared or for the
immediately preceding fiscal year. Surplus is defined as the excess of a
company's total assets over the sum of its total liabilities plus the par
value of its outstanding capital stock. In order to pay dividends in cash, we
must have surplus or net profits equal to the full amount of the cash dividend
at the time such dividend is declared. We cannot predict what the value of our
assets or the amount of the liabilities will be in the future and,
accordingly, we cannot guarantee that we will be able to pay cash dividends on
the exchangeable preferred stock.
Subordination of the Exchangeable Preferred Stock
Our obligations with respect to the exchangeable preferred stock are
subordinate and junior in right of payment to all our present and future
indebtedness, including the Notes. In the event of a bankruptcy, liquidation
or reorganization, our assets will be available to pay obligations on the
exchangeable preferred stock only after we have paid all other indebtedness.
Therefore, we may not have sufficient assets remaining to pay amounts due on
any or all of the exchangeable preferred stock then outstanding.
While any shares of exchangeable preferred stock are outstanding, we may not
authorize, create or increase the amount of any class or series of stock that
ranks senior to the exchangeable preferred stock with respect to the payment
of dividends or amounts upon liquidation, dissolution or winding up without
the consent of the holders of a majority of the outstanding shares of
exchangeable preferred stock. However, without the consent of any holder of
exchangeable preferred stock, we may create additional classes of stock,
increase the authorized number of shares of preferred stock or issue a new
series of stock that ranks pari passu with or junior to the exchangeable
preferred stock with respect to the payment of dividends and amounts upon
liquidation, dissolution or winding up.
Subordination of the Exchange Debentures
If the exchange debentures are issued, they will rank behind all of our
existing indebtedness (other than trade payables) and all of our future
borrowings (other than trade payables), except any future indebtedness that
expressly provides that it ranks equal with, or subordinated in right of
payment to, the exchange debentures. As a result, upon any distribution to our
creditors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or our property, the holders of senior debt of our Company will
be entitled to be paid in full in cash before any payment may be made with
respect to the exchange debentures.
In addition, all payments on the exchange debentures will be blocked in the
event of a payment default on senior debt and may be blocked for up to 179 of
360 consecutive days in the event of certain non-payment defaults on senior
debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our company, holders of the exchange debentures will
participate with trade creditors and all other holders of subordinated
indebtedness of the company in the assets remaining after we have paid all of
the senior debt. However, because the indenture requires that amounts
otherwise payable to holders of senior debt instead, holders of the exchange
debentures may receive less, ratably, than holders of trade payables in any
such proceeding. In any of these cases, we may not have sufficient funds to
pay all of our creditors and holders of exchange debentures may receive less,
ratably, than the holders of senior debt.
26
<PAGE>
Assuming we had completed the Offering and applied the net proceeds as
intended on September 30, 1998, as of that date we would have had $507.3
million of outstanding indebtedness and other liabilities (including
approximately $343.3 million of indebtedness and other liabilities of our
subsidiaries), all of which would have been senior in right of payment to the
exchange debentures. Assuming we had consummated the proposed joint venture
and the Offering and applied the net proceeds as intended on September 30,
1998, as of that date we would have had $687.3 million of indebtedness and
other liabilities (including $523.3 million of indebtedness and other
liabilities of our subsidiaries). See "Description of Securities--Description
of the Senior Subordinated Exchange Debentures--Ranking".
Broad Discretion in Application of Proceeds of the Offering
While we plan on using a significant portion of the proceeds from the
Offering for the Proposed Joint Venture, we cannot guarantee that it will be
formed or that it will be formed on the terms described in this document. See
"--The Proposed Joint Venture May Not Occur." If the proposed joint venture
does not occur or if it occurs on terms different from those described, we
would use the proceeds of the Offering that were intended for the proposed
joint venture for working capital and general corporate purposes including as
yet unidentified acquisitions, investments or joint ventures in the United
States or abroad. In that situation, we would have broad discretion in
allocating a significant portion of the net proceeds from the Offering without
your action or approval. Accordingly, if the proposed joint venture is not
formed as described in this document, you would not have the opportunity to
evaluate the economic, financial and other relevant information that we would
consider in determining the application of the net proceeds. See "Use of
Proceeds".
Even if we form the proposed joint venture and use the proceeds of the
Offering as described in this document, we will have broad discretion in
allocating the portion of the proceeds designated for general corporate
purposes. Further, under the Notes Indenture and the Certificate of
Designations, we are permitted to contribute the proceeds of the Offering to
an unrestricted subsidiary.
Holding Company Structure; Dependence on Dividends to Meet Cash Requirements
or Pay Dividends
We are a holding company with no business operations. Our only significant
asset is the outstanding capital stock of our subsidiaries, through which we
conduct all our business operations. We intend to contribute all of the net
proceeds from the Offering to subsidiaries. We will rely on payments from our
subsidiaries to be able to meet our obligations. We will not be able to pay
out cash dividends on the exchangeable preferred stock, redeem the
exchangeable preferred stock or pay interest and principal on the exchange
debentures without receiving dividends from our subsidiaries. Furthermore,
both CCI and CTI are restricted by their respective debt instruments on paying
dividends or making distributions to the Company. In addition, our
subsidiaries are permitted under the terms of their existing debt instruments
to incur certain additional indebtedness that also may restrict or prohibit
distributions, dividends or loans to the parent company. See "--Substantial
Leverage; Restrictions Imposed by the Terms of Our Indebtedness" and
"Description of Certain Indebtedness".
Risks Related to Agreements with TdF
We have entered into certain agreements with TdF that give TdF significant
protective rights with respect to the governance of CCIC and CTI, the
ownership of CTI and the disposition of shares in CCIC and CTI. CTI's
operations currently account for a substantial majority of our revenues.
Governance Rights
We have granted TdF the ability to govern some of our activities, including
the ability to:
. prohibit us from entering into certain material transactions;
. elect up to two members of our Board of Directors; and
. elect at least one director to the executive, nominating and corporate
governance committees of our Board of Directors.
27
<PAGE>
In addition, TdF has significant governance rights over CTI. Although TdF
has only a 20% equity interest in CTI, these governance rights give TdF
generally the same rights that a 50% partner to a joint venture would have.
While TdF's governance rights are limited in certain ways and are
automatically forfeited under certain conditions, they nonetheless give TdF
significant control over our activities. TdF's exercise of these rights could
be contrary to your interests and could prevent us from conducting certain
activities that our Board of Directors consider to be in our best interests
and the best interests of our shareholders. See "Certain Transactions--
Governance Agreement".
CTSH Option
Under certain circumstances, TdF will also have the right to acquire all of
our shares in CTSH or to require us to purchase all of TdF's shares in CTSH
(at fair market value in either case). This right will be triggered under the
following circumstances:
. the sale of all or substantially all of our assets;
. a merger, consolidation or similar transaction that would result in any
person owning more than 50% of our voting power or equity securities;
. an unsolicited acquisition by any person of more than 25% (or 30% if we
notify TdF in writing) of our voting power or equity securities; or
. other circumstances arising from an acquisition by any person that would
give rise to a right of the BBC to terminate our analog transmission
contract with the BBC or our digital transmission contract with the BBC.
Further, immediately before any of these events occurs, TdF will have the
right to require us to purchase 50% of their Class A Common Stock in cash at
the same price we would have to pay once the event occurs.
If we were required to sell our shares in CTSH to TdF, we would no longer
own the CTI business. On the other hand, if we were required to purchase all
of TdF's shares in CTSH and/or purchase 50% of their Class A Common Stock, we
cannot guarantee that we would have the necessary funds to do so or that we
would be permitted to do so under our debt instruments. If we did not have
sufficient funds, we would have to obtain additional financing. We cannot
guarantee, however, that such financing would be available on commercially
reasonable terms or at all. If such financing were not available, we might be
forced to sell certain other assets at unfavorable prices in order to generate
the cash needed to buy the shares from TdF. In addition, our obligation to
purchase TdF's shares could result in an event of default under our debt
instruments.
Liquidity Rights
Under certain other circumstances, TdF will have the right to require us to
purchase all of their shares in CTSH, at fair market value. We may elect to
pay either (1) in cash or (2) with our common stock at a discount of 15% to
its market value. If we were to issue shares of our common stock to effect the
purchase, our ability to raise additional capital through the sale of our
equity securities could be impaired.
Risks Associated with Construction and Acquisition of Towers
Our growth strategy depends on our ability to construct, acquire and operate
towers in conjunction with the expansion of wireless communications carriers.
As of September 30, 1998, we had 66 towers under construction and had plans to
commence construction on approximately 600 additional towers during fiscal
1999 (not including any towers to be constructed by the proposed joint
venture). Our ability to construct new towers can be affected by a number of
factors beyond our control, including:
. zoning and local permitting requirements and national regulatory
approvals;
28
<PAGE>
. availability of construction equipment and skilled construction
personnel; and
. bad weather conditions.
In addition, as the concern over tower proliferation has grown in recent
years, certain communities have placed restrictions on new tower construction
or have delayed granting permits required for construction. You should
consider that:
. the barriers to new construction may prevent us from building towers
where we want;
. we may not be able to complete the number of towers planned for
construction in accordance with the requirements of our customers; and
. we cannot guarantee that there will be a significant need for the
construction of new towers once the wireless communications carriers
complete the build-out of their tower network infrastructure.
Competition for the acquisition of towers is keen, and we expect it to
continue to grow. We not only compete against other independent tower owners
and operators, but also against certain wireless communications carriers,
broadcasters and site developer. As competition increases for tower
acquisitions, we may be faced with fewer acquisition opportunities, as well as
higher acquisition prices. While we regularly explore acquisition
opportunities, we cannot guarantee that we will be able to identify suitable
towers to acquire in the future. In addition, we may need to seek additional
debt or equity financing in order to fund such acquisitions. We cannot,
however, guarantee that such financing will be available or that the proposed
financings will be permitted under our debt instruments. Moreover, we cannot
guarantee that we will be able to identify, finance and complete future
construction and acquisitions on acceptable terms or that we will be able to
manage profitably and market under-utilized capacity on additional towers. The
extent to which we are unable to construct or acquire additional towers, or
manage profitably tower expansion, may have a material adverse effect on our
financial condition and results of operations.
We believe that the time frame for the current wireless build-out cycle may
be limited to the next few years, as many PCS and PCN networks have already
been built out in large markets. If we do not move quickly and aggressively to
obtain growth capital and capture this infrastructure opportunity, our
financial condition and results of operations could be materially adversely
affected.
Dependence on Demand for Wireless Communications; Risk Associated with New
Technologies
Demand for our site rentals depends on demand for communication sites from
wireless communication carriers, which, in turn, depends on the demand for
wireless services. Most types of wireless services currently require ground-
based network facilities, including communication sites for transmission and
reception. The demand for our sites depends on certain factors which we cannot
control, including:
. the level of demand for wireless services generally;
. the financial condition and access to capital of wireless carriers;
. the strategy of carriers with respect to owning or leasing communication
sites;
. changes in telecommunications regulations; and
. general economic conditions.
The wireless communications industry has experienced significant growth in
recent years. A slowdown in the growth of, or reduction in, demand in a
particular wireless segment could adversely affect the demand for
communication sites. For example, we anticipate that a significant amount of
our revenues over the next several years will be generated from carriers in
the PCS and PCN market and, as such, we will be subject to downturns in PCS
and PCN demand. Moreover, wireless communications carriers often operate with
substantial leverage, and financial problems for our customers could result in
accounts receivable going uncollected, in the loss of a customer and the
associated lease revenue or in a reduced ability of these customers to finance
expansion activities.
29
<PAGE>
Finally, advances in technology, such as the development of new satellite
systems, could reduce the need for land-based transmission and reception
networks. The occurrence of any of these factors could have a material adverse
effect on our financial condition and results of operations.
Variability in Demand for Network Services
Demand for our network services fluctuates from period to period and within
periods. These fluctuations are caused by a number of factors, including:
. the timing of customers' capital expenditures;
. annual budgetary considerations of customers;
. the rate and volume of wireless communications carriers' tower build-
outs;
. timing of existing customer contracts; and
. general economic conditions.
While demand for our network services fluctuates, we must incur certain
costs, such as maintaining a staff of network services employees in
anticipation of future contracts, even when there may be no current business.
Consequently, the operating results of our network services businesses for any
particular period may vary significantly, and should not be considered as
necessarily being indicative of longer-term results. For example, we
experienced a decline, as compared to the two previous quarters, in demand for
our network services business in the fourth quarter of 1997 and the first
quarter of 1998. Furthermore, as wireless communications carriers complete
their build-outs, the need for the construction of new towers and the demand
for certain network services could decrease significantly and could result in
fluctuations and, possibly, significant declines in our operating performance.
Competition
We face competition for site rental customers from various sources,
including:
. other large independent tower owners;
. wireless communication carriers that own and operate their own tower
footprints and lease antenna space to other carriers;
. site development companies which acquire antenna space on existing
towers for wireless communications carriers and manage new tower
construction; and
. traditional local independent tower operators.
Wireless communications carriers that own and operate their own tower
footprints generally are substantially larger and have greater financial
resources than we have. We believe that tower location and capacity, price,
quality of service and density within a geographic market historically have
been and will continue to be the most significant competitive factors
affecting the site rental business.
We compete for acquisition and new tower construction opportunities with
wireless communications carriers, broadcasters, site developers and other
independent tower operators. We believe that competition for tower
acquisitions will increase and that additional competitors will enter the
tower market. These additional competitors may have greater financial
resources than we have. See "--Risks Associated with Construction and
Acquisition of Towers".
NTL, which owns the privatized engineering division of the Independent
Broadcasting Authority, is our principal competitor in the terrestrial
broadcast transmission market in the United Kingdom. We could encounter
significant competition from NTL for our transmission business with the BBC or
ONdigital following the expiration of our current contracts with these
broadcasters. See "--Reliance on Significant Agreements".
30
<PAGE>
Reliance on Significant Agreements
Assuming we had completed the Roll-Up as of January 1, 1998, for the nine
month period ended September 30, 1998, none of our customers would have
accounted for more than ten percent of our revenues, except the BBC, which
would have accounted for 45.4% of our revenues. If the proposed joint venture
had been completed as of January 1, 1998, BAM and the BBC would have accounted
for 12.7% and 37.6% of our revenues, respectively, for that same period.
Our broadcast transmission business is substantially dependent on contracts
with the BBC. See "Business--U.K. Operations--Significant Contracts". The
prices that we charge the BBC for analog television and radio transmission
services are subject to regulation by the U.K. Office of Telecommunications
("OFTEL"). See "--Regulatory Compliance and Approval". The initial term of our
analog transmission contract with the BBC will expire on March 31, 2007, and
our digital transmission contract with the BBC expires on October 31, 2010. In
addition, our digital transmission contract with the BBC may be terminated by
the BBC after five years if the BBC's Board of Governors does not believe that
digital television in the United Kingdom has enough viewers, subject to
payment to CTI of predetermined cash compensation payments if this occurs. We
cannot guarantee that the BBC will renew these contracts or that they will not
attempt to negotiate terms that are not as favorable as those in place now. If
we were to lose the BBC contracts, our business, results of operations and
financial condition could be materially adversely affected. See "Business--
U.S. Operations--Significant Contracts--Nextel Agreement".
Our agreement with Nextel is also significant to our business and results of
operations. Under certain circumstances, Nextel could terminate the agreement.
Since this agreement represents a significant part of our business strategy,
and we expect site-sharing with Nextel to represent an even larger portion of
our business in the future, if Nextel were to terminate the agreement, our
ability to achieve our business strategy could be materially adversely
affected.
In order to optimize service coverage in the United Kingdom and enable
viewers to receive all analog UHF television services using one receiving
antenna, CTI and NTL have agreed to share all UHF television sites. See
"Business--U.K. Operations--Significant Contracts". We are currently in
negotiations with NTL to amend the agreement to reflect the build-out of
digital transmission sites and equipment, new rates for site sharing fees for
new digital facilities and revised operating and maintenance procedures for
the new equipment. This agreement may be terminated with five years' notice by
either CTI or NTL, and is set to expire on December 31, 2005. Although we do
not believe that the agreement will be terminated, we cannot guarantee that it
will not be, which could have a material adverse effect on our business,
results of operations and financial condition.
Regulatory Compliance and Approval
We are subject to a variety of foreign, federal, state and local regulation.
In the United States, both the Federal Communications Commission (the "FCC")
and Federal Aviation Administration (the "FAA") regulate towers and other
sites used for wireless communications transmitters and receivers. Such
regulations control siting and marking of towers and may, depending on the
characteristics of the tower, require registration of tower facilities.
Wireless communications devices operating on towers are separately regulated
and independently licensed based upon the regulation of the particular
frequency used. Most proposals to construct new antenna structures or to
modify existing antenna structures are reviewed by both the FCC and the FAA to
ensure that a structure will not present a hazard to aviation. Owners of
towers may have an obligation to paint them or install lighting to conform to
FCC standards and to maintain such painting or lighting. Tower owners may also
bear the responsibility for notifying the FAA of any tower lighting failures.
We generally indemnify our customers against any failure to comply with
applicable standards. Failure to comply with applicable requirements may lead
to civil penalties or require us to assume costly indemnification obligations.
Local regulations include city or other local ordinances, zoning restrictions
and restrictive covenants imposed by community developers. These regulations
vary greatly, but typically require tower owners to obtain approval from local
officials or community standards organizations prior to tower construction.
Local regulations can delay or prevent new tower
31
<PAGE>
construction or site upgrade projects, thereby limiting our ability to respond
to customers' demands. In addition, such regulations increase the costs
associated with new tower construction. We cannot guarantee that existing
regulatory policies will not adversely affect the timing or cost of new tower
construction or that additional regulations will not be adopted which increase
such delays or result in additional costs. These factors could have a material
adverse effect on our financial condition and results of operations.
In the United Kingdom, both OFTEL and the Radiocommunications Agency
regulate and monitor telecommunications and frequency licensing for sites used
for wireless communications transmitters and receivers. Site rental fees for
broadcasting (but not telecommunications) are also subject to price regulation
by OFTEL. In order to construct or materially alter towers, we must receive
regulatory approvals from the Civil Aviation Authority, which ensures that new
antenna structures do not present a hazard to aviation, and from local
government planning authorities. In addition, we sometimes must receive
international frequency clearance. Our ability to respond to customers'
demands may be delayed or even prevented by the need to seek these approvals.
We cannot guarantee, therefore, that existing regulatory policies will not
adversely affect the timing or cost of new tower construction or that
additional regulations will not be adopted which increase such delays or
result in additional costs. These factors could have a material adverse effect
on our financial condition and results of operations.
Since we signed the analog transmission contract with the BBC, the BBC has
increased its service requirements to include 24-hour broadcasting on our
terrestrial transmission network for the BBC's two national television
services and a requirement for CTI to add a number of filler stations to its
network to extend existing BBC services. The BBC has agreed to increases of
approximately (Pounds)800,000 ($1,359,600) per year in the charges payable by
the BBC to CTI for these service enhancements. The additional charges may
necessitate an amendment to CTI's Transmission Telecommunications License.
OFTEL, the relevant regulatory authority in the United Kingdom, has confirmed
in initial discussions with CTI that it is not OFTEL's intention to prevent
the provision of such additional services to the BBC at an additional charge.
CTI is discussing with OFTEL the most appropriate way to rectify this
situation in order to allow the additional services to be provided to the BBC
in return for the additional agreed payments. While we expect the license to
be amended, there can be no assurance as to the final resolution of these
issues with OFTEL.
Our customers may also become subject to new regulations or regulatory
policies which adversely affect the demand for communication sites. In
addition, as we pursue international opportunities, we will be subject to
regulation in foreign jurisdictions.
We are also subject to laws and regulations relating to worker health and
safety. If we fail to comply with such laws and regulations, it could have a
material adverse effect on our business, results of operations or financial
condition. See "Business--Environmental Matters".
Environmental Matters
Our operations are subject to foreign, federal, state and local laws and
regulations regarding the management, use, storage, disposal, emission,
release and remediation of, and exposure to, hazardous and nonhazardous
substances, materials or wastes. Under certain environmental laws, we could be
held liable for the remediation of hazardous substance contamination at
current or former facilities or at third-party waste disposal sites, and also
could be subject to personal injury or property damage claims related to such
contamination. Although we believe that we are in substantial compliance with
all applicable environmental laws, we cannot guarantee that costs of
compliance with existing or future environmental laws will not have a material
adverse effect on our financial condition and results of operations. See
"Business--Environmental Matters".
Perceived Health Risks Associated with Radio Frequency Emissions
Our towers are subject to government requirements and other guidelines
relating to radio frequency emissions. The potential connection between radio
frequency emissions and certain negative health effects,
32
<PAGE>
including some forms of cancer, has been the subject of substantial study by
the scientific community in recent years. To date, the results of these
studies have been inconclusive. Although we have not been subject to any
claims relating to radio frequency emissions, we cannot guarantee that we will
not be subject to such claims in the future.
Risks Associated with International Operations
We conduct business in countries outside the United States, which exposes us
to fluctuations in foreign currency exchange rates. For the first nine months
of 1998, assuming we had completed the Roll-Up on January 1, 1998,
approximately 75% of our consolidated revenues would have originated outside
the United States, all of which were denominated in currencies other than U.S.
dollars (principally pounds sterling). We have not historically engaged in
significant hedging activities with respect to our non-U.S. dollar operations.
Our international operations are subject to other risks, such as the
imposition of government controls, inflation, tariff or taxes and other trade
barriers, difficulties in staffing and managing international operations,
price, wage and exchange controls, and political, social and economic
instability. We cannot guarantee that these and other factors will not have a
material adverse effect on our financial condition or results of operations.
Dependence on Principal Executive Officers
Our existing operations and continued future development are dependent to a
significant extent upon the performance and active participation of certain
key individuals, including senior management. We cannot guarantee that we will
be successful in retaining the services of these, or other key personnel. None
of our employees have signed noncompetition agreements. If we were to lose any
of these individuals, our financial condition and results of operations could
be materially adversely affected.
Year 2000 Compliance
We are in the process of conducting a comprehensive review of our computer
systems to identify which of our systems will need to be modified, upgraded or
converted to recognize and process dates after December 31, 1999 (the "Y2K
problem"). The failure to correct a material Y2K problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Y2K problem, resulting in part from the uncertainty of whether
our suppliers and customers are addressing the Y2K problem, we are unable to
determine at this time whether failures brought on by the Y2K problem will
have a material adverse effect on our results of operations, liquidity or
financial condition. We believe that, with the implementation of new business
systems, the possibility of significant interruptions of normal operations
should be reduced; however, we cannot guarantee that our business, financial
condition and results of operations will not be materially adversely affected
if we or our customers or contractors fail to resolve the Y2K problem in a
timely manner.
Repurchase of the Exchangeable Preferred Stock or the Exchange Debentures Upon
a Change of Control
Under the Certificate of Designation (in the case of the exchangeable
preferred stock) and the Exchange Indenture (in the case of the exchange
debentures), in the event of certain changes of control of CCIC:
. we are required to offer to purchase all outstanding shares of
exchangeable preferred stock, in whole or in part, at a purchase price
equal to 101% of its aggregate liquidation preference, plus accumulated
and unpaid dividends; and
. each holder of exchange debentures may require us to purchase their
exchange debentures, in whole or in part, at a purchase price equal to
101% of their aggregate principal amount, plus any accrued and unpaid
interest.
33
<PAGE>
In the case of the senior exchangeable preferred stock, our offer to
repurchase upon a change of control must comply with certain provisions of our
existing senior notes indenture. If we are unable to comply with those
provisions and fail to repurchase senior exchangeable preferred stock, then
holders of the senior exchangeable preferred stock would be entitled to
certain voting rights. In addition, if a change of control were to occur, we
may not have the financial resources to repurchase all of the exchangeable
preferred stock and/or exchange debentures and repay any other indebtedness
that would become payable upon the occurrence of the change of control. This
feature of the exchangeable preferred stock and exchange debentures may in
certain circumstances discourage or make more difficult a sale or takeover of
the Company.
Lack of Public Market for the Securities
The shares of new preferred stock will be new securities for which there
currently is no established trading market. We do not intend to apply for
listing of the new preferred stock on a national securities exchange or
automatic quotation system. Although the initial purchasers of the old
preferred stock have informed us that they currently intend to make a market
in the new preferred stock, the initial purchasers are not obligated to do so,
and any such market making may be discontinued at any time without notice. The
liquidity of any market for the shares of new preferred stock will depend upon
the number of holders of the new preferred stock, the interest of securities
dealers in making a market in the new preferred stock and other factors.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the shares of new preferred stock. If an active trading market
for the shares of new preferred stock does not develop, the market price and
liquidity of the shares of new preferred stock may be adversely affected. If
the shares of new preferred stock are traded, they may trade at a discount
from their initial offering price, depending upon prevailing interest rates,
the market for similar securities, our financial performance and certain other
factors. The liquidity of, and trading markets for, the shares of new
preferred stock also may be adversely affected by general declines in the
market for payment-in-kind preferred stock. Such declines may adversely affect
the liquidity of, and trading markets for, the shares of new preferred stock,
independent of our financial performance or prospects.
Historically, the market for payment-in-kind preferred stock has been
subject to disruptions that have caused substantial volatility in the prices
of securities similar to the new preferred stock. There can be no assurance
that the market, if any, for the shares of new preferred stock will not be
subject to similar disruptions. Any such disruptions may have an adverse
effect on the holders of the new preferred stock.
USE OF PROCEEDS
We will not receive any proceeds from the Exchange Offer.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its capital stock in
the foreseeable future. It is the current policy of the Company's Board of
Directors to retain earnings to finance the expansion of the Company's
operations. Future declaration and payment of dividends, if any, will be
determined in light of the then-current conditions, including the Company's
earnings, operations, capital requirements, financial condition and other
factors deemed relevant by the Board of Directors. In addition, the Company's
ability to pay dividends is limited by the terms of the Notes Indenture and
the terms of the Certificate of Designations. See "Description of Securities--
Description of the Exchangeable Preferred Stock", "Description of Certain
Indebtedness" and "Description of Capital Stock".
34
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1998 (i) the historical
capitalization of the Company, (ii) the pro forma capitalization of the
Company after giving effect to the Offering and (iii) the pro forma
capitalization of the Company after giving effect to the Offering and the
Proposed JV. The information set forth below should be read in conjunction
with "Unaudited Pro Forma Condensed Consolidated Financial Statements",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the notes thereto
included elsewhere in this document.
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------
Pro Forma Pro Forma for
for Offering and
Actual Offering Proposed JV
---------- ---------- -------------
(Dollars in thousands, except share
amounts)
<S> <C> <C> <C>
Cash and cash equivalents(b)............. $ 201,349 $ 322,349 $ 113,974
========== ========== ==========
Notes payable and current maturities of
long-term debt.......................... $ -- $ -- $ --
========== ========== ==========
Long-term debt (less current maturities):
Senior Credit Facility(a).............. $ 69,000 $ -- $ --
10 5/8% Senior Discount Notes due
2007.................................. 163,803 163,803 163,803
CTI Credit Facility(a)................. 56,294 56,294 56,294
9% Guaranteed Bonds due 2007........... 205,227 205,227 205,227
Proposed JV Credit Facility............ -- -- 180,000
---------- ---------- ----------
Total long-term debt(b)............ 494,324 425,324 605,324
---------- ---------- ----------
Minority interests....................... 38,529 38,529 50,340
Redeemable preferred stock:
Exchangeable Preferred Stock ($.01 par
value; 400,000 shares authorized;
200,000 shares issued, pro forma for
Offering)(b).......................... -- 200,000 200,000
Stockholders' equity:
Common stock ($.01 par value;
690,000,000 shares authorized):
Common Stock (82,548,545 shares
issued, actual and 98,123,591 shares
issued, pro forma for Proposed
JV)(c).............................. 825 825 981
Class A Common Stock (11,340,000
shares issued)...................... 113 113 113
Additional paid-in capital(c)............ 800,973 790,973 987,817
Cumulative foreign currency translation
adjustment.............................. 5,069 5,069 5,069
Accumulated deficit...................... (51,863) (51,863) (51,863)
---------- ---------- ----------
Total stockholders' equity(b)...... 755,117 745,117 942,117
---------- ---------- ----------
Total capitalization(b).......... $1,287,970 $1,408,970 $1,797,781
========== ========== ==========
</TABLE>
- --------
(a) As of November 1, 1998, the Company's principal U.S. subsidiary, CCI, had
no significant unused borrowing availability under the Senior Credit
Facility, and the Company's principal U.K. subsidiary, CTI, had
approximately (Pounds)30.0 million ($50.2 million) of unused borrowing
availability under the CTI Credit Facility. See "Description of Certain
Indebtedness". On a pro forma basis to reflect the repayment of borrowings
under the Senior Credit Facility from a portion of the net proceeds of the
Offering, CCI would have approximately $73.9 million of unused borrowing
availability under the Senior Credit Facility.
(b) On a pro forma basis for the Offering and the Proposed JV, the Restricted
Group (as defined) would have cash and cash equivalents, total long-term
debt, redeemable preferred stock, total stockholders' equity and total
capitalization of $49.9 million, $163.8 million, $200.0 million, $942.1
million and $1,305.9 million, respectively. See "Unaudited Pro Forma
Condensed Consolidated Financial Statements--Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet".
(c) The Company's issuance of approximately 15.6 million shares of its common
stock in connection with the formation of the proposed joint venture will
give TdF the right to purchase up to approximately 4.46 million shares of
the Company's common stock at approximately $12.65 per share pursuant to
TdF's antidilutive right under the Governance Agreement. See "Certain
Relationships and Related Transactions--Governance Agreement".
35
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Financial Statements") are based on the historical
financial statements of CCIC and the historical financial statements of the
entities acquired by CCIC (including TEA and Crown) during the periods
presented, adjusted to give effect to the following transactions
(collectively, the "Transactions"): (i) the CTI Investment, (ii) the TEA
Acquisition, (iii) the acquisition of TeleStructures (the "TeleStructures
Acquisition"), (iv) the Crown Merger (together with the acquisitions described
in clauses (i), (ii) and (iii), the "Historical Acquisitions"), (v) the 1997
Refinancing, (vi) the Roll-Up, (vii) the IPO, (viii) the Senior Preferred
Conversion, (ix) the Offering and (x) the Proposed JV.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1997 gives effect to the Transactions as if they
had occurred as of January 1, 1997, and the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the nine months ended September 30,
1998 gives effect to the Roll-Up, the IPO, the Senior Preferred Conversion,
the Offering and the Proposed JV as if they had occurred as of January 1,
1998. The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives
effect to the Offering and the Proposed JV as if they had occurred as of
September 30, 1998. The pro forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that management believes are reasonable.
Included in the notes accompanying the Pro Forma Financial Statements are
tables summarizing the unaudited pro forma results of operations and balance
sheet for CCIC and its Restricted Subsidiaries (as defined in the Indenture
governing the Notes, the "Indenture"); such group of companies is hereinafter
referred to as the "Restricted Group". The Restricted Group excludes CTI and
the Proposed JV, both of which are designated as Unrestricted Subsidiaries (as
defined in the Indenture).
The Pro Forma Financial Statements do not purport to represent what CCIC's
results of operations or financial condition would actually have been had the
Transactions in fact occurred on such dates or to project CCIC's results of
operations or financial condition for any future date or period. The Pro Forma
Financial Statements should be read in conjunction with the consolidated
financial statements and the notes thereto included elsewhere in this document
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
The Historical Acquisitions, the Roll-Up and the Proposed JV are accounted
for under the purchase method of accounting. The total purchase price for each
Historical Acquisition, the Roll-Up and the Proposed JV have been allocated to
the identifiable tangible and intangible assets and liabilities of the
applicable acquired business based upon CCIC's preliminary estimate of their
fair values with the remainder allocated to goodwill and other intangible
assets. The allocations of the purchase prices are subject to revision when
additional information concerning asset and liability valuations is obtained;
however, the Company does not expect that any such revisions will have a
material effect on its consolidated financial position or results of
operations. The Company has recorded the purchase price for the Roll-Up based
on (i) the number of shares of CCIC's Common Stock and Class A Common Stock
exchanged for shares of CTI's capital stock and (ii) the price per share
received by CCIC from the IPO.
36
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
for
Adjustments Pro Historical
for Forma for Acquisitions,
Historical Historical Historical Adjustments 1997
------------------------- Acquisitions Acquisitions Historical for Refinancing, Adjustments
Historical and 1997 and 1997 CTI Roll-Up and Roll-Up and for
CCIC(a) Acquisitions(a) Refinancing Refinancing (j) IPO IPO Offering
-------- --------------- ------------ ------------ ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission...... $ 11,010 $ 4,550 $ -- $ 15,560 $110,922 $ -- $126,482 $ --
Network services
and other......... 20,395 21,964 (1,068)(b) 41,291 13,558 (395)(k) 54,454 --
-------- ------- -------- -------- -------- ------- -------- --------
Total net
revenues........ 31,405 26,514 (1,068) 56,851 124,480 (395) 180,936 --
-------- ------- -------- -------- -------- ------- -------- --------
Operating expenses:
Costs of
operations:
Site rental and
broadcast
transmission...... 2,213 1,421 -- 3,634 53,806 -- 57,440 --
Network services
and other......... 13,137 13,303 (1,134)(c) 25,306 5,990 -- 31,296 --
General and
administrative.... 6,824 4,430 -- 11,254 9,124 (395)(k) 19,983 --
Corporate
development....... 5,731 -- (2,224)(d) 3,507 -- -- 3,507 --
Depreciation and
amortization...... 6,952 1,058 5,179(e) 13,189 34,627 17,138 (l) 64,954 --
-------- ------- -------- -------- -------- ------- -------- --------
34,857 20,212 1,821 56,890 103,547 16,743 177,180 --
-------- ------- -------- -------- -------- ------- -------- --------
Operating income
(loss)............. (3,452) 6,302 (2,889) (39) 20,933 (17,138) 3,756 --
Other income
(expense):
Equity in losses
of unconsolidated
affiliate......... (1,138) -- (136)(f) (1,274) 7 1,274 (m) -- --
Interest and
other income
(expense)......... 1,951 (17) (1,165)(g) 769 552 -- 1,321 --
Interest expense
and amortization
of deferred
financing costs... (9,254) (943) (7,638)(h) (17,835) (20,473) -- (38,308) --
-------- ------- -------- -------- -------- ------- -------- --------
Income (loss)
before income taxes
and minority
interests.......... (11,893) 5,342 (11,828) (18,379) 1,012 (15,864) (33,231) --
Provision for
income taxes....... (49) (1) -- (50) -- -- (50) --
Minority
interests.......... -- -- -- -- -- (1,320)(n) (1,320) --
-------- ------- -------- -------- -------- ------- -------- --------
Net income (loss).. (11,942) 5,341 (11,828) (18,429) 1,012 (17,184) (34,601) --
Dividends on
Preferred Stock.... (2,199) -- (6,134)(i) (8,333) -- 8,333 (o) -- (26,745)(p)
-------- ------- -------- -------- -------- ------- -------- --------
Net income (loss)
after deduction of
dividends on
Preferred Stock.... $(14,141) $ 5,341 $(17,962) $(26,762) $ 1,012 $(8,851) $(34,601) $(26,745)
======== ======= ======== ======== ======== ======= ======== ========
<CAPTION>
Pro
Forma
for
Pro Adjustments Offering
Forma Historical for and
for Proposed Proposed Proposed
Offering JV(q) JV JV
--------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission...... $126,482 $ 6,480 $27,812 (r) $160,774
Network services
and other......... 54,454 -- -- 54,454
--------- ---------- ------------- ---------
Total net
revenues........ 180,936 6,480 27,812 215,228
--------- ---------- ------------- ---------
Operating expenses:
Costs of
operations:
Site rental and
broadcast
transmission...... 57,440 15,131 -- (s) 72,571
Network services
and other......... 31,296 -- -- 31,296
General and
administrative.... 19,983 -- -- (s) 19,983
Corporate
development....... 3,507 -- -- 3,507
Depreciation and
amortization...... 64,954 7,221 22,405 (t) 94,580
--------- ---------- ------------- ---------
177,180 22,352 22,405 221,937
--------- ---------- ------------- ---------
Operating income
(loss)............. 3,756 (15,872) 5,407 (6,709)
Other income
(expense):
Equity in losses
of unconsolidated
affiliate......... -- -- -- --
Interest and
other income
(expense)......... 1,321 -- -- 1,321
Interest expense
and amortization
of deferred
financing costs... (38,308) -- (17,711)(u) (56,019)
--------- ---------- ------------- ---------
Income (loss)
before income taxes
and minority
interests.......... (33,231) (15,872) (12,304) (61,407)
Provision for
income taxes....... (50) -- -- (50)
Minority
interests.......... (1,320) -- 7,205 (v) 5,885
--------- ---------- ------------- ---------
Net income (loss).. (34,601) (15,872) (5,099) (55,572)
Dividends on
Preferred Stock.... (26,745) -- -- (26,745)
--------- ---------- ------------- ---------
Net income (loss)
after deduction of
dividends on
Preferred Stock.... $(61,346) $(15,872) $(5,099) $(82,317)
========= ========== ============= =========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1998
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Pro Forma
Adjustments Forma Pro Adjustments for
Historical for for Adjustments Forma Historical for Offering and
------------------ Roll-Up and Roll-Up for for Proposed Proposed Proposed
CCIC CTI(j) IPO and IPO Offering Offering JV(q) JV JV
-------- -------- ----------- -------- ----------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.... $ 28,456 $ 84,714 $ -- $113,170 $ -- $113,170 $ 8,302 $ 22,986 (r) $144,458
Network services
and other....... 23,805 12,514 (265)(k) 36,054 -- 36,054 -- -- 36,054
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total net
revenues....... 52,261 97,228 (265) 149,224 -- 149,224 8,302 22,986 180,512
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating
expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 8,398 35,901 -- 44,299 -- 44,299 12,285 -- (s) 56,584
Network services
and other....... 14,234 7,916 -- 22,150 -- 22,150 -- -- 22,150
General and
administrative.. 15,022 5,265 (265)(k) 20,022 -- 20,022 -- -- (s) 20,022
Corporate
development..... 2,838 8 -- 2,846 -- 2,846 -- -- 2,846
Non-cash
compensation
charges......... 11,361 3,831 -- 15,192 -- 15,192 -- -- 15,192
Depreciation and
amortization.... 17,105 25,684 11,463 (l) 54,252 -- 54,252 6,206 16,013 (t) 76,471
-------- -------- -------- -------- -------- -------- -------- -------- --------
68,958 78,605 11,198 158,761 -- 158,761 18,491 16,013 193,265
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income
(loss)........... (16,697) 18,623 (11,463) (9,537) -- (9,537) (10,189) 6,973 (12,753)
Other income
(expense):
Equity in
earnings of
unconsolidated
affiliate....... 2,055 -- (2,055)(m) -- -- 97 -- -- --
Interest and
other income
(expense)....... 2,293 725 -- 3,018 -- 3,018 -- -- 3,018
Interest expense
and amortization
of deferred
financing
costs........... (17,581) (13,378) -- (30,959) 2,587 (w) (28,372) -- (13,283)(u) (41,655)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
before income
taxes and
minority
interests........ (29,930) 5,970 (13,518) (37,478) 2,587 (34,891) (10,189) (6,310) (51,390)
Provision for
income taxes..... (218) -- -- (218) -- (218) -- -- (218)
Minority
interests........ (328) -- (1,194)(n) (1,522) -- (1,522) -- 3,659 (v) 2,137
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income
(loss)........... (30,476) 5,970 (14,712) (39,218) 2,587 (36,631) (10,189) (2,651) (49,471)
Dividends on
Preferred Stock.. (4,348) -- 4,348 (o) -- (19,741)(p) (19,741) -- -- (19,741)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)
after deduction
of dividends on
Preferred Stock.. $(34,824) $ 5,970 $(10,364) $(39,218) $(17,154) $(56,372) $(10,189) $ (2,651) $(69,212)
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations
38
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
(Dollars in thousands)
(a) The historical results of operations for each of the entities acquired by
CCIC in the Historical Acquisitions are included in CCIC's historical
results of operations for the period from their respective dates of
acquisition through the end of the period presented. The historical
results of operations presented for each of the acquired entities are
their pre-acquisition results of operations. Set forth below are the
respective dates of each Historical Acquisition:
<TABLE>
<CAPTION>
Company Date
------- ----
<S> <C>
TEA........................................................ May 12, 1997
TeleStructures............................................. May 12, 1997
Crown...................................................... August 15, 1997
</TABLE>
(b) Reflects the following adjustments to net revenues:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Elimination of intercompany sales between TEA and
TeleStructures......................................... $(1,134)
Addition of management fee payable to CCIC from CTI for
the portion of the period preceding the CTI
Investment(i).......................................... 66
-------
Total adjustments to net revenues..................... $(1,068)
=======
</TABLE>
--------
(i) the CTI Investment was consummated on February 28, 1997. Management
fees received by CCIC during the period subsequent to the CTI
Investment are reflected in CCIC's historical results of
operations.
(c) Reflects the elimination of intercompany transactions between TEA and
TeleStructures.
(d) Reflects the elimination of (i) nonrecurring cash bonus awards of $913
paid to certain executive officers in connection with the CTI Investment
and (ii) a nonrecurring cash charge of $1,311 related to the purchase by
CCIC of shares of Class B Common Stock from CCIC's former chief executive
officer in connection with the CTI Investment. See "Certain Relationships
and Related Transactions".
(e) Reflects the incremental amortization of goodwill and other intangible
assets and the incremental depreciation of property and equipment as a
result of the Historical Acquisitions. Goodwill is being amortized over
twenty years and other intangible assets (primarily existing contracts)
are being amortized over ten years.
(f) Reflects equity accounting adjustments to include CCIC's percentage in
CTI's losses for the preinvestment period.
(g) Reflects the elimination of a nonrecurring success fee received by CCIC in
connection with the CTI Investment.
(h) Reflects (i) additional interest expense of $5,291 attributable to the
seller notes issued in connection with the Crown Merger and the TEA
Acquisition and borrowings under the Senior Credit Facility prior to
October 31, 1997 at interest rates ranging from 8.0% to 11.0%, and (ii)
net increase in interest expense of $4,267 as a result of the issuance of
the Notes in connection with the 1997 Refinancing at an interest rate on
the Notes of 10.625% per annum. The adjustment also includes the
elimination of $1,920 of nonrecurring financing fees charged to interest
expense in September and October of 1997. Such fees related to an unfunded
interim loan facility related to the Crown Merger and an unfunded
revolving credit facility.
(i) Reflects additional dividends attributable to the Senior Convertible
Preferred Stock prior to the dates of issuance.
(j) Reflects the historical results of operations of CTI (under U.S. GAAP) for
the periods prior to the consummation of the Roll-Up in August 1998. Such
results have been translated from pounds sterling to U.S. dollars at the
average Noon Buying Rate for the period.
39
<PAGE>
(k) Reflects the elimination of management fees payable to CCIC from CTI.
(l) Reflects the incremental amortization of goodwill as a result of the Roll-
Up. Goodwill is being amortized over twenty years.
(m) Reflects the elimination of equity accounting adjustments to include
CCIC's percentage in CTI's earnings and losses.
(n) Reflects the minority interest in dividends accrued on CTI's Redeemable
Preference Shares.
(o) Reflects decrease in dividends attributable to the conversion of the
outstanding shares of Senior Convertible Preferred Stock into shares of
Common Stock in the Senior Preferred Conversion.
(p) Reflects dividends attributable to the old preferred stock issued in the
Offering.
(q) Reflects the historical results of operations of the tower operations to
be contributed to the Proposed JV.
(r) Reflects additional revenues to be recognized by the Proposed JV pursuant
to the Global Lease and the Formation Agreement.
(s) CCIC expects that the Proposed JV will incur incremental operating
expenses as a stand-alone entity. Such incremental expenses are currently
estimated to amount to approximately $5.2 million per year.
(t) Reflects the incremental depreciation of property and equipment as a
result of the Proposed JV.
(u) Reflects additional interest expense attributable to borrowings under a
credit facility to be entered into by the Proposed JV. Such borrowings are
initially estimated to incur interest at a rate of 9.25%.
(v) Reflects the minority partner's 37.7% interest in the Proposed JV's
operations.
(w) Reflects decrease in interest expense attributable to the repayment of
borrowings under the Senior Credit Facility from a portion of the net
proceeds of the Offering.
40
<PAGE>
The following tables summarize the unaudited pro forma results of operations
for the Restricted Group. Such information is not intended as an alternative
measure of operating results as determined in accordance with generally
accepted accounting principles.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
Year Ended December 31, 1997 1998
----------------------------------- -----------------------------------
Restricted Restricted
Exclusion Group Exclusion Group
Pro of Pro Pro of Pro
Forma Exclusion of Certain Forma Forma Exclusion of Certain Forma
for Unrestricted Adjustments for for Unrestricted Adjustments for
Offering Subsidiary for Roll-Up Offering Offering Subsidiaries for Roll-Up Offering
-------- ------------ ----------- ---------- -------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.......... $126,482 $(110,922) $ -- $ 15,560 $113,170 $ (97,040) $ -- $ 16,130
Network services and
other................. 54,454 (13,558) -- 40,896 36,054 (14,456) -- 21,598
-------- --------- -------- -------- -------- --------- -------- --------
Total net revenues.... 180,936 (124,480) -- 56,456 149,224 (111,496) -- 37,728
-------- --------- -------- -------- -------- --------- -------- --------
Operating expenses:
Costs of operations:
Site rental and
broadcast
transmission.......... 57,440 (53,806) -- 3,634 44,299 (40,225) -- 4,074
Network services and
other................. 31,296 (5,990) -- 25,306 22,150 (9,847) -- 12,303
General and
administrative........ 19,983 (9,124) 395 11,254 20,022 (6,017) 265 14,270
Corporate development.. 3,507 -- -- 3,507 2,846 (8) -- 2,838
Non-cash compensation
charges............... -- -- -- -- 15,192 (5,808) -- 9,384
Depreciation and
amortization.......... 64,954 (34,627) (17,138) 13,189 54,252 (30,747) (11,463) 12,042
-------- --------- -------- -------- -------- --------- -------- --------
177,180 (103,547) (16,743) 56,890 158,761 (92,652) (11,198) 54,911
-------- --------- -------- -------- -------- --------- -------- --------
Operating income
(loss)................. 3,756 (20,933) 16,743 (434) (9,537) (18,844) 11,198 (17,183)
Other income (expense):
Interest and other
income (expense)...... 1,321 (552) -- 769 3,018 (1,632) -- 1,386
Interest expense and
amortization of
deferred financing
costs................. (38,308) 20,473 -- (17,835) (28,372) 15,055 -- (13,317)
-------- --------- -------- -------- -------- --------- -------- --------
Income (loss) before
income taxes and
minority interests..... (33,231) (1,012) 16,743 (17,500) (34,891) (5,421) 11,198 (29,114)
Provision for income
taxes.................. (50) -- -- (50) (218) -- -- (218)
Minority interests...... (1,320) -- 1,320 -- (1,522) 328 1,194 --
-------- --------- -------- -------- -------- --------- -------- --------
Net income (loss)....... (34,601) (1,012) 18,063 (17,550) (36,631) (5,093) 12,392 (29,332)
Dividends on Preferred
Stock.................. (26,745) -- -- (26,745) (19,741) -- -- (19,741)
-------- --------- -------- -------- -------- --------- -------- --------
Net income (loss) after
deduction of dividends
on Preferred Stock..... $(61,346) $ (1,012) $ 18,063 $(44,295) $(56,372) $ (5,093) $ 12,392 $(49,073)
======== ========= ======== ======== ======== ========= ======== ========
</TABLE>
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments for Offering
Historical Adjustments Pro Forma Proposed for and
CCIC for Offering for Offering JV(e) Proposed JV Proposed JV
---------- ------------ ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents.......... $ 201,349 $121,000 (a) $ 322,349 $ -- $(208,375)(f) $ 113,974
Receivables........... 34,499 -- 34,499 -- -- 34,499
Inventories........... 5,209 -- 5,209 -- -- 5,209
Prepaid expenses and
other current
assets............... 2,883 -- 2,883 48 -- 2,931
---------- -------- ---------- ------- --------- ----------
Total current
assets............. 243,940 121,000 364,940 48 (208,375) 156,613
Property and equipment,
net.................... 544,486 -- 544,486 84,089 508,424 (g) 1,136,999
Investments in
affiliates............. 2,221 -- 2,221 -- -- 2,221
Goodwill and other
intangible assets,
net.................... 563,706 -- 563,706 -- -- 563,706
Deferred financing costs
and other assets, net.. 15,586 -- 15,586 -- 4,625 (h) 20,211
---------- -------- ---------- ------- --------- ----------
$1,369,939 $121,000 $1,490,939 $84,137 $ 304,674 $1,879,750
========== ======== ========== ======= ========= ==========
Liabilities and Stockholders'
Equity:
Current liabilities:
Accounts payable...... $ 30,271 $ -- $ 30,271 $ -- $ -- $ 30,271
Other current
liabilities.......... 47,078 -- 47,078 -- -- 47,078
Long-term debt,
current maturities... -- -- -- -- -- --
---------- -------- ---------- ------- --------- ----------
Total current
liabilities........ 77,349 -- 77,349 -- -- 77,349
Long-term debt, less
current maturities..... 494,324 (69,000)(b) 425,324 -- 180,000 (i) 605,324
Other liabilities....... 4,620 -- 4,620 -- -- 4,620
---------- -------- ---------- ------- --------- ----------
Total liabilities... 576,293 (69,000) 507,293 -- 180,000 687,293
---------- -------- ---------- ------- --------- ----------
Minority interests...... 38,529 -- 38,529 -- 11,811 (j) 50,340
Redeemable preferred
stock.................. -- 200,000 (c) 200,000 -- -- 200,000
Stockholders' equity.... 755,117 (10,000)(d) 745,117 84,137 112,863 (k) 942,117
---------- -------- ---------- ------- --------- ----------
$1,369,939 $121,000 $1,490,939 $84,137 $ 304,674 $1,879,750
========== ======== ========== ======= ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
42
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(a) Reflects the following adjustments to cash and cash equivalents:
<TABLE>
<S> <C>
(1) Increase resulting from the receipt of proceeds from the
Offering...................................................... $200,000
(2) Decrease resulting from the payment of underwriting discounts
and commissions and other fees and expenses related to the
Offering...................................................... (10,000)
(3) Decrease resulting from the repayment of borrowings under the
Senior Credit Facility from a portion of the net proceeds of
the Offering.................................................. (69,000)
---------
Total adjustments to cash and cash equivalents................ $121,000
=========
(b) Reflects the repayment of borrowings under the Senior Credit Facility from
a portion of the net proceeds of the Offering.
(c) Reflects the increase resulting from the receipt of proceeds from the
Offering.
(d) Reflects the decrease resulting from the payment of underwriting discounts
and commissions and other fees and expenses related to the Offering.
(e) Reflects the historical amounts from the statement of net assets for the
tower operations to be contributed to the Proposed JV.
(f) Reflects the following adjustments to cash and cash equivalents:
(1) Increase resulting from borrowings under a credit facility to
be entered into by the Proposed JV............................ $ 180,000
(2) Decrease resulting from distribution to minority partner...... (380,000)
(3) Decrease resulting from payment of defined financing costs for
credit facility to be entered into by the Proposed JV......... (4,625)
(4) Decrease resulting from payment of fees and expenses related
to the Proposed JV............................................ (3,750)
---------
Total adjustments to cash and cash equivalents................ $(208,375)
=========
(g) Reflects the increase in basis of property and equipment contributed to the
Proposed JV by the minority partner.
(h) Reflects the deferred financing costs for the credit facility to be entered
into by the Proposed JV.
(i) Reflects the borrowings under a credit facility to be entered into by the
Proposed JV.
(j) Reflects the 37.7% minority interest in the Proposed JV.
(k) Reflects the following adjustments to stockholders' equity:
(1) Increase resulting from increase in basis of property and
equipment contributed to the Proposed JV by the minority
partner....................................................... $ 508,424
(2) Decrease resulting from distribution to minority partner...... (380,000)
(3) Decrease resulting from minority interest..................... (11,811)
(4) Decrease resulting from payment of fees and expenses related
to the Proposed JV............................................ (3,750)
---------
Total adjustments to stockholders' equity..................... $ 112,863
=========
</TABLE>
The following table summarizes the adjustments for the Offering, with
increases to liabilities and stockholders' equity balances shown as negative
amounts:
<TABLE>
<CAPTION>
Adjustment Reference
--------------------------------
(a)(1),(a)(2),(c),(d) (a)(3),(b) Totals
--------------------- ---------- ---------
<S> <C> <C> <C>
Cash and cash equivalents.... $ 190,000 $(69,000) $ 121,000
Long-term debt, less current
maturities.................. -- 69,000 69,000
Redeemable preferred stock... (200,000) -- (200,000)
Stockholders' equity......... 10,000 -- 10,000
--------- -------- ---------
$ -- $ -- $ --
========= ======== =========
</TABLE>
43
<PAGE>
The following table summarizes the adjustments for the Proposed JV, with
increases to liabilities and stockholders' equity balances shown as negative
amounts:
<TABLE>
<CAPTION>
Adjustment Reference
-----------------------------------------------------------------
(g)(j),(k)(1),
(f)(1),(i) (f)(2),(k)(2) (f)(3),(h) (f)(4),(k)(4) (k)(3) Totals
---------- ------------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 180,000 $(380,000) $(4,625) $(3,750) $ -- $(208,375)
Property and equipment,
net.................... -- -- -- -- 508,424 508,424
Deferred financing costs
and other assets, net.. -- -- 4,625 -- -- 4,625
Long-term debt, less
current maturities..... (180,000) -- -- -- -- (180,000)
Minority interests...... -- -- -- -- (11,811) (11,811)
Stockholders' equity.... -- 380,000 -- 3,750 (496,613) (112,863)
--------- --------- ------- ------- --------- ---------
$ -- $ -- $ -- $ -- $ -- $ --
========= ========= ======= ======= ========= =========
</TABLE>
44
<PAGE>
The following table summarizes the unaudited pro forma balance sheet for the
Restricted Group. Such information is not intended as an alternative measure of
financial position as determined in accordance with generally accepted
accounting principles.
<TABLE>
<CAPTION>
As of September 30, 1998
-----------------------------------------------------------
Restricted
Restricted Group Pro
Group Adjustments Forma
Pro Exclusion of Pro for for Offering
Forma for Unrestricted Forma for Proposed and
Offering Subsidiaries Offering JV Proposed JV
---------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash
equivalents.......... $ 322,349 $(272,414) $ 49,935 $ -- $ 49,935
Receivables........... 34,499 (21,357) 13,142 -- 13,142
Inventories........... 5,209 (3,854) 1,355 -- 1,355
Prepaid expenses and
other current
assets............... 2,883 (1,329) 1,554 -- 1,554
---------- --------- ---------- -------- ----------
Total current
assets............. 364,940 (298,954) 65,986 -- 65,986
Property and equipment,
net.................... 544,486 (402,275) 142,211 -- 142,211
Investments in
affiliates............. 2,221 -- 2,221 -- 2,221
Investments in
Unrestricted
Subsidiaries........... -- 750,875 750,875 197,000 947,875
Goodwill and other
intangible assets,
net.................... 563,706 (417,591) 146,115 -- 146,115
Deferred financing costs
and other assets, net.. 15,586 (2,207) 13,379 -- 13,379
---------- --------- ---------- -------- ----------
$1,490,939 $(370,152) $1,120,787 $197,000 $1,317,787
========== ========= ========== ======== ==========
Current liabilities
Accounts payable...... $ 30,271 $ (23,696) $ 6,575 $ -- $ 6,575
Other current
liabilities.......... 47,078 (42,470) 4,608 -- 4,608
Long-term debt,
current maturities... -- -- -- -- --
---------- --------- ---------- -------- ----------
Total current
liabilities........ 77,349 (66,166) 11,183 -- 11,183
Long-term debt, less
current maturities..... 425,324 (261,521) 163,803 -- 163,803
Other liabilities....... 4,620 (3,936) 684 -- 684
---------- --------- ---------- -------- ----------
Total liabilities... 507,293 (331,623) 175,670 -- 175,670
---------- --------- ---------- -------- ----------
Minority interests...... 38,529 (38,529) -- -- --
Redeemable preferred
stock.................. 200,000 -- 200,000 -- 200,000
Stockholders' equity.... 745,117 -- 745,117 197,000 942,117
---------- --------- ---------- -------- ----------
$1,490,939 $(370,152) $1,120,787 $197,000 $1,317,787
========== ========= ========== ======== ==========
</TABLE>
45
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF CCIC
The selected historical consolidated financial and other data for CCIC set
forth below for each of the three years in the period ended December 31, 1997,
and as of December 31, 1995, 1996 and 1997, have been derived from the
consolidated financial statements of CCIC, which have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The selected
historical consolidated financial and other data for CCIC set forth below for
the nine months ended September 30, 1997 and 1998, and as of September 30,
1998, have been derived from the unaudited consolidated financial statements
of CCIC, which include all adjustments that the Company considers necessary
for a fair presentation of the financial position and results of operations
for those periods. Operating results for the nine months ended September 30,
1997 and 1998 are not necessarily indicative of the results that may be
expected for the entire year. The selected historical financial and other data
for the Restricted Group (as defined) are not intended as alternative measures
of operating results or cash flows from operations (as determined in
accordance with generally accepted accounting principles). The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--CCIC" and the consolidated financial statements and the notes
thereto of CCIC included elsewhere in this document.
46
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended December 31, September 30,
----------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- --------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues:
Site rental and broadcast
transmission............ $ 4,052 $ 5,615 $ 11,010 $ 6,743 $ 28,456
Network services and
other................... 6 592 20,395 11,503 23,805
-------- -------- --------- -------- ----------
Total net revenues...... 4,058 6,207 31,405 18,246 52,261
-------- -------- --------- -------- ----------
Costs of operations:
Site rental and broadcast
transmission............ 1,226 1,292 2,213 1,422 8,398
Network services and
other................... -- 8 13,137 7,187 14,234
-------- -------- --------- -------- ----------
Total costs of
operations............. 1,226 1,300 15,350 8,609 22,632
-------- -------- --------- -------- ----------
General and
administrative........... 729 1,678 6,824 3,841 15,022
Corporate development(a).. 204 1,324 5,731 4,654 2,838
Non-cash compensation
charges.................. -- -- -- -- 11,361
Depreciation and
amortization............. 836 1,242 6,952 3,295 17,105
-------- -------- --------- -------- ----------
Operating income (loss)... 1,063 663 (3,452) (2,153) (16,697)
Equity in earnings
(losses) of
unconsolidated
affiliate................ -- -- (1,138) (1,189) 2,055
Interest and other income
(expense)(b)............. 53 193 1,951 1,606 2,293
Interest expense and
amortization of deferred
financing costs.......... (1,137) (1,803) (9,254) (4,368) (17,581)
-------- -------- --------- -------- ----------
Income (loss) before
income taxes and minority
interests................ (21) (947) (11,893) (6,104) (29,930)
Provision for income
taxes.................... -- (10) (49) (46) (218)
Minority interests........ -- -- -- -- (328)
-------- -------- --------- -------- ----------
Net income (loss)......... (21) (957) (11,942) (6,150) (30,476)
Dividends on Senior
Convertible Preferred
Stock.................... -- -- (2,199) (461) (4,348)
-------- -------- --------- -------- ----------
Net income (loss) after
deduction of dividends on
Senior Convertible
Preferred Stock.......... $ (21) $ (957) $ (14,141) $ (6,611) $ (34,824)
======== ======== ========= ======== ==========
Other Data:
Site data (at period
end)(c):
Towers owned.............. 126 155 240 1,173
Towers managed............ 7 7 133 129
Rooftop sites managed
(revenue producing)(d)... 41 52 80 135
-------- -------- --------- -------- ----------
Total sites owned and
managed.................. 174 214 453 1,437
======== ======== ========= ======== ==========
EBITDA(e)................. $ 1,899 $ 1,905 $ 3,500 $ 1,142 $ 11,769
Restricted Group EBITDA... 1,899 1,905 3,500 1,142 4,508
Capital expenditures...... 161 890 18,035 5,295 77,728
Summary cash flow
information:
Net cash provided by
(used for) operating
activities.............. 1,672 (530) (624) (2,061) 3,352
Net cash used for
investing activities.... (16,673) (13,916) (111,484) (97,242) (76,731)
Net cash provided by
financing activities.... 15,597 21,193 159,843 105,055 219,226
Ratio of earnings to fixed
charges(f)............... -- -- -- -- --
Ratio of EBITDA to cash
interest expense......... 1.72x 0.92x 0.49x 0.27x 2.61x
Ratio of net debt to
Adjusted EBITDA(e)(g).... 6.75x 7.26x 40.43x
Balance Sheet Data (at
period end):
Cash and cash
equivalents.............. $ 596 $ 7,343 $ 55,078 $ 201,349
Property and equipment,
net...................... 16,003 26,753 81,968 544,486
Total assets.............. 19,875 41,226 371,391 1,369,939
Total debt................ 11,182 22,052 156,293 494,324
Redeemable preferred
stock(h)................. 5,175 15,550 160,749 --
Total stockholders' equity
(deficit)................ 619 (210) 41,792 755,117
</TABLE>
- --------
(a) Corporate development expenses represent costs incurred in connection with
acquisitions and development of new business initiatives. These expenses
consist primarily of allocated compensation, benefits and overhead costs
that are not directly related to the administration or management of
existing towers. For the
47
<PAGE>
year ended December 31, 1997, such expenses include (i) nonrecurring cash
bonuses of $0.9 million paid to certain executive officers in connection
with the CTI Investment and (ii) a nonrecurring cash charge of $1.3 million
related to the purchase by CCIC of shares of Common Stock from CCIC's
former chief executive officer in connection with the CTI Investment. See
"Certain Relationships and Related Transactions".
(b) Includes a $1.2 million fee received in March 1997 as compensation for
leading the investment consortium which provided the equity financing for
CTI in connection with the CTI Investment.
(c) Represents the aggregate number of sites of CCIC as of the end of each
period.
(d) As of September 30, 1998, CCIC had contracts with 1,367 buildings in the
United States to manage on behalf of such buildings the leasing of space
for antenna on the rooftops of such buildings. A revenue producing rooftop
represents a rooftop where CCIC has arranged a lease of space on such
rooftop and, as such, is receiving payments in respect of its management
contract. CCIC generally does not receive any payment for rooftops under
management unless CCIC actually leases space on such rooftops to third
parties. As of September 30, 1998, CCIC had 1,286 rooftop sites under
management throughout the United States that were not revenue producing
but were available for leasing to customers and, in the United Kingdom,
the Company had 54 revenue producing rooftop sites that were occupied by
the Company's transmitters but were not available for leasing to
customers.
(e) EBITDA is defined as operating income (loss) plus depreciation and
amortization and non-cash compensation charges. Adjusted EBITDA is defined
as the sum of (i) annualized site rental and broadcast transmission EBITDA
before corporate development for the most recent calendar quarter and (ii)
EBITDA, less site rental and broadcast transmission EBITDA before
corporate development, for the most recent four calendar quarters. EBITDA
and Adjusted EBITDA are presented as additional information because
management believes them to be useful indicators of CCIC's ability to meet
debt service and capital expenditure requirements. They are not, however,
intended as alternative measures of operating results or cash flow from
operations (as determined in accordance with generally accepted accounting
principles). Furthermore, CCIC's measure of EBITDA may not be comparable
to similarly titled measures of other companies.
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes, fixed charges and equity in
earnings (losses) of unconsolidated affiliate. Fixed charges consist of
interest expense, the interest component of operating leases and
amortization of deferred financing costs. For the years ended December 31,
1995, 1996 and 1997 and the nine months ended September 30, 1997 and 1998,
earnings were insufficient to cover fixed charges by $21,000, $0.9
million, $10.8 million, $5,000 and $32.0 million, respectively.
(g) Net debt represents total debt less cash and cash equivalents.
(h) Represents (i) the Senior Convertible Preferred Stock privately placed by
CCIC in August 1997 and October 1997, all of which has been converted into
shares of Common Stock, and (ii) the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock and the Series C Convertible
Preferred Stock privately placed by CCIC in April 1995, July 1996 and
February 1997, respectively, all of which has been converted into shares
of Common Stock in connection with the IPO.
48
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF CROWN
The selected historical combined financial data for Crown presented below
for each of the two years in the period ended December 31, 1996 and the seven
months ended July 31, 1997, have been derived from the combined financial
statements of Crown, which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. Crown was acquired by CCIC in the
Crown Merger in August 1997 and, as a result, twelve-month historical
financial data for Crown is not presented. The information set forth below
should be read in conjunction with the combined financial statements and the
notes thereto of Crown included elsewhere in this document.
<TABLE>
<CAPTION>
Seven Months
Years Ended Ended
December 31, July 31,
---------------- ------------
1995 1996 1997
------- ------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Site rental................................... $ 3,632 $ 5,120 $ 4,550
Network services and other.................... 7,384 14,260 13,137
------- ------- --------
Total net revenues.......................... 11,016 19,380 17,687
------- ------- --------
Costs of operations:
Site rental................................... 763 1,691 1,421
Network services and other.................... 3,944 8,632 5,841
------- ------- --------
Total costs of operations................... 4,707 10,323 7,262
------- ------- --------
General and administrative...................... 2,625 3,150 3,761
Depreciation and amortization................... 568 1,168 1,006
------- ------- --------
Operating income................................ 3,116 4,739 5,658
Interest and other income (expense)............. 19 (53) (26)
Interest expense................................ (785) (1,175) (925)
------- ------- --------
Income before income taxes...................... 2,350 3,511 4,707
Provision for income taxes...................... -- -- --
------- ------- --------
Net income...................................... $ 2,350 $ 3,511 $ 4,707
======= ======= ========
Other Data:
Site data (at period end)(a):
Towers owned.................................. 45 53 61
Towers managed................................ 122 127 127
Rooftop sites managed (revenue producing)..... 9 16 20
------- ------- --------
Total sites owned and managed............... 176 196 208
======= ======= ========
EBITDA(b):
Site rental................................... $ 2,589 $ 3,098 $ 2,943
Network services and other.................... 1,095 2,809 3,721
------- ------- --------
Total EBITDA................................ $ 3,684 $ 5,907 $ 6,664
======= ======= ========
EBITDA as a percentage of net revenues(b):
Site rental................................... 71.3% 60.5% 64.7%
Network services and other.................... 14.8 19.7 28.3
Total EBITDA as a percentage of net
revenues................................... 33.4 30.5 37.7
Capital expenditures............................ $ 5,670 $ 8,658 $ 12,425
Summary cash flow information:
Net cash provided by operating activities..... 2,974 4,162 5,199
Net cash used for investing activities........ (5,670) (8,652) (12,425)
Net cash provided by financing activities..... 2,367 4,100 7,018
</TABLE>
- --------
(a) Represents the aggregate number of sites of Crown as of the end of each
period.
(b) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA is presented as additional information because management believes
it to be a useful indicator of a company's ability to meet debt service
and capital expenditure requirements. It is not, however, intended as an
alternative measure of operating results or cash flow from operations (as
determined in accordance with generally accepted accounting principles).
Furthermore, Crown's measure of EBITDA may not be comparable to similarly
titled measures of other companies.
49
<PAGE>
SELECTED FINANCIAL AND OTHER DATA OF CTI
The selected historical financial data for CTI, which was 34.3% owned by
CCIC prior to the Roll-Up, presents (i) selected historical financial data of
the BBC Home Service Transmission Business prior to its acquisition by CTI
(the "Predecessor") for the year ended March 31, 1996 and the eleven and two
months ended February 27, 1997, (ii) selected historical consolidated
financial data of CTI after such acquisition for the one month ended March 31,
1997 and for the nine months ended December 31, 1997, and (iii) selected
historical consolidated financial data of CTI for the eight months ended
August 31, 1998. The selected historical financial data for the year ended
March 31, 1996 and the eleven months ended February 27, 1997 have been derived
from the financial statements of the Predecessor, which have been audited by
KPMG, Chartered Accountants. The selected financial data for the one month
ended March 31, 1997 and the nine months ended December 31, 1997 have been
derived from the consolidated financial statements of CTI, which have been
audited by KPMG, Chartered Accountants. The selected historical financial data
for the two months ended February 27, 1997 have been derived from the
unaudited financial statements of the Predecessor, and the selected historical
financial data for the eight months ended August 31, 1998 have been derived
from the unaudited consolidated financial statements of CTI, which include all
adjustments that CTI considers necessary for a fair presentation of the
financial position and results of operations for that period. The results of
operations for the one month ended March 31, 1997, the nine months ended
December 31, 1997 and the eight months ended August 31, 1998 are not
necessarily indicative of the results of operations of CTI that may be
expected for the entire year. CCIC acquired a majority ownership interest in
CTI upon consummation of the Roll-Up in August 1998 and, as a result,
historical financial data of CTI for the nine months ended September 30, 1998
is not presented. This information reflects financial data for CTI as a whole,
is not limited to that portion of the financial data attributable to CCIC's
percentage ownership of CTI prior to the Roll-Up and is not indicative of any
distributions or dividends that CCIC might receive in the future. CTI is
subject to significant restrictions on its ability to make dividends and
distributions to CCIC. See "Risk Factors--Holding Company Structure;
Dependence on Dividends to Meet Cash Requirements or Pay Dividends". The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations--CTI" and the consolidated financial statements and the
notes thereto of CTI included elsewhere in this document.
50
<PAGE>
<TABLE>
<CAPTION>
Predecessor Company CTI
----------------------------------------------- -------------------------------------------------
Eleven Two Nine
Months Months One Months Eight
Year Ended Ended Month Ended Months
Ended February 27, February 27, Ended December 31, Ended
March 31, 1996 1997 1997 March 31, 1997 1997 August 31, 1998
--------------- -------------- -------------- --------------- --------------- ---------------
(Pounds sterling in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of
Operations
Data:
Net revenues.... (Pounds) 70,367 (Pounds)70,614 (Pounds)12,805 (Pounds) 6,433 (Pounds) 56,752 (Pounds) 59,033
Operating
expenses(b).... 62,582 56,612 10,108 5,188 47,976 47,821
--------------- -------------- -------------- --------------- --------------- ---------------
Operating
income......... 7,785 14,002 2,697 1,245 8,776 11,212
Interest and
other income... -- -- -- 49 288 440
Interest expense
and
amortization of
deferred
financing
costs.......... -- -- -- (969) (12,419) (9,507)
--------------- -------------- -------------- --------------- --------------- ---------------
Income (loss)
before income
taxes.......... 7,785 14,002 2,697 325 (3,355) 2,145
Provision for
income taxes... -- -- -- -- -- --
--------------- -------------- -------------- --------------- --------------- ---------------
Net income
(loss) under
U.K. GAAP...... 7,785 14,002 2,697 325 (3,355) 2,145
Adjustments to
convert to U.S.
GAAP........... 3,707 3,993 726 78 866 1,493
--------------- -------------- -------------- --------------- --------------- ---------------
Net income
(loss) under
U.S. GAAP...... (Pounds) 11,492 (Pounds)17,995 (Pounds) 3,423 (Pounds) 403 (Pounds) (2,489) (Pounds) 3,638
=============== ============== ============== =============== =============== ===============
Other Data:
Site data(c):
Towers and
revenue
producing
rooftop sites
at end of
period.........
EBITDA (under
U.S. GAAP)(d).. (Pounds) 20,620 (Pounds)27,040 (Pounds) 5,161 (Pounds) 3,064 (Pounds) 25,695 (Pounds) 29,244
Capital
expenditures
(under U.S.
GAAP).......... 18,079 21,810 711 748 14,361 36,304
Ratio of
earnings to
fixed
charges(e).....
Ratio of EBITDA
to cash
interest
expense........
Summary cash
flow
information
(under U.S.
GAAP):
Net cash
provided by
operating
activities..... 24,311 28,146 5,161 4,871 25,555 27,226
Net cash used
for investing
activities..... (17,190) (21,811) (711) (52,889) (14,668) (36,135)
Net cash
provided by (used for)
<CAPTION>
financing CTI
activities..... ---------(7,121)---------(6,335)-- (4,450) 57,706 (12,423) 9,955
One Nine Eight
Month Months Months
Ended Ended Ended
March 31, December 31, August 31,
1997(a) 1997(a) 1998(a)
---------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C>
Statement of
Operations
Data:
Net revenues.... $ 10,933 $ 96,448 $100,327
Operating
expenses(b).... 8,817 81,594 81,272
---------- ------------ ----------
Operating
income......... 2,116 14,854 19,055
Interest and
other income... 83 489 748
Interest expense
and
amortization of
deferred
financing
costs.......... (1,647) (21,106) (16,157)
---------- ------------ ----------
Income (loss)
before income
taxes.......... 552 (5,763) 3,646
Provision for
income taxes... -- -- --
---------- ------------ ----------
Net income
(loss) under
U.K. GAAP...... 552 (5,763) 3,646
Adjustments to
convert to U.S.
GAAP........... 133 1,472 2,537
---------- ------------ ----------
Net income
(loss) under
U.S. GAAP...... $ 685 $ (4,291) $ 6,183
========== ============ ==========
Other Data:
Site data(c):
Towers and
revenue
producing
rooftop sites
at end of
period......... 801 808
============ ==========
EBITDA (under
U.S. GAAP)(d).. $ 5,207 $ 43,656 $ 49,700
Capital
expenditures
(under U.S.
GAAP).......... 1,271 24,407 61,699
Ratio of
earnings to
fixed
charges(e)..... 1.44x -- 1.44x
Ratio of EBITDA
to cash
interest
expense........ 3.58x 2.71x 3.76x
Summary cash
flow
information
(under U.S.
GAAP):
Net cash
provided by
operating
activities..... 8,278 43,431 46,271
Net cash used
for investing
activities..... (89,885) (24,928) (61,411)
Net cash
provided by
(used for)
financing
activities..... 98,071 (21,113) 16,919
</TABLE>
- --------
(a) CTI publishes its consolidated financial statements in pounds sterling.
For the convenience of the reader, the information set forth above
contains translations of pound sterling amounts into U.S. dollars at the
Noon Buying Rate on September 30, 1998, of (Pounds)1.00 = $1.6995. No
representation is made that the pound sterling amounts have been, could
have been or could be converted into U.S. dollars at the rate indicated or
any other rates. On November 30, 1998, the Noon Buying Rate was
(Pounds)1.00 = $1.6485.
(b) Included in operating expenses for the eight months ended August 31, 1998
are non-cash compensation charges for (Pounds)2.3 million ($4.0 million)
related to the issuance of stock options to certain executives and
employees.
(c) As of August 31, 1998, CTI's 54 revenue producing rooftop sites were
occupied by its transmitters but were not available for leasing to
customers.
(d) EBITDA is defined as operating income (loss) plus depreciation and
amortization and non-cash compensation charges. EBITDA is presented as
additional information because management believes it to be a useful
indicator of CTI's ability to meet debt service and capital expenditure
requirements. It is not, however, intended as an alternative measure of
operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles). Furthermore,
CTI's measure of EBITDA may not be comparable to similarly titled measures
of other companies.
(e) For purposes of computing the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes and fixed charges. Fixed
charges consist of interest expense, the interest component of operating
leases and amortization of deferred financing costs. For the nine months
ended December 31, 1997, earning were insufficient to cover fixed charges
by (Pounds)2.5 million ($4.2 million).
51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion sets forth separately the historical consolidated
results of operations of CCIC and CTI and is intended to assist in
understanding (i) CCIC's consolidated financial condition as of September 30,
1998 and its consolidated results of operations for the nine-month periods
ended September 30, 1997 and 1998 and for each year in the three-year period
ended December 31, 1997 and (ii) CTI's consolidated results of operations for
each twelve-month period in the two-year period ended March 31, 1998. The
statements in this discussion regarding the industry outlook, the Company's
expectations regarding the future performance of its businesses and the other
nonhistorical statements in this discussion are forward-looking statements.
These forward-looking statements are subject to numerous risks and
uncertainties, including but not limited to the uncertainties relating to
decisions on capital expenditures to be made in the future by wireless
communications carriers and broadcasters and the risks and uncertainties
described in "Risk Factors". This discussion should be read in conjunction
with "Unaudited Pro Forma Condensed Consolidated Financial Statements",
"Selected Financial and Other Data of CCIC", "Selected Financial and Other
Data of Crown", "Selected Financial and Other Data of CTI" and the
consolidated financial statements and the notes thereto included elsewhere in
this document. Results of operations of the acquired businesses that are
wholly owned are included in the Company's consolidated financial statements
for the periods subsequent to the respective dates of acquisition. As such,
the Company's results of operations for the nine months ended September 30,
1997 are not comparable to the results of operations for the nine months ended
September 30, 1998, and the results for the year ended December 31, 1996 are
not comparable to the year ended December 31, 1997.
Overview
The continued growth of the Company's business depends substantially on the
condition of the wireless communications and broadcast industries. The Company
believes that the demand for communications sites will continue to grow and
expects that, due to increased competition, wireless communications carriers
will continue to seek operating and capital efficiencies by (i) outsourcing
certain network services and the build-out and operation of new and existing
infrastructure and (ii) co-locating antennas and transmission equipment on
multiple tenant towers. In addition, wireless communications carriers are
beginning to seek to sell their wireless communications infrastructure to, or
establish joint ventures with, experienced infrastructure providers, such as
the Company, that have the ability to manage networks.
Further, the Company believes that wireless communications carriers and
broadcasters ultimately will seek to outsource the operation of their towers
and transmission networks, including the transmission of their signals.
Management believes that the Company's ability to manage towers and
transmission networks and its proven track record of providing end-to-end
services to the wireless communications and broadcasting industries position
it to capture such business.
The willingness of wireless communications carriers to utilize the Company's
infrastructure and related services is affected by numerous factors, including
consumer demand for wireless services, interest rates, cost of capital,
availability of capital to wireless carriers, tax policies, willingness to co-
locate equipment, local restrictions on the proliferation of towers, cost of
building towers and technological changes affecting the number of
communications sites needed to provide wireless communications services to a
given geographic area. The Company's revenues that are derived from the
provision of transmission services to the broadcasting industry will be
affected by the timing of the commencement of digital terrestrial television
broadcasts in both the United Kingdom and the United States, as well as in
other countries around the world, consumer demand for digital terrestrial
broadcasting, interest rates, cost of capital, zoning restrictions on tall
towers and the cost of building towers.
As an important part of its business strategy, the Company will seek (i) to
take advantage of the operating leverage of its site rental business by
increasing the antenna space leased on its owned or managed communications
sites, (ii) to leverage its in-house technical and operational expertise,
(iii) to expand its tower footprints by partnering with wireless
communications carriers to assume ownership of their existing towers and by
pursuing build-to-suit opportunities and (iv) to acquire existing transmission
networks globally as opportunities arise.
52
<PAGE>
Results of Operations
The Company's primary sources of revenues are from (i) the rental of antenna
space on towers and rooftops sites, (ii) the provision of network services and
(iii) the provision of analog and digital broadcast transmission services.
CCIC
CCIC's primary sources of revenues are from (i) the rental of antenna space
on towers and rooftop sites and (ii) the provision of network services, which
includes network design and site selection, site acquisition, site development
and construction and antenna installation.
Site rental revenues are received primarily from wireless communications
companies, including cellular, PCS, paging, specialized mobile radio/enhanced
specialized mobile radio ("SMR/ESMR") and microwave operators. Site rental
revenues are generally recognized on a monthly basis under lease agreements,
which typically have original terms of five years (with three or four optional
renewal periods of five years each). Average revenues for CCIC's managed
rooftop sites are less than for the owned and managed towers because a
substantial portion of the revenues from the tenants at rooftop sites is
remitted to the building owner or manager.
Network services revenues consist of revenues from (i) network design and
site selection, (ii) site acquisition, (iii) site development and
construction, (iv) antenna installation and (v) other services. Network
services revenues are received primarily from wireless communications
companies. Network services revenues are recognized under service contracts
which provide for billings on either a fixed price basis or a time and
materials basis. Demand for CCIC's network services fluctuates from period to
period and within periods. See "Risk Factors--Variability in Demand for
Network Services". Consequently, the operating results of CCIC's network
services businesses for any particular period may vary significantly, and
should not be considered as indicative of longer-term results. CCIC also
derives revenues from the ownership and operation of microwave radio and SMR
networks in Puerto Rico where CCIC owns radio wave spectrum in the 2,000 MHz
and 6,000 MHz range (for microwave radio) and the 800 MHz range (for SMR).
These revenues are generally recognized under monthly management or service
agreements.
Costs of operations for site rental primarily consist of land leases,
repairs and maintenance, utilities, insurance, property taxes and monitoring
costs as well as, in the case of managed sites, rental payments. For any given
tower, such costs are relatively fixed over a monthly or an annual time
period. As such, operating costs for owned towers do not generally increase
significantly as additional customers are added. However, rental expenses at
certain managed towers increase as additional customer antennas are added,
resulting in higher incremental revenues but lower incremental margins than on
owned towers. Costs of operations for network services consist primarily of
employee compensation and related benefits costs, subcontractor services,
consulting fees, and other on-site construction and materials costs. CCIC
incurs these network services costs (i) to support its internal operations,
including construction and maintenance of its owned towers, and (ii) to
maintain the employees necessary to provide end-to-end services to third
parties regardless of the level of such business at any time. The Company
believes that its experienced staff enables it to provide the type of end-to-
end services that enhance its ability to acquire access to the infrastructure
of wireless communications carriers and to attract significant build-to-suit
contracts.
General and administrative expenses consist primarily of employee
compensation and related benefits costs, advertising, professional and
consulting fees, office rent and related expenses and travel costs. Corporate
development expenses represent costs incurred in connection with acquisitions
and development of new business initiatives. These expenses consist primarily
of allocated compensation, benefits and overhead costs that are not directly
related to the administration or management of existing towers.
Depreciation and amortization charges relate to CCIC's property and
equipment (primarily towers, construction equipment and vehicles), goodwill
and other intangible assets recorded in connection with business acquisitions.
Depreciation of towers and amortization of goodwill are computed with a useful
life of 20 years.
53
<PAGE>
Amortization of other intangible assets (principally the value of existing
site rental contracts at Crown) is computed with a useful life of 10 years.
Depreciation of construction equipment and vehicles are generally computed
with useful lives of 10 years and 5 years, respectively.
In May 1997, the Company consummated the TEA Acquisition and the
TeleStructures Acquisition. In August 1997, the Company consummated the Crown
Merger. In August 1998, the Company consummated a share exchange with the
shareholders of CTI, pursuant to which the Company's ownership of CTI
increased from approximately 34.3% to 80%. Results of operations of these
acquired businesses are included in the Company's consolidated financial
statements for the periods subsequent to the respective dates of acquisition.
As such, the Company's results of operations for the three and nine months
ended September 30, 1997 are not comparable to the results of operations for
the three and nine months ended September 30, 1998. See "--CTI" for a
description of the revenues and operating expenses that are included in CCIC's
consolidated results of operations subsequent to the consummation of the share
exchange in August 1998.
Discussion of Pro Forma Results of Operations
As discussed above, the historical financial statements included elsewhere
herein do not reflect the results of operations of the businesses of CCIC,
Crown and CTI (the "Businesses") on an aggregate basis for all of the periods
presented. As a result, management believes that the historical financial
statements included elsewhere herein do not, by themselves, provide investors
with sufficient information to adequately assess the recent trends of the
Businesses. The Company is providing the following discussion of the last two
quarters' and the last nine months' pro forma results of operations,
therefore, to supplement the historical financial information included
elsewhere herein to assist investors in evaluating the Businesses' historical
results of operations.
The pro forma results of operations discussed below have been derived from
the historical results of operations of the Company for the three months ended
September 30, 1998 and June 30, 1998, and for the nine months ended September
30, 1998, and are adjusted to include CTI's results of operations for periods
prior to the consummation of the share exchange with the shareholders of CTI.
The pro forma results of operations do not purport to present the combined
results of operations that the Businesses would have achieved had they been
under common ownership and control during such periods, nor are they
indicative of the results of operations that may be achieved in the future.
The acquisitions of the acquired businesses (including CTI) by CCIC resulted
in new bases of accounting whereby the assets and liabilities of the acquired
businesses were adjusted to their fair values on their respective dates of
acquisition pursuant to Accounting Principles Board Opinion No. 16. To the
extent such adjustments resulted in charges to depreciation and amortization
expense, such charges do not enter into the determination of costs of
operations, general and administrative expenses or corporate development
expenses.
Discussion of Three Months Ended September 30, 1998 and June 30, 1998
Revenues for the three months ended September 30, 1998 were $54.3 million,
an increase of $5.2 million from the three months ended June 30, 1998. This
increase was primarily attributable to (i) a $3.3 million, or 8.8%, increase
in site rental and broadcast transmission revenues, of which $3.0 million was
attributable to CTI and $0.3 million was attributable to the Crown operations;
and (ii) a $3.0 million increase in network services revenues from the Crown
operations, partially offset by a $0.9 million decrease in network services
revenues from CTI. The increase in site rental and broadcast transmission
revenues at CTI was primarily due to additional digital broadcast transmission
sites coming into service. The increase in site rental revenues at Crown was
primarily due to the addition of 51 towers during the third quarter of 1998.
Crown added 50 new tenant leases during the third quarter of 1998, compared to
43 new tenant leases during the second quarter of 1998. The increase in
network services revenues at Crown was attributable to the completion of 148
tenant antenna installations during the third quarter of 1998, compared to 58
such installations during the second quarter of 1998. The decrease in network
services revenues at CTI was attributable to a decrease in the number of
completed projects during the third quarter of 1998 as compared to the second
quarter of 1998.
54
<PAGE>
The Company expects demand for third-party site acquisition services to
continue to decline. In addition, demand for the Company's network services
fluctuates from period to period and within periods. These fluctuations are
caused by a number of factors, including the timing of customers' capital
expenditures, annual budgetary considerations of customers, the rate and
volume of wireless communications carriers' tower build-outs, timing of
existing customer contracts and general economic conditions. While such demand
fluctuates, the Company must incur certain costs, such as maintaining a staff
of network services employees in anticipation of future contracts, even when
there may be no current business. Consequently, the operating results of the
Company's network services businesses for any particular period may vary
significantly, and should not be considered as necessarily being indicative of
longer-term results.
Costs of operations for the three months ended September 30, 1998 were $24.0
million, an increase of $1.7 million from the three months ended June 30,
1998. This increase was primarily attributable to a $2.3 million increase in
network services costs related to the Crown operations, offset by a $0.8
million decrease in site rental and broadcast transmission costs. Costs of
operations for site rental and broadcast transmission as a percentage of site
rental and broadcast transmission revenues decreased to 36.9% for the third
quarter of 1998 from 42.2% for the second quarter of 1998; this improvement in
margins was due to lower costs at CTI, where a greater proportion of
engineering staff cost was incurred in connection with digital terrestrial
transmission projects and capitalized. Costs of operations for network
services as a percentage of network services revenues increased to 65.2% for
the third quarter of 1998 from 55.6% for the second quarter of 1998, primarily
due to lower margins from the Crown operations. Margins from the Crown network
services operations decreased as a result of increasingly competitive market
conditions.
General and administrative expenses for the three months ended September 30,
1998 were $7.1 million, a decrease of $0.2 million from the three months ended
June 30, 1998. General and administrative expenses as a percentage of revenues
decreased to 13.0% for the third quarter of 1998 from 14.8% from the second
quarter of 1998, primarily due to lower expenses at CTI.
Discussion of Nine Months Ended September 30, 1998
Revenues for the nine months ended September 30, 1998 were $149.2 million,
consisting of (i) $113.2 million in site rental and broadcast transmission
revenues and (ii) $36.0 million in network services and other revenues. Site
rental and broadcast transmission revenues from CTI amounted to $97.0 million,
or 85.7% of total site rental and broadcast transmission revenues. Network
services revenues from CTI, the Crown operations and the TEA operations
amounted to $14.5 million, $13.3 million and $4.8 million, respectively.
Costs of operations for the nine months ended September 30, 1998 were $66.4
million, consisting of (i) $44.3 million in site rental and broadcast
transmission costs and (ii) $22.1 million in network services and other costs.
Costs of operations for site rental and broadcast transmission as a percentage
of site rental and broadcast transmission revenues were 39.1% (41.5% at CTI
and 25.3% at Crown). Costs of operations for network services as a percentage
of network services revenues were 61.4%.
General and administrative expenses for the nine months ended September 30,
1998 were $20.0 million. General and administrative expenses as a percentage
of revenues were 13.4%.
Corporate development expenses for the nine months ended September 30, 1998
were $2.8 million, or 1.9% of revenues. Such costs are incurred primarily at
the Company's corporate office.
55
<PAGE>
Discussion of Historical Results of Operations
The following information is derived from CCIC's Historical Consolidated
Statements of Operations for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended Year Ended Year Ended Nine Months Ended September 30,
December 31, 1995 December 31, 1996 December 31, 1997 September 30, 1997 1998
-------------------- -------------------- ------------------ ---------------------- ------------------
Percent Percent Percent Percent Percent
of Net of Net of Net of Net of Net
Amount Revenues Amount Revenues Amount Revenues Amount Revenues Amount Revenues
--------- --------- --------- --------- -------- -------- ---------- ---------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Site rental and
broadcast
transmission.... $ 4,052 99.9% $ 5,615 90.5% $ 11,010 35.1% $ 6,743 37.0% $ 28,456 54.4%
Network services
and other....... 6 0.1 592 9.5 20,395 64.9 11,503 63.0 23,805 45.6
--------- ------- --------- ------- -------- ----- ---------- -------- -------- -----
Total net
revenues....... 4,058 100.0 6,207 100.0 31,405 100.0 18,246 100.0 52,261 100.0
--------- ------- --------- ------- -------- ----- ---------- -------- -------- -----
Operating
expenses:
Costs of
operations:
Site rental and
broadcast
transmission.... 1,226 30.3 1,292 23.0 2,213 20.1 1,422 21.1 8,398 29.5
Network services
and other....... -- -- 8 1.4 13,137 64.6 7,187 62.5 14,234 59.8
--------- ------- --------- ------- -------- ----- ---------- -------- -------- -----
Total costs of
operations..... 1,226 30.2 1,300 21.0 15,350 48.9 8,609 47.2 22,632 43.3
General and
administrative.. 729 18.0 1,678 27.0 6,824 21.7 3,841 21.0 15,022 28.8
Corporate
development..... 204 5.0 1,324 21.3 5,731 18.3 4,654 25.5 2,838 5.4
Non-cash
compensation
charges......... -- -- -- -- -- -- -- -- 11,361 21.7
Depreciation and
amortization.... 836 20.6 1,242 20.0 6,952 22.1 3,295 18.1 17,105 32.7
--------- ------- --------- ------- -------- ----- ---------- -------- -------- -----
Operating income
(loss)........... 1,063 26.2 663 10.7 (3,452) (11.0) (2,153) (11.8) (16,697) (31.9)
Other income
(expense):
Equity in
earnings
(losses) of
unconsolidated
affiliate....... -- -- -- -- (1,138) (3.6) (1,189) (6.5) 2,055 3.9
Interest and
other income
(expense)....... 53 1.3 193 3.1 1,951 6.2 1,606 8.8 2,293 4.4
Interest expense
and amortization
of deferred
financing
costs........... (1,137) (28.0) (1,803) (29.0) (9,254) (29.5) (4,368) (23.9) (17,581) (33.7)
--------- ------- --------- ------- -------- ----- ---------- -------- -------- -----
Loss before income
taxes and
minority
interests........ (21) (0.5) (947) (15.2) (11,893) (37.9) (6,104) (33.4) (29,930) (57.3)
Provision for
income taxes..... -- -- (10) (0.2) (49) (0.1) (46) (0.3) (218) (0.4)
Minority
interests........ -- -- -- -- -- -- -- -- (328) (0.6)
--------- ------- --------- ------- -------- ----- ---------- -------- -------- -----
Net loss.......... $ (21) (0.5)% $ (957) (15.4)% $(11,942) (38.0)% $ (6,150) (33.7)% $(30,476) (58.3)%
========= ======= ========= ======= ======== ===== ========== ======== ======== =====
</TABLE>
Comparison of Nine Months Ended September 30, 1998 and 1997
Consolidated revenues for the nine months ended September 30, 1998 were
$52.3 million, an increase of $34.0 million from the nine months ended
September 30, 1997. This increase was primarily attributable to (i) a $21.7
million, or 322.0%, increase in site rental and broadcast transmission
revenues, of which $12.3 million was attributable to CTI and $9.4 million was
attributable to the Crown operations; (ii) a $10.4 million increase in network
services revenues from the Crown operations, partially offset by a $2.2
million decrease in network services revenues from TEA; and (iii) $1.9 million
in network services revenues from CTI.
Costs of operations for the nine months ended September 30, 1998 were $22.6
million, an increase of $14.0 million from the nine months ended September 30,
1997. This increase was primarily attributable to (i) a $7.0 million increase
in site rental and broadcast transmission costs, of which $4.3 million was
attributable to CTI and $2.7 million was attributable to the Crown operations;
(ii) a $6.4 million increase in network services costs related to the Crown
operations, partially offset by a $2.3 million decrease in network services
costs from TEA; and (iii) $1.9 million in network services costs from CTI.
Costs of operations for site rental and broadcast transmission as a percentage
of site rental and broadcast transmission revenues increased to 29.5% for the
nine months ended September 30, 1998 from 21.1% for the nine months ended
September 30, 1997 because of higher costs attributable to the CTI and Crown
operations. Costs of operations for network services as a percentage of
network services revenues decreased to 59.8% for the nine months ended
September 30, 1998 from 62.5% for
56
<PAGE>
the nine months ended September 30, 1997, primarily due to improved margins
from the TEA operations. Margins from the Crown network services operations
decreased for the nine months ended September 30, 1998 as a result of
increasingly competitive market conditions.
General and administrative expenses for the nine months ended September 30,
1998 were $15.0 million, an increase of $11.2 million from the nine months
ended September 30, 1997. This increase was primarily attributable to (i) a
$7.1 million increase in expenses related to the Crown operations; (ii) a $0.8
million increase in expenses related to the TEA operations; (iii) a $2.0
million increase in expenses at the Company's corporate office; and (iv) $0.8
million in expenses at CTI. General and administrative expenses as a
percentage of revenues increased for the nine months ended September 30, 1998
to 28.8% from 21.0% for the nine months ended September 30, 1997 because of
higher overhead costs as a percentage of revenues for Crown and TEA and the
increase in costs at the Company's corporate office.
Corporate development expenses for the nine months ended September 30, 1998
were $2.8 million, a decrease of $1.8 million from the nine months ended
September 30, 1997. Corporate development expenses for the nine months ended
September 30, 1997 include nonrecurring compensation charges associated with
the CTI Investment of (i) $0.9 million for certain executive bonuses and (ii)
the repurchase of shares of the Company's common stock from a member of its
Board of Directors, which resulted in compensation charges of $1.3 million.
Corporate development expenses for the nine months ended September 30, 1998
include discretionary bonuses related to the Company's performance totaling
approximately $0.8 million for certain members of the Company's management.
The Company has recorded non-cash compensation charges of $11.4 million
related to the issuance of stock options to certain employees and executives.
Such charges are expected to amount to approximately $1.6 million per year
through 2002 and approximately $0.8 million in 2003. See "--Compensation
Charges Related to Stock Option Grants".
Depreciation and amortization for the nine months ended September 30, 1998
was $17.1 million, an increase of $13.8 million from the nine months ended
September 30, 1997. This increase was primarily attributable to (i) an $8.0
million increase in depreciation and amortization related to the property and
equipment, goodwill and other intangible assets acquired in the Crown Merger;
(ii) $5.1 million of depreciation and amortization related to the property and
equipment and goodwill from CTI; and (iii) a $0.3 million increase in
depreciation and amortization related to the property and equipment and
goodwill acquired in the TEA and TeleStructures Acquisitions.
The equity in earnings (losses) of unconsolidated affiliate represents the
Company's 34.3% share of CTI's net earnings (losses) for the periods from
March 1997 through August 1998 (at which time the share exchange with CTI's
shareholders was consummated). For the eight months ended August 31, 1998,
after making appropriate adjustments to CTI's results of operations for such
period to conform to generally accepted accounting principles of the United
States, CTI had net revenues, operating income, interest expense (including
amortization of deferred financing costs) and net income of $97.2 million,
$18.6 million, $13.4 million and $6.0 million, respectively. Included in CTI's
results of operations for such period are noncash compensation charges for
approximately $3.8 million related to the issuance of stock options to certain
members of CTI's management.
Interest and other income for the nine months ended September 30, 1997
includes a $1.2 million fee received in March 1997 as compensation for leading
the investment consortium which provided the equity financing for CTI.
Interest income for the nine months ended September 30, 1998 resulted
primarily from (i) the investment of excess proceeds from the sale of the
Notes in November 1997; and (ii) the investment of the net proceeds from the
Offering (see "--Liquidity and Capital Resources").
Interest expense and amortization of deferred financing costs for the nine
months ended September 30, 1998 was $17.6 million, an increase of $13.2
million, or 302.5%, from the nine months ended September 30, 1997. This
increase was primarily attributable to amortization of the original issue
discount on the Notes and interest on CTI's indebtedness.
Minority interests represent the minority shareholder's 20% interest in
CTI's operations.
57
<PAGE>
Comparison of Years Ended December 31, 1997 and 1996
Consolidated revenues for 1997 were $31.4 million, an increase of $25.2
million from 1996. This increase was primarily attributable to (i) a $5.4
million, or 96.1%, increase in site rental revenues, of which $4.2 million was
attributable to the Crown operations and $0.7 million was attributable to the
Puerto Rico operations; (ii) $10.4 million in network services revenues from
TEA; and (iii) $7.2 million in network services revenues from the Crown
operations. The remainder of the increase was largely attributable to higher
revenues from SMR and microwave radio services in Puerto Rico and the monthly
service fees received from CTI beginning in March 1997.
Costs of operations for 1997 were $15.4 million, an increase of $14.1
million from 1996. This increase was primarily attributable to (i) $8.5
million of network services costs related to the TEA operations; (ii) $3.9
million of network services costs related to the Crown operations; and (iii)
$0.9 million in site rental costs attributable to the Crown operations. Costs
of operations for site rental as a percentage of site rental revenues
decreased to 20.1% for 1997 from 23.0% for 1996 because of increased
utilization of the towers located in the southwestern United States and Puerto
Rico. Costs of operations for network services as a percentage of network
services revenues were 64.4% for 1997, reflecting lower margins that are
inherent in the network services businesses acquired in 1997.
General and administrative expenses for 1997 were $6.8 million, an increase
of $5.1 million from 1996. This increase was primarily attributable to $3.0
million of expenses related to the Crown operations and $1.4 million of
expenses related to the TEA operations, along with an increase in costs of
$0.2 million at CCIC's corporate office. General and administrative expenses
as a percentage of revenues decreased for 1997 to 21.7% from 27.0% for 1996
because of lower overhead costs as a percentage of revenues for Crown and TEA.
Corporate development expenses for 1997 were $5.7 million, an increase of
$4.4 million from 1996. A substantial portion of this increase was
attributable to nonrecurring compensation charges associated with the CTI
Investment of (i) $0.9 million for certain executive bonuses and (ii) the
repurchase of shares of CCIC's common stock from a member of its Board of
Directors, which resulted in compensation charges of $1.3 million. The
remaining $2.2 million of the increase in corporate development expenses was
attributable to a higher allocation of personnel costs, along with an overall
increase in such costs, associated with an increase in acquisition and
business development activities.
Depreciation and amortization for 1997 was $7.0 million, an increase of $5.7
million from 1996. This increase was primarily attributable to (i) $4.7
million of depreciation and amortization related to the property and
equipment, goodwill and other intangible assets acquired in the Crown Merger;
(ii) $0.5 million of depreciation and amortization related to the property and
equipment and goodwill acquired in the TEA and TeleStructures Acquisitions;
and (iii) $0.3 million resulting from twelve months of depreciation related to
the property and equipment acquired in the Puerto Rico Acquisition.
The equity in losses of unconsolidated affiliate of $1.1 million represents
CCIC's 34.3% share of CTI's net loss for the period from March through
December 1997. After making appropriate adjustments to CTI's results of
operations for such period to conform to generally accepted accounting
principles of the United States, CTI had net revenues, operating income,
interest expense (including amortization of deferred financing costs) and net
losses of $103.5 million, $16.5 million, $20.4 million and $3.3 million,
respectively.
Interest and other income for 1997 includes a $1.2 million fee received in
March 1997 as compensation for leading the investment consortium which
provided the equity financing for CTI, the impact on earnings of which was
partially offset by certain executive bonuses related to the CTI Investment
and included in corporate development expenses. Interest income for 1997
resulted primarily from the investment of excess proceeds from the sale of
CCIC's Series C Convertible Preferred Stock in February 1997.
Interest expense and amortization of deferred financing costs for 1997 was
$9.3 million, an increase of $7.5 million, or 413.3%, from 1996. This increase
was primarily attributable to (i) commitment fees related to an
58
<PAGE>
unfunded interim loan facility related to the Crown Merger and an unfunded
revolving credit facility; (ii) interest on notes payable to the former
stockholders of Crown for a portion of the purchase price of the Crown
Business; (iii) amortization of the original issue discount on the Notes; (iv)
interest and fees associated with borrowings under CCIC's bank credit facility
which were used to finance the Crown Merger on an interim basis; (v) interest
on outstanding borrowings assumed in connection with the Crown Merger; and
(vi) interest on borrowings under CCIC's bank credit facility which were used
to finance the acquisition of the Puerto Rico System.
Comparison of Years Ended December 31, 1996 and 1995
Consolidated revenues for 1996 were $6.2 million, an increase of $2.1
million, or 53.0%, from 1995. This increase was primarily attributable to (i)
$0.6 million in site rental revenues attributable to the Puerto Rico
operations; (ii) $0.6 million in site rental revenues resulting from the
effect of a full year's activity for the operations of Spectrum (which was
acquired in October 1995); (iii) an increase in site rental revenues of $0.3
million, or 6.9%, from the towers acquired from PCI; and (iv) $0.5 million in
SMR and microwave radio services revenues attributable to the Puerto Rico
operations.
Costs of operations for 1996 were $1.3 million, an increase of $0.1 million,
or 6.0%, from 1995. Additional costs in 1996 of $0.3 million attributable to
the Puerto Rico operations were largely offset by decreased costs of $0.2
million associated with the towers acquired from PCI. Such towers were managed
by PCI during 1995 under an agreement with CCIC, and the management fees
charged to CCIC amounted to $0.6 million. CCIC began managing the towers on
January 1, 1996. As a result of these factors, costs of operations as a
percentage of revenues decreased to 21.0% in 1996 from 30.2% in 1995.
General and administrative expenses for 1996 were $1.7 million, an increase
of $0.9 million from 1995. This increase was primarily attributable to costs
of $0.5 million and $0.1 million associated with the Spectrum and Puerto Rico
Acquisitions, respectively, along with an increase in costs of $0.3 million,
or 41.7%, at CCIC's corporate office. General and administrative expenses at
CCIC's corporate office increased because of additional personnel costs and
higher overhead resulting from CCIC's internal management of the PCI towers
beginning in 1996. As a result of these factors, general and administrative
expenses as a percentage of revenues increased to 27.0% in 1996 from 18.0% in
1995.
Corporate development expenses for 1996 were $1.3 million, an increase of
$1.1 million from 1995. This increase was primarily attributable to a higher
allocation of personnel costs, along with an overall increase in such costs
associated with an increase in acquisition and business development activities
during the last half of 1996.
Depreciation and amortization for 1996 was $1.2 million, an increase of $0.4
million from 1995. This increase was primarily associated with depreciation
associated with towers purchased in the Puerto Rico Acquisition and goodwill
created in the Spectrum Acquisition.
Interest and other income for 1996 was $0.2 million, an increase of $0.1
million from 1995, primarily resulting from the investment of excess proceeds
from the sale of CCIC's Series B Convertible Preferred Stock in July 1996.
Interest expense and amortization of deferred financing costs for 1996 were
$1.8 million, an increase of $0.7 million, or 58.6%, from 1995, primarily
resulting from borrowings under CCIC's bank credit agreement which were used
to finance the Puerto Rico Acquisition.
CTI
CTI's primary sources of revenues are from (i) the provision of analog and
digital broadcast transmission services to the BBC and commercial
broadcasters, (ii) the rental of antenna space on towers and (iii) the
provision of network services, which includes broadcast consulting, network
design and site selection, site acquisition, site development and antenna
installation and site management and other services.
59
<PAGE>
Broadcast transmission services revenues are received for both analog and
digital transmission services. Monthly analog transmission revenues are
principally received from the BBC under a contract with an initial 10-year
term through March 31, 2007. Digital transmission services revenues from the
BBC and ONdigital are recognized under contracts with initial terms of 12
years through November 15, 2010. Monthly revenues from these digital
transmission contracts increase over time as the network rollout progresses.
See "Business--U.K. Operations--Significant Contracts".
Site rental revenues are received from other broadcast transmission service
providers (primarily NTL) and wireless communications companies, including all
four U.K. cellular operators (Cellnet, Vodafone, One2One and Orange). As of
September 30, 1998, approximately 200 companies rented space on approximately
405 of CTI's 808 towers and rooftops. Site rental revenues are generally
recognized on a monthly basis under lease agreements with original terms of
three to twelve years. Such lease agreements generally require annual payments
in advance, and include rental rate adjustment provisions between one and
three years from the commencement of the lease. Site rental revenues are
expected to become an tincreasing portion of CTI's total U.K. revenue base,
and the Company believes that the demand for site rental from communication
service providers will increase in line with the expected growth of these
communication services in the United Kingdom.
Network services revenues consist of (i) network design and site selection,
site acquisition, site development and antenna installation (collectively,
"network design and development") and (ii) site management and other services.
Network design and development services are provided to (i) a number of
broadcasting and related organizations, both in the United Kingdom and other
countries; (ii) all four U.K. cellular operators; and (iii) a number of other
wireless communications companies, including Dolphin and Highway One. These
services are usually subject to a competitive bid, although a significant
proportion result from an operator coming onto an existing CTI site. Revenues
from such services are recognized on either a fixed price or a time and
materials basis. Site management and other services, consisting of both
network monitoring and equipment maintenance, are carried out in the United
Kingdom for a number of emergency service organizations. Revenues for such
services are received under contracts with original terms of between three and
five years. They provide for fixed prices with respect to network monitoring
and variable pricing dependent on the level of equipment maintenance carried
out in a given period.
Costs of operations for broadcast transmission services consist primarily of
employee compensation and related benefits costs, utilities, rental payments
under the Site-Sharing Agreement with NTL, circuit costs and repairs and
maintenance on both transmission equipment and structures.
Site rental operating costs consist primarily of employee compensation and
related benefits costs, utilities and repairs and maintenance. The majority of
such costs are relatively fixed in nature, with increases in revenue from new
installations on existing sites generally being achieved without a
corresponding increase in costs.
Costs of operations for network services consist primarily of employee
compensation and related benefits costs and on-site construction and materials
costs.
General and administrative expenses consist primarily of office occupancy
and related expenses, travel costs, professional and consulting fees,
advertising, insurance and employee training and recruitment costs. Corporate
development expenses represent costs incurred in connection with acquisitions
and development of new business initiatives. These expenses consist primarily
of external professional fees related to specific activities and allocated
compensation, benefits and overhead costs that are not directly related to the
administration or management of CTI's existing lines of business.
Depreciation and amortization charges relate to CTI's property and equipment
(primarily towers, broadcast transmission equipment and associated buildings)
and goodwill recorded in connection with the acquisition of the Home Service
Transmission business from the BBC (the "BBC Home Service Transmission
Business"). Depreciation of towers is computed with useful lives of 20 to 25
years; depreciation of broadcast transmission
60
<PAGE>
equipment is computed with a useful life of 20 years; and depreciation of
buildings is computed with useful lives ranging from 20 to 50 years.
Amortization of goodwill is computed with a useful life of 20 years.
The following information is derived from the Consolidated Profit and Loss
Accounts of (i) CTI for periods subsequent to February 28, 1997 (the date of
inception of CTI's operations) and (ii) the BBC Home Service Transmission
Business for periods prior to that date. For purposes of the following
discussion, CTI's results for the month ended March 31, 1997 have been
combined with the results of the BBC Home Service Transmission Business for
the eleven months ended February 27, 1997, and CTI's results for the nine
months ended December 31, 1997 have been combined with its results for the
three months ended March 31, 1998. The following discussion presents an
analysis of such combined results for the twelve-month periods ended March 31,
1998 and 1997. Results for CTI are not comparable to results from the BBC Home
Service Transmission Business due to differences in the carrying amounts of
property and equipment and goodwill. As of December 31, 1997, CTI changed its
fiscal year end for financial reporting purposes from March 31 to December 31;
as such, the results for the three months ended March 31, 1998 are unaudited.
CTI uses the U.K. pound sterling as the functional currency for its
operations. The following amounts have been translated to U.S. dollars using
the average Noon Buying Rate for each period. The following amounts reflect
certain adjustments to present the results of operations in accordance with
U.S. generally accepted accounting principles ("GAAP"). For the results of the
BBC Home Service Transmission Business, such adjustments effect depreciation
and amortization expense as a result of differences in the carrying amounts
for property and equipment; for CTI, such adjustments effect (i) operating
expenses as a result of differences in the accounting for pension costs, and
(ii) interest expense as a result of the capitalization of interest costs in
connection with constructed assets.
<TABLE>
<CAPTION>
Twelve Months Twelve Months
Ended Ended
March 31, 1997 March 31, 1998
------------------ ------------------
Percent Percent
of Net of Net
Amount Revenues Amount Revenues
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net revenues:
Site rental and broadcast
transmission.......................... $112,122 91.7% $113,558 89.2%
Network services and other............. 10,090 8.3 13,731 10.8
-------- ----- -------- -----
Total net revenues................. 122,212 100.0 127,289 100.0
-------- ----- -------- -----
Operating expenses:
Costs of operations:
Site rental and broadcast
transmission........................ 61,339 54.7 53,957 47.5
Network services and other........... 5,912 58.6 6,075 44.2
-------- ----- -------- -----
Total cost of operations........... 67,251 55.0 60,032 47.1
General and administrative............. 7,196 5.9 8,626 6.8
Corporate development.................. -- -- 2,303 1.8
Depreciation and amortization.......... 17,256 14.1 37,382 29.4
-------- ----- -------- -----
Operating income......................... 30,509 25.0 18,946 14.9
Other income (expense):
Interest and other income.............. 79 0.1 746 0.6
Interest expense and amortization of
deferred financing costs.............. (1,434) (1.2) (24,201) (19.0)
Income (loss) before income taxes........ 29,154 23.9 (4,509) (3.5)
Provision for income taxes............. -- -- -- --
-------- ----- -------- -----
Net income (loss)........................ $ 29,154 23.9% $ (4,509) (3.5)%
======== ===== ======== =====
</TABLE>
61
<PAGE>
Comparison of Twelve Months Ended March 31, 1998 and Twelve Months Ended
March 31, 1997
Consolidated revenues for the twelve months ended March 31, 1998 were $127.3
million, an increase of $5.1 million from the twelve months ended March 31,
1997. This increase was primarily attributable to (i) a $1.4 million increase
in broadcast transmission services and site rental revenues and (ii) a $3.6
million increase in network services and other revenues. Revenues from the BBC
for the twelve months ended March 31, 1998 amounted to $79.5 million, or 62.5%
of total revenues, as compared to $85.5 million, or 70.0% of total revenues,
for the twelve months ended March 31, 1997. Revenues from NTL for the twelve
months ended March 31, 1998 amounted to $11.8 million, or 9.2% of total
revenues. Network services revenues for the twelve months ended March 31, 1998
consisted of $10.6 million from network design and development services and
$3.1 million from site management and other services.
Costs of operations for the twelve months ended March 31, 1998 were $60.0
million, a decrease of $7.2 million from the twelve months ended March 31,
1997. This decrease was primarily attributable to a $7.4 million decrease in
broadcast transmission services and site rental costs, partially offset by a
$0.2 million increase in network services and other costs. Costs of operations
as a percentage of revenues for broadcast transmission services and site
rental were 47.5% for the twelve months ended March 31, 1998, as compared to
54.7% for the twelve months ended March 31, 1997. This decrease was
attributable to (i) increases in site rental revenues from existing sites with
little change in site operating costs; and (ii) the elimination, as of
February 28, 1997, of certain costs recharged to the BBC Home Service
Transmission Business by the BBC. Costs of operations as a percentage of
revenues for network services and other were 44.2% for the twelve months ended
March 31, 1998, as compared to 58.6% for the twelve months ended March 31,
1997. This decrease was attributable to (i) a higher proportion of broadcast
consulting revenues, which result in higher margins than certain other network
design and development services and (ii) the elimination, as of February 28,
1997, of certain costs recharged to the BBC Home Service Transmission Business
by the BBC. Costs of operations for site rental and broadcast transmission for
the twelve months ended March 31, 1998 includes non-cash compensation charges
for $1.1 million related to the issuance of stock options to certain
employees.
General and administrative expenses for the twelve months ended March 31,
1998 were $8.6 million, an increase of $1.4 million from the twelve months
ended March 31, 1997. As a percentage of revenues, general and administrative
expenses were 6.8% and 5.9% for the twelve months ended March 31, 1998 and
1997, respectively. This increase was attributable to costs incurred by CTI as
a separate enterprise which were not directly incurred by the BBC Home Service
Transmission Business as a part of the BBC.
Corporate development expenses for the twelve months ended March 31, 1998
relate primarily to costs incurred in connection with certain projects in
Australasia and non-cash compensation charges for $1.8 million related to the
issuance of stock options to certain executives.
Depreciation and amortization for the twelve months ended March 31, 1998 was
$37.4 million, an increase of $20.1 million from the twelve months ended March
31, 1997. Monthly charges for depreciation and amortization increased for
periods subsequent to February 28, 1997 due to (i) a decrease in the estimated
useful lives for certain transmission and power plant equipment from 25 to 20
years; and (ii) the amortization of goodwill recorded in connection with the
acquisition of the BBC Home Service Transmission Business.
Interest and other income for the twelve months ended March 31, 1998
resulted primarily from (i) the investment of excess proceeds from amounts
drawn under CTI's bank credit facilities in February 1997; and (ii) the
investment of cash generated from operations during the period.
Interest expense and amortization of deferred financing costs for the twelve
months ended March 31, 1998 was $24.2 million. This amount was comprised of
(i) $4.9 million related to amounts drawn under the CTI Credit Facility; (ii)
$15.6 million related to the CTI Bonds; and (iii) $3.7 million for the
amortization of deferred financing costs. Interest expense and amortization of
deferred financing costs of $1.4 million for the twelve months ended March 31,
1997 was attributable to amounts drawn under the CTI Credit Facility. The BBC
Home Service Transmission Business did not incur any financing costs as a part
of the BBC prior to February 28, 1997.
62
<PAGE>
Liquidity and Capital Resources
As of September 30, 1998, after giving pro forma effect to the Offering, the
Company would have had consolidated cash and cash equivalents of $322.3
million (including $18.2 million at CTI), consolidated long-term debt of
$425.3 million, consolidated redeemable preferred stock of $200.0 million and
consolidated stockholders' equity of $745.1 million. In addition, on December
8, 1998, the Company entered into a Formation Agreement with BAM in which the
Company agreed to contribute $250.0 million in cash to the Proposed JV. As of
September 30, 1998, after giving pro forma effect to the Offering and the
Proposed JV, the Company would have had consolidated cash and cash equivalents
of $114.0 million (including $18.2 million at CTI), consolidated long-term
debt of $605.3 million, consolidated redeemable preferred stock of $200.0
million and consolidated stockholders' equity of $942.1 million.
As of November 1, 1998, CCI and its subsidiaries had no significant unused
borrowing availability under the Senior Credit Facility, and CTI had unused
borrowing availability under the CTI Credit Facility of approximately
(Pounds)30.0 million ($51.0 million). As of September 30, 1998, after giving
pro forma effect to the Offering, CCI and its subsidiaries and CTI and its
subsidiaries would have had approximately $73.9 million and (Pounds)30.0
million ($51.0 million) of unused borrowing availability, respectively, under
the Senior Credit Facility and the CTI Credit Facility. At formation of the
joint venture, the Proposed JV will borrow $180.0 million under a committed
$250.0 million credit facility. The Senior Credit Facility and the CTI Credit
Facility require, and the Proposed JV Credit Facility will require, that the
respective borrowers maintain certain financial covenants; in addition, all
three credit facilities place restrictions on the ability of the Company and
its subsidiaries to, among other things, incur debt and liens, pay dividends,
make capital expenditures, undertake transactions with affiliates and make
investments. These facilities also limit the ability of the Company's
subsidiaries to pay dividends to CCIC.
The Company's business strategy contemplates substantial capital
expenditures in connection with (i) the expansion of its tower footprints by
partnering with wireless communications carriers to assume ownership of their
existing towers and by pursuing build-to-suit opportunities and (ii) to
acquire existing transmission networks globally as opportunities arise. The
exact amount of such capital expenditures will depend on the number of such
opportunities that the Company is able to successfully consummate. In addition
to the Proposed JV, the Company is currently pursuing other potential
significant acquisitions, investments and joint venture opportunities that
could require the Company to use all remaining proceeds of this Offering and
to raise additional debt or equity financing in the near term. However, there
can be no assurance that the Company will consummate any of these transactions
in the near term or at all. See "Risk Factors--Broad Discretion in Application
of Proceeds" and "Managing Integration and Growth".
In addition, the Company anticipates that it will build, through the end of
1999, approximately 600 towers in the United States at a cost of approximately
$135.0 million and approximately 200 towers in the United Kingdom at a cost of
approximately $23.0 million. The Company also expects that the capital
expenditure requirements related to the roll-out of digital broadcast
transmission in the United Kingdom will be approximately (Pounds)100.0 million
($170.0 million). Capital expenditures were $77.7 million for the nine months
ended September 30, 1998, of which $3.4 million was for CCIC, $62.1 million
was for Crown and $12.2 million was for CTI. On a pro forma basis after giving
effect to the Proposed JV, capital expenditures (excluding acquisitions) would
have been $74.1 million for the year ended December 31, 1997 (of which $3.4
million would have been for CCIC and TEA, $27.1 million would have been for
Crown, $17.6 million would have been for the Proposed JV and $26.0 million
would have been for CTI), and $140.0 million for the nine months ended
September 30, 1998 (of which $3.4 million would have been for CCIC, $62.1
million would have been for Crown, $2.5 million would have been for the
Proposed JV and $72.0 million would have been for CTI). The Company has
budgeted capital expenditures (excluding acquisitions) of $62.0 million for
the three months ended December 31, 1998 and $337.0 million for the fiscal
year ended December 31, 1999 (of which $37.0 million is budgeted for the
Proposed JV).
63
<PAGE>
To fund the execution of the Company's business strategy, the Company and
its subsidiaries expect to use the net proceeds of the Offering, the
borrowings available under the Senior Credit Facility, the borrowings
available under the CTI Credit Facility and the remaining net proceeds from
the 1997 Notes Offering and the IPO. Whether the Company utilizes the Senior
Credit Facility and the CTI Credit Facility to finance expansion opportunities
will depend upon a number of factors, including (i) the attractiveness of the
opportunities, (ii) the time frame in which they are identified, (iii) the
number of pre-existing projects to which the Company is committed and (iv) the
Company's liquidity at the time of any potential opportunity. In the event the
Company does not otherwise have cash available (from the net proceeds of the
1997 Notes Offering, the IPO, this Offering or otherwise), or borrowings under
the Senior Credit Facility or the CTI Credit Facility have otherwise been
utilized, when an opportunity arises, the Company would be forced to seek
additional debt or equity financing or to forego the opportunity. In the event
the Company determines to seek additional debt or equity financing, there can
be no assurance that any such financing will be available (on commercially
acceptable terms or at all) or permitted by the terms of the Company's
existing indebtedness. To the extent the Company is unable to finance future
capital expenditures, it will be unable to achieve its currently contemplated
business strategy.
For the nine months ended September 30, 1997 and 1998, the Company's net
cash provided by (used for) operating activities was ($2.1 million) and $3.4
million, respectively. For the years ended December 31, 1995, 1996 and 1997,
the Company's net cash provided by (used for) operating activities was $1.7
million ($0.5 million) and ($0.6 million), respectively. Since its inception,
the Company has generally funded its activities (other than its acquisitions
and investments) through excess proceeds from contributions of equity capital.
The Company has financed its acquisitions and investments with the proceeds
from equity contributions, borrowings under the Senior Credit Facility and the
issuance of promissory notes to sellers. Since its inception, CTI has
generally funded its activities (other than the acquisition of the BBC Home
Service Transmission Business) through cash provided by operations and
borrowings under the CTI Credit Facility. CTI financed the acquisition of the
BBC Home Service Transmission Business with the proceeds from equity
contributions and the issuance of the CTI Bonds.
On December 21, 1998, the Company privately placed under Rule 144A and
Regulation S of the Securities Act, 200,000 shares of its 12 3/4% Senior
Exchangeable Preferred Stock due 2010, each share of which has a liquidation
preference of $1,000.
On August 18, 1998, the Company consummated the IPO at a price to the public
of $13 per share. The Company sold 12,320,000 shares of its common stock and
received proceeds of $151.0 million (after underwriting discounts of $9.1
million but before other expenses of the IPO, which totaled approximately $3.8
million). The net proceeds from the IPO were contributed to an unrestricted
subsidiary and are currently invested in short-term investments.
On August 18, 1998, the Company consummated a share exchange with certain
shareholders of CTI, which increased the Company's ownership of CTI from
approximately 34.3% to 80.0%. The Company issued 20,867,700 shares of its
Common Stock and 11,340,000 shares of its Class A Common Stock, with such
shares valued at an aggregate of $418.7 million (based on the price per share
to the public in the IPO). The Company recognized goodwill of $343.9 million
in connection with this transaction, which was accounted for as an acquisition
using the purchase method. CTI's results of operations and cash flows are
included in the consolidated financial statements for the period subsequent to
the date the exchange was consummated.
In July 1998, all of the holders of the Company's Senior Convertible
Preferred Stock converted such shares into an aggregate of 9,629,200 shares of
the Company's common stock. Upon consummation of the IPO, all of the holders
of the Company's then-existing shares of Class A Common Stock, Class B Common
Stock, Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock converted such shares into an
aggregate of 39,842,290 shares of the Company's common stock.
In August and October of 1997, CCIC issued shares of its Senior Convertible
Preferred Stock for aggregate net proceeds of $29.3 million and $36.5 million,
respectively. The proceeds from the August issuance were used
64
<PAGE>
to make a $25.0 million payment as part of the cash purchase price for the
Crown Merger. On October 31, 1997, the Company entered into an amendment to
the Senior Credit Facility. As amended, the Senior Credit Facility provides
for available borrowings of $100.0 million and expires on December 31, 2004.
On October 31, 1997, in connection with the October Refinancing, new
borrowings under the Senior Credit Facility of $94.7 million, along with the
proceeds from the October issuance of the Senior Convertible Preferred Stock,
were used to repay the seller note issued in connection with the Crown Merger,
to repay loans outstanding under a credit agreement at CCI and to pay related
fees and expenses.
CCIC used the net proceeds from the 1997 Notes Offering to repay
substantially all of its outstanding indebtedness, including borrowings under
the Senior Credit Facility, and to pay related fees and expenses. The balance
of the net proceeds from the 1997 Notes Offering is being used for general
corporate purposes.
On October 8, 1998, the Company acquired all of the outstanding shares of
Millennium Communications Limited ("Millennium") for aggregate consideration
of $14.5 million, consisting of cash, CCIC common stock and the assumption of
indebtedness. Millennium develops, owns and operates telecommunications towers
and related assets in the United Kingdom. On the date of acquisition,
Millennium owned 102 tower sites. Millennium is being operated as a subsidiary
of CTI.
On February 28, 1997, CTI used the proceeds from equity contributions and
borrowings under the CTI Credit Facility to finance the acquisition of the BBC
Home Service Transmission Business. On May 21, 1997, CTI used the net proceeds
from the sale of the CTI Bonds to repay substantially all of the outstanding
borrowings under the CTI Credit Facility. On July 17, 1998, the lenders
(acting through Credit Suisse First Boston, as agent) under the CTI Credit
Facility waived a provision in the CTI Credit Facility that would have
required the repayment of the CTI Credit Facility concurrently with the
listing of the Company's Common Stock.
Prior to May 15, 2003, the Company's interest expense on the Notes will be
comprised solely of the amortization of original issue discount. Thereafter,
the Notes will require annual cash interest payments of approximately $26.7
million. Prior to December 15, 2003, the Company does not expect to pay cash
dividends on the Exchangeable Preferred Stock or, if issued, cash interest on
the Exchange Debentures. Thereafter, assuming all dividends or interest have
been paid-in-kind, the Exchangeable Preferred Stock or, if issued, the
Exchange Debentures will require annual cash dividend or interest payments of
approximately $47.8 million. Annual cash interest payments on the CTI Bonds
are (Pounds)11.25 million ($19.1 million). In addition, the Senior Credit
Facility and the CTI Credit Facility will require periodic interest payments
on amounts borrowed thereunder. The Company's ability to make scheduled
payments of principal of, or to pay interest on, its debt obligations, and its
ability to refinance any such debt obligations (including the Notes and the
CTI Bonds), will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond its control.
As discussed above, the Company's business strategy contemplates substantial
acquisitions and capital expenditures in connection with the expansion of its
tower footprints. There can be no assurance that the Company will generate
sufficient cash flow from operations in the future, that anticipated revenue
growth will be realized or that future borrowings, equity contributions or
loans from affiliates will be available in an amount sufficient to service its
indebtedness and make anticipated capital expenditures. The Company
anticipates that it may need to refinance all or a portion of its indebtedness
(including the Notes and the CTI Bonds) on or prior to its scheduled maturity.
There can be no assurance that the Company will be able to effect any required
refinancings of its indebtedness (including the Notes and the CTI Bonds) on
commercially reasonable terms or at all. See "Risk Factors".
Compensation Charges Related to Stock Option Grants
During the period from April 24, 1998 through July 15, 1998, the Company
granted options to employees and executives for the purchase of 3,236,980
shares of its common stock at an exercise price of $7.50 per share. Of such
options, options for 1,810,730 shares vested upon consummation of the IPO and
the remaining options
65
<PAGE>
for 1,426,250 shares will vest at 20% per year over five years, beginning one
year from the date of grant. In addition, the Company has assigned its right
to repurchase shares of its common stock from a stockholder (at a price of
$6.26 per share) to two individuals (including a newly-elected director) with
respect to 100,000 of such shares. Since the granting of these options and the
assignment of these rights to repurchase shares occurred subsequent to the
date of the share exchange agreement with CTI's shareholders and at prices
substantially below the price to the public in the IPO, the Company has
recorded a non-cash compensation charge related to these options and shares
based upon the difference between the respective exercise and purchase prices
and the price to the public in the IPO. Such compensation charge will total
approximately $18.4 million, of which approximately $10.6 million was
recognized upon consummation of the IPO (for such options and shares which
vested upon consummation of the IPO), and the remaining $7.8 million is being
recognized over five years (approximately $1.6 million per year) through the
second quarter of 2003. An additional $1.6 million in non-cash compensation
charges will be recognized through the third quarter of 2001 for stock options
issued to certain members of CTI's management prior to the consummation of the
share exchange.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"). SFAS 128 establishes new standards for computing and presenting
earnings per share ("EPS") amounts for companies with publicly held common
stock or potential common stock. The new standards require the presentation of
both basic and diluted EPS amounts for companies with complex capital
structures. Basic EPS is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period, and excludes the effect of potentially dilutive securities (such
as options, warrants and convertible securities) which are convertible into
common stock. Dilutive EPS reflects the potential dilution from such
convertible securities. SFAS 128 is effective for periods ending after
December 15, 1997. The Company has adopted the requirements of SFAS 128 in its
financial statements for the year ended December 31, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income in a company's
financial statements. Comprehensive income includes all changes in a company's
equity accounts (including net income or loss) except investments by, or
distributions to, the company's owners. Items which are components of
comprehensive income (other than net income or loss) include foreign currency
translation adjustments, minimum pension liability adjustments and unrealized
gains and losses on certain investments in debt and equity securities. The
components of comprehensive income must be reported in a financial statement
that is displayed with the same prominence as other financial statements. SFAS
130 is effective for fiscal years beginning after December 15, 1997. The
Company has adopted the requirements of SFAS 130 in its financial statements
for the three months ended March 31, 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 establishes standards for the way that public companies
report, in their annual financial statements, certain information about their
operating segments, their products and services, the geographic areas in which
they operate and their major customers. SFAS 131 also requires that certain
information about operating segments be reported in interim financial
statements. SFAS 131 is effective for periods beginning after December 15,
1997. The Company will adopt the requirements of SFAS 131 in its financial
statements for the year ending December 31, 1998.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires
that costs of start-up activities be charged to expense as incurred and
broadly defines such costs. The Company has deferred certain costs incurred in
connection with potential business initiatives and new geographic markets, and
SOP 98-5 will require that such deferred costs be charged to results of
operations upon its adoption. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998. The Company will adopt
66
<PAGE>
the requirements of SOP 98-5 as of January 1, 1999. The cumulative effect of
the change in accounting principle for the adoption of SOP 98-5 will result in
a charge to results of operations in the Company's financial statements for
the three months ended March 31, 1999; it is currently estimated that such
charge will amount to approximately $2,300,000.
Year 2000 Compliance
We are in the process of conducting a comprehensive review of our computer
systems to identify which of our systems will need to be modified, upgraded or
converted to recognize and process dates after December 31, 1999 (the "Y2K
problem"). The failure to correct a material Y2K problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Y2K problem, resulting in part from the uncertainty of whether
our suppliers and customers are addressing the Y2K problem, we are unable to
determine at this time whether failures brought on by the Y2K problem will
have a material adverse effect on our results of operations, liquidity or
financial condition. We believe that, with the implementation of new business
systems, the possibility of significant interruptions of normal operations
should be reduced; however, we cannot guarantee that our business, financial
condition and results of operations will not be materially adversely affected
if we or our customers or contractors fail to resolve the Y2K problem in a
timely manner.
67
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
In connection with the sale of the Old Preferred Stock, the Company entered
into the Registration Rights Agreement with the Initial Purchasers, pursuant
to which the Company agreed to use their best efforts to file with the
Commission a registration statement with respect to the exchange of the Old
Preferred Stock for a new series of exchangeable preferred stock with terms
identical in all material respects to the terms of the Old Preferred Stock,
except that the New Preferred Stock have been registered under the Securities
Act and are issued free of any covenant regarding registration, including the
payment of additional interest upon a failure to file or have declared
effective an exchange offer registration statement or to consummate the
Exchange Offer by certain dates.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in Exxon Capital Holdings Corp., SEC No-
Action Letter (April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action
Letter (June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (July 2,
1993). However, the Company has not sought its own no-action letter, and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other
circumstances. Based upon these interpretations by the staff of the
Commission, the Company believes that New Preferred Stock issued pursuant to
this Exchange Offer in exchange for Old Preferred Stock may be offered for
resale, resold and otherwise transferred by a holder thereof other than (i) a
broker-dealer who purchased such Old Preferred Stock directly from the Company
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" (as defined in Rule 405
of the Securities Act) of the Company without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
New Preferred Stock are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of such New
Preferred Stock. Holders of Old Preferred Stock accepting the Exchange Offer
will represent to the Company in the Letter of Transmittal that such
conditions have been met. Any holder who participates in the Exchange Offer
for the purpose of participating in a distribution of the New Preferred Stock
may not rely on the position of the staff of the Commission as set forth in
these no-action letters and would have to comply with the registration and
prospectus delivery requirements, of the Securities Act in connection with any
secondary resale transaction. A secondary resale transaction in the United
States by a holder who is using the Exchange Offer to participate in the
distribution of New Preferred Stock must be covered by a registration
statement containing the selling securityholder information required by Item
507 of Regulation S-K of the Securities Act.
Each broker-dealer that receives New Preferred Stock for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Old Note,
as a result of market-making activities or other trading activities and will
deliver a prospectus in connection with any resale of such New Preferred
Stock. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New
Preferred Stock received in exchange for Old Preferred Stock where such Old
Preferred Stock were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Letter of Transmittal
states that by acknowledging and delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed that for a period of 180 days after the
Expiration Date, they will make this Prospectus available to broker-dealers
for use in connection with any such resale. See "Plan of Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other retransfer of New Preferred Stock.
The Exchange Offer is not being made to, nor will the Company accept tenders
for exchange from, holders of Old Preferred Stock in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
68
<PAGE>
Terms of the Exchange
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will, unless such Old Preferred Stock are withdrawn in accordance with
the withdrawal rights specified in "Withdrawal of Tenders" below, accept any
and all Old Preferred Stock validly tendered prior to 5:00 p.m., New York City
time, on the Expiration Date. The date of acceptance for exchange of the Old
Preferred Stock, and consummation of the Exchange Offer, is the Exchange Date,
which will be the first business day following the Expiration Date (unless
extended as described herein). The Company will issue, on or promptly after
the Exchange Date, an aggregate liquidation preference of up to $200,000,000
of New Preferred Stock in exchange for an equal liquidation preference at
maturity of outstanding Old Preferred Stock tendered and accepted in
connection with the Exchange Offer. The New Preferred Stock issued in
connection with the Exchange Offer will be delivered on the earliest
practicable date following the Exchange Date. Holders may tender some or all
of their Old Preferred Stock in connection with the Exchange Offer.
The terms of the New Preferred Stock are identical in all material respects
to the terms of the Old Preferred Stock, except that the New Preferred Stock
have been registered under the Securities Act and are issued free from any
covenant regarding registration, including the payment of additional interest
upon a failure to file or have declared effective an exchange offer
registration statement or to consummate the Exchange Offer by certain dates.
The New Preferred Stock will evidence the same obligations as the Old
Preferred Stock and will be issued under and be entitled to the same benefits
under the Certificate of Designation as the Old Preferred Stock. As of the
date of this Prospectus, $200,000,000 aggregate liquidation preference of the
Old Preferred Stock is outstanding.
In connection with the issuance of the Old Preferred Stock, the Company
arranged for the Old Preferred Stock originally purchased by qualified
institutional buyers to be issued and transferable in book-entry form through
the facilities of The Depository Trust Company ("DTC"), acting as depositary.
Except as described under "Book-Entry, Delivery and Form," the New Preferred
Stock will be issued in the form of a global note registered in the name of
DTC or its nominee and each holder's interest therein will be transferable in
book-entry form through DTC. See "Book-Entry, Delivery and Form."
Holders of Old Preferred Stock do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Preferred Stock which are
not tendered for exchange or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Certificate of Designations, but will not be entitled to any registration
rights under the Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Old Preferred
Stock when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purposes of receiving the New Preferred Stock from the
Company.
If any tendered Old Preferred Stock are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Preferred Stock will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Preferred Stock in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Old Preferred Stock in connection with the Exchange Offer. The
Company will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
69
<PAGE>
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1999, unless extended by the Company in its sole discretion (but in no
event to a date later than , 1999), in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended.
The Company reserves the right, in its sole discretion (i) to delay
accepting any Old Preferred Stock, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Preferred Stock not
previously accepted, if any of the conditions set forth below under
"Conditions to the Exchange Offer" shall not have been satisfied and shall not
have been waived by the Company (if permitted to be waived by the Company) and
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered holders. If
the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Old Preferred Stock, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period. In no event, however, shall the Expiration Date be later
than , 1999.
If the Company determines to make a public announcement of any delay,
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.
Conditions to the Exchange Offer
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange, any Old Preferred Stock
for any New Preferred Stock, and may terminate or amend the Exchange Offer
before the acceptance of any Old Preferred Stock for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable good faith judgment, would be expected
to impair the ability of the Company to proceed with the Exchange Offer, or
(b) any law, statute, rule of regulation is adopted or enacted, or any
existing law, statute, rule or regulation is interpreted by the Commission
or its staff, which, in the Company's reasonable good faith judgment, would
be expected to impair the ability of the Company to proceed with the
Exchange Offer.
If the Company determines in its reasonable good faith judgment that any of
the foregoing conditions exist, the Company may (i) refuse to accept any Old
Preferred Stock and return all tendered Old Preferred Stock to the tendering
holders, (ii) extend the Exchange Offer and retain all Old Preferred Stock
tendered prior to the expiration of the Exchange Offer, subject, however, to
the rights of holders who tendered such Old Preferred Stock to withdraw their
tendered Old Preferred Stock which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business days. In no event, however, shall the Expiration Date be a date later
than , 1999.
Procedures for Tendering
To tender in connection with the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Old Preferred Stock (unless such tender is being effected
pursuant to the procedure for book-entry transfer described below) and any
70
<PAGE>
other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Preferred Stock by
causing DTC to transfer such Old Preferred Stock into the Exchange Agent's
account in accordance with DTC's procedure for such transfer. Although
delivery of Old Preferred Stock may be effected through book-entry transfer
into the Exchange Agent's account at DTC, the Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received or
confirmed by the Exchange Agent at its addresses set forth under the caption
"Exchange Agent," below, prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Preferred Stock will constitute an agreement
between such holder and the Company in accordance with the terms and subject
to the conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Old Preferred Stock and the Letter of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that
holders use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure delivery to the Exchange Agent before the
Expiration Date. No Letter of Transmittal of Old Preferred Stock should be
sent to the Company. Holders may request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the tenders for such
holders.
Any beneficial owner whose Old Preferred Stock are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivery of
such owner's Old Preferred Stock, either make appropriate arrangements to
register ownership of the Old Preferred Stock in such owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signature on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Preferred Stock tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal,
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Preferred Stock listed therein, such Old Preferred Stock
must be endorsed by such registered holder or accompanied by a properly
completed bond power, in each case signed or endorsed in blank by such
registered holder as such registered holder's name appears on such Old
Preferred Stock.
If the Letter of Transmittal or any Old Preferred Stock or bond powers are
signed or endorsed by trustees, executors, administrators, guardians,
attorney-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Old Preferred Stock will be
determined by the Company in its sole discretion, which determination
71
<PAGE>
will be final and binding. The Company reserves the absolute right to reject
any and all Old Preferred Stock not properly tendered or any Old Preferred
Stock whose acceptance by the Company would, in the opinion of U.S. counsel to
the Company, be unlawful. The Company also reserves the right to waive any
defects, irregularities or conditions of tender as to any particular Old
Preferred Stock either before or after the Expiration Date. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding, on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Old Preferred Stock must be cured within such time as the Company
shall determine. Although the Company intends to request the Exchange Agent to
notify holders of defects or irregularities with respect to tenders of Old
Preferred Stock, neither the Company, the Exchange Agent nor any other person
shall have any duty or incur any liability for failure to give such
notification. Tenders of Old Preferred Stock will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Preferred Stock received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right, as set forth above under the
caption "Conditions to the Exchange Offer," to terminate the Exchange Offer.
By tendering, each holder represents to the Company that, among other
things, the New Preferred Stock acquired in connection with the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such New Preferred Stock, whether or not such person is the holder, that
neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Preferred Stock and that neither the holder nor any such other person is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company.
If the holder is a broker-dealer which will receive New Preferred Stock for
its own account in exchange of Old Preferred Stock, it will acknowledge that
it acquired such Old Preferred Stock as the result of market making activities
or other trading activities and it will deliver a prospectus in connection
with any resale of such New Preferred Stock. See "Plan of Distribution."
Guaranteed Delivery Procedures
Holders who wish to tender their Old Preferred Stock and (i) whose Old
Preferred Stock are not immediately available, or (ii) who cannot deliver
their Old Preferred Stock, the Letter of Transmittal or any other required
documents to the Exchange Agent, or cannot complete the procedure for book-
entry transfer, prior to the Expiration Date, may effect a tender of their Old
Preferred Stock if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent received from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such Old Preferred Stock and the principal amount of Old
Preferred Stock tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the certificate
or certificates representing the Old Preferred Stock to be tendered in
proper form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at DTC of Old Preferred Stock delivered
electronically) and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof) as well as the certificate or certificates representing
all tendered Old Preferred Stock in proper form for transfer (or
confirmation of a book-entry transfer into the Exchange Agent's account at
DTC of Old Preferred Stock delivered electronically) and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.
72
<PAGE>
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Preferred Stock may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Preferred Stock in connection with the Exchange
Offer, a written facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person who deposited the Old Preferred Stock to be
withdrawn (the "Depositor"), (ii) identify the Old Preferred Stock to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Preferred Stock), (iii) be signed by the Depositor in the same manner
as the original signature on the Letter of Transmittal by which such Old
Preferred Stock were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the trustee
register the transfer of such Old Preferred Stock into the name of the person
withdrawing the tender, and (iv) specify the name in which any such Old
Preferred Stock are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Preferred
Stock so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Preferred Stock will be issued with
respect thereto unless Old Preferred Stock so withdrawn are validly re-
tendered. Any Old Preferred Stock which have been tendered but which are not
accepted for exchange or which are withdrawn will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Preferred Stock may be retendered by following one of the procedures
described above under the caption "Procedures for Tendering" at any time prior
to the Expiration Date.
Exchange Agent
ChaseMellon Shareholder Services, L.L.C. has been appointed as Exchange
Agent in connection with the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal should be directed to the Exchange Agent, at its offices at
2323 Bryan Street, Suite 2300, Dallas, Texas 75201. The Exchange Agent's
telephone number is (214) 965-2220 and facsimile number is (214) 965-2233.
Fees and Expenses
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company will pay certain
other expenses to be incurred in connection with the Exchange Offer, including
the fees and expenses of the Trustee, accounting and certain legal fees.
Holders who tender their Old Preferred Stock for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Preferred Stock are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Preferred Stock
tendered, or if tendered Old Preferred Stock are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old
Preferred Stock in connection with the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendered holder.
Accounting Treatment
The New Preferred Stock will be recorded at the same carrying value as the
Old Preferred Stock as reflected in the Company's accounting records on the
date of the exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company upon the consummation of the Exchange Offer.
Any expenses of the Exchange Offer that are paid by the Company will be
charged against the Company's additional paid-in capital in accordance with
generally accepted accounting principles.
73
<PAGE>
Consequences of Failures to Properly Tender Old Preferred Stock in the
Exchange
Issuance of the New Preferred Stock in exchange for the Old Preferred Stock
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of such Old Preferred Stock, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Preferred Stock desiring to tender such Old Preferred Stock
in exchange for New Preferred Stock should allow sufficient time to ensure
timely delivery. The Company is under no duty to give notification of defects
or irregularities with respect to tenders of Old Preferred Stock for exchange.
Old Preferred Stock that are not tendered or that are tendered but not
accepted by the Company, will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof
under the Securities Act and, upon consummation of the Exchange Offer, certain
registration rights under the Registration Rights Agreement will terminate.
In the event the Exchange Offer is consummated, the Company will not be
required to register the remaining Old Preferred Stock. Remaining Old
Preferred Stock will continue to be subject to the following restrictions on
transfer: (i) the Remaining Old Preferred Stock may be resold only if
registered pursuant to the Securities Act, if any exemption from registration
is available thereunder, or if neither such registration nor such exemption is
required by law, and (ii) the Remaining Old Preferred Stock will bear a legend
restricting transfer in the absence of registration or an exemption therefrom.
The Company does not currently anticipate that it will register the Remaining
Old Preferred Stock under the Securities Act. To the extent that Old Preferred
Stock are tendered and accepted in connection with the Exchange Offer, any
trading market for Remaining Old Preferred Stock could be adversely affected.
74
<PAGE>
INDUSTRY BACKGROUND
General
The Company owns, operates and manages wireless communications and broadcast
transmission infrastructure, including towers and other communications sites,
and also provides a full range of complementary network support services. Each
of the wireless communications and broadcasting industries is currently
experiencing a period of significant change.
The wireless communications industry is growing rapidly as new wireless
technologies are developed and consumers become more aware of the benefits of
wireless services. Wireless technologies are being used in more applications
and the cost of wireless services to consumers is declining. A significant
number of new competitors in the wireless communications industry have
developed as additional frequency spectrum has become available for a wide
range of uses, most notably Personal Communications Services ("PCS") (known as
"PCN" in the United Kingdom). This competition, combined with an increasing
reliance on wireless communications by consumers and businesses, has led to an
increased demand for higher quality, uninterrupted service and improved
coverage, which, in turn, has led to increased demand for communications sites
as new carriers build out their networks and existing carriers upgrade and
expand their networks to maintain their competitiveness. These trends are
affecting the wireless communications industry around the world.
As the wireless communications industry has become more competitive,
wireless communications carriers have sought operating and capital
efficiencies by outsourcing certain network services and the build-out and
operation of new and existing infrastructure and by co-locating transmission
equipment with other carriers on multiple tenant towers. The need for co-
location has also been driven by the growing trend by municipalities to slow
the proliferation of towers. Further, the Company believes that there has been
a fundamental shift in strategy among established wireless communications
carriers relating to infrastructure ownership. The Company believes that in
order to free up capital for the growth and management of their customer bases
and expansion of their service offerings, such carriers are beginning to seek
to sell their wireless communications infrastructure to, or establish joint
ventures with, experienced infrastructure providers that have the ability to
manage networks. The Company believes that those infrastructure providers with
a proven track record of providing end-to-end services will be best positioned
to successfully acquire access to such wireless communications infrastructure.
The television broadcasting industry is experiencing significant change
because of the impending widespread deployment of digital terrestrial
television broadcasting (known as "DTV" in the United States and "DTT" in the
United Kingdom). In the United States, the FCC has required the four major
networks (ABC, CBS, NBC and Fox) to commence DTV broadcasts in the top ten
markets by May 1999 and in the top 30 markets by November 1999. In the United
Kingdom, pursuant to the Broadcasting Act 1996, six digital television
transmission multiplexes, which permit the holders to transmit digital
television broadcasting services, have been allocated. The Company
successfully began commercial operation of the DTT network from an initial 22
transmission sites on November 15, 1998. Australia, France, Germany, Japan,
Spain and Sweden are expected to be the next countries to introduce digital
terrestrial television, followed by other European nations and later by
developing countries. Many countries are expected to start to establish
digital services within the next five years. The shift to digital transmission
will require network design, development and engineering services and the
significant enhancement of existing broadcast transmission infrastructure,
including new transmission and monitoring equipment and the modification,
strengthening and construction of towers (including over 1,000 tall towers in
the United States). In addition, state-run broadcast transmission networks are
continuing to be privatized throughout the world.
The Company expects these trends to continue around the world in both the
wireless communications and broadcasting industries. The Company believes that
the next logical step in the outsourcing of infrastructure by wireless
communications carriers and broadcasters will be the outsourcing of the
operation of their towers and transmission networks, including the
transmission of their signals, in much the same way as the BBC has done with
its transmission network. This outsourcing will allow carriers to realize
additional operating and capital
75
<PAGE>
efficiencies and to focus on management of their customer bases and expansion
of their service offerings. Management believes that such carriers will only
entrust the transmission of their signals to those infrastructure providers,
such as the Company, that have the ability to manage towers and transmission
networks and a proven track record of providing end-to-end services to the
wireless communications and broadcasting industries.
Development of the Tower Industry
United States. The U.S. wireless communications industry was transformed in
the 1970s through the issuance of licenses by the FCC to provide high quality
communications services to vehicle-mounted and hand-held portable telephones,
pagers and other devices. The licensees built and began operating wireless
networks that were supported by communication sites, transmission equipment
and other infrastructure. In the early 1980s, the number of towers began to
expand significantly with the development of more advanced wireless
communications systems, particularly cellular and paging. Nevertheless, as
additional towers were built by the wireless communications carriers, they
often were built for a single purpose rather than as multiple tenant towers.
Further, these towers were generally owned and maintained by carriers and were
treated as corporate cost centers operated primarily for the purpose of
transmitting or receiving such carriers' signals.
During the mid-to-late 1980s, a number of independent operators of towers
began to emerge. These independent tower operators focused on owning and
managing towers with multiple tenants by adding lessees to existing and
reconstructed towers. The Company believes the majority of these operators
were small business owners with a small number of local towers and few
services other than site rental. In the last five years, however, several
larger independent tower operators have emerged as demand for wireless
services has continued to grow and as additional high frequency licenses have
been awarded for new wireless services (including PCS, narrowband paging and
wireless local loop), each requiring networks with extensive tower
infrastructure. These independent tower operators have sought to acquire
smaller operators as well as suitable clusters of towers formerly owned by
carriers and broadcasters in order to establish regional and national "tower
footprints". Carriers expanding or building a network in a geographic area
generally seek to lease space for antennas from a tower company with a
strategically located cluster of towers and other communication sites in that
area in order to efficiently and effectively establish service coverage in a
given market.
Today, towers are owned by a variety of companies, including wireless
communications carriers, local and long distance telecommunications companies,
broadcasting companies, independent tower operators, utilities and railroad
companies. Despite the increasing demand for towers, the tower industry in the
United States remains highly fragmented, with only a few independent tower
operators owning a large number of towers. The pace of consolidation has begun
to accelerate, however, as the larger independent operators continue to
acquire small local operators and purchase towers from wireless communications
companies. In addition, wireless communications carriers are building out new,
or filling in existing, tower footprints for new and existing wireless
services. Independent operators have also expanded into a number of associated
network and communication site services, including the design of communication
sites and networks, the selection and acquisition of tower and rooftop sites
(including the resolution of zoning and permitting issues) and the
construction of towers. Previously, carriers typically handled such services
through in-house departments, and local nonintegrated service contractors
focused on specific segments such as radio frequency engineering and site
acquisition.
Broadcast towers in the United States have typically been owned and operated
on a fragmented basis. Typically, each network affiliate in each major market
owns and operates its own television broadcasting tower. Local stations often
have co-located their transmission equipment on these towers. Radio broadcast
towers have also typically been erected by each station in a given market.
Both television and radio broadcast towers have generally been constructed
only for a single user and would require substantial strengthening to house
new digital transmission equipment or other analog transmission equipment. As
a result, similar to wireless communications towers, such towers historically
have been treated as corporate cost centers operated primarily for the purpose
of transmitting such broadcasters' signals.
76
<PAGE>
United Kingdom. The first towers in the United Kingdom were built for the
BBC's MF radio services. Additional towers were built in the 1940s to transmit
HF radio services around the world. In the 1950s, both the BBC and Independent
Television Authority (the predecessor of the Independent Broadcasting
Authority) built towers for transmission of VHF television. The BBC used some
of these towers and built additional towers in the 1960s for its VHF/FM radio
services. UHF television started in 1964 and is now transmitted from some
1,100 towers. These towers have been built at a relatively constant rate
(compared with wireless communications towers). The majority of tall towers
were built in the 1950s and 1960s. The number of smaller towers built peaked
at approximately 80 per year in the 1970s, reducing to approximately 25 per
year in the early 1990s. The size and structure of towers varies widely due to
location, antenna requirements and wind loading. Towers built primarily for
broadcast transmission are often able to carry wireless communications
antennas. Those that are currently incapable of doing so can be strengthened
or replaced.
Since 1982, the growth of wireless communications in the United Kingdom has
led to significant expansion in the number of towers. Historically, there have
been four major wireless communications carriers in the United Kingdom, each
of which, in general, built towers for its own use, rather than as multiple
tenant owners. These towers are owned and maintained by such carriers and, as
in the United States, were treated as corporate cost centers operated
primarily for the purpose of transmitting or receiving their signals. With the
smaller geographic size of the United Kingdom, as compared to the United
States, these carriers typically constructed their tower footprint to provide
national coverage. Because of this nationwide build out, independent tower
owners have not developed as they have in the United States. In addition to
wireless communications providers, towers in the United Kingdom are owned by a
variety of companies, such as telecommunications companies, utilities and
railroad companies.
Today, tower owners are upgrading their networks to provide more capacity
and better service to their customers, while new entrants to the wireless
communications market have sought to acquire rapid access to networks that
provide national coverage. With the significant costs associated with the
approval process for and the construction of new towers, and the significant
capital requirements associated with ownership of tower infrastructure,
wireless communications carriers have begun to look to third party tower
owners to co-locate their antennas on existing towers, to build, own and
operate new towers and to acquire such carriers' portfolios of existing
towers.
Characteristics of the Tower Industry
Management believes that, in addition to the favorable growth and
outsourcing trends in the wireless communications and broadcasting industries
and high barriers to entry as a result of regulatory and local zoning
restrictions associated with new tower sites, tower operators benefit from
several favorable characteristics. The ability of tower operators to provide
antenna sites to customers on multiple tenant towers provides them with
diversification against the specific technology, product and market risks
typically faced by any individual carrier. The emergence of new technologies,
carriers, products and markets may allow independent tower operators to
further diversify against such risks. Additionally, tower operators face
increased "Not-In-My-Backyard" ("NIMBY") sentiment by communities and
municipalities, which is reducing the number of opportunities for new towers
to be built and driving the trend toward co-location on multiple tenant
towers.
The Company believes that independent tower operators also benefit from the
contractual nature of the site rental business and the predictability and
stability of monthly, recurring revenues. In addition, the site rental
business has low variable costs and significant operating leverage. Towers
generally are fixed cost assets with minimal variable costs associated with
additional tenants. A tower operator can generally expect to experience
increasing operating margins when new tenants are added to existing towers.
The site rental business typically experiences low tenant churn as a result
of the high costs that would be incurred by a wireless communications carrier
were it to relocate an antenna to another site and consequently be forced to
re-engineer its network. Moving a single antenna may alter the pre-engineered
maximum signal coverage, requiring a reconfigured network at significant cost
to maintain the same coverage. Similarly, a
77
<PAGE>
television or FM broadcaster would incur significant costs were it to relocate
a transmitter because, in order to avoid interruption of its transmissions, it
would be necessary for the broadcaster to install and commence operations of a
second broadcast site prior to ceasing signal transmission at the first site.
In addition, regulatory problems associated with licensing the location of the
new antenna with the FCC, in the United States, or being licensed for the
location by the Radiocommunications Agency (the "RA") in the United Kingdom,
may arise if the new location is at the edge of the wireless communication
carrier's coverage area and if there is a possible adverse impact on other
carriers. Municipal approvals are becoming increasingly difficult to obtain
and may also affect the carrier's decision to relocate. The costs associated
with network reconfiguration and FCC, RA and municipal approval and the time
required to complete these activities may not be justified by any potential
savings in reduced site rental expense.
Trends in the Wireless Communications and Broadcasting Industries
The Company's existing and future business opportunities are affected by the
ongoing trends within the two major industries it serves, namely the wireless
communications industry and the radio and television broadcasting industry.
Each of these industries is currently experiencing a period of significant
change that the Company believes is creating an increasing demand for
communication sites and related infrastructure and network support services.
Wireless Communications
The wireless communications industry now provides a broad range of services,
including cellular, PCS, paging, SMR and ESMR. The industry has benefitted in
recent years from increasing demand for its services, and industry experts
expect this demand to continue to increase.
The Company believes that more communication sites will be required in the
future to accommodate the expected increase in demand for wireless
communications services. Further, the Company sees additional opportunities
with the development of higher frequency technologies (such as PCS), which
have a reduced cell range as a result of signal propagation characteristics
that require a more dense network of towers. In addition, network services may
be required to service the network build-outs of new carriers and the network
upgrades and expansion of existing carriers.
In addition to the increasing demand for wireless services and the need to
develop and expand wireless communications networks, the Company believes that
other trends influencing the wireless communication industry have important
implications for independent tower operators. In order to speed new network
deployment or expansion and generate efficiencies, carriers are increasingly
co-locating transmission equipment with that of other network operators. The
trend towards co-location has been furthered by the NIMBY arguments generated
by local zoning/planning authorities in opposition to the proliferation of
towers. Further, the number of competitors in wireless communications is
increasing due to the auction of new spectrum and the deployment of new
technologies. In this increasingly competitive environment, many carriers are
dedicating their capital and operations primarily to those activities that
directly contribute to subscriber growth, such as marketing and distribution.
These carriers, therefore, have sought to reduce costs and increase efficiency
through the outsourcing of infrastructure network functions such as
communication site ownership, construction, operation and maintenance.
Further, the Company believes that these carriers are beginning to seek to
move their tower portfolios off their balance sheets through sales to, or
joint ventures with, experienced tower operators who have the proven
capability to provide end-to-end services to the wireless communications
industry.
United States. Current emerging wireless communications systems, such as PCS
and ESMR, represent an immediate and sizable market for independent tower
operators and network services providers as carriers build out large
nationwide and regional networks. While several PCS and ESMR carriers have
already built limited networks in certain markets, these carriers still need
to fill in "dead zones" and expand geographic coverage. The Cellular
Telecommunications Industry Association ("CTIA") estimates that, as of
December 31, 1997, there were 51,600 antenna sites in the United States. The
Personal Communications Industry Association ("PCIA")
78
<PAGE>
estimates that the wireless communications industry will construct at least
100,000 new antenna sites over the next 10 years. As a result of advances in
digital technology, ESMR operators, including Nextel, have also begun to
design and deploy digital mobile telecommunications networks in competition
with cellular carriers. In particular response to the increased competition,
cellular operators are re-engineering their networks by increasing the number
of sites, locating sites within a smaller radius, filling in "dead zones" and
converting from analog to digital cellular service in order to manage
subscriber growth, extend geographic coverage and provide competitive
services. The demand for communication sites is also being stimulated by the
development of new paging applications, such as e-mail and voicemail
notification and two-way paging, as well as other wireless data applications.
In addition, as wireless communications networks expand and new networks are
deployed, the Company anticipates that demand for microwave transmission
facilities that provide "backhaul" of traffic between communications sites to
or from a central switching facility will also increase.
Licenses are also being awarded, and technologies are being developed, for
numerous new wireless applications that will require networks of communication
sites. Future potential applications include those that will be deployed by
the winners of licenses auctioned in February and March 1998 for local multi-
point distribution services, including wireless local loop, wireless cable
television, wireless data and wireless Internet access. Radio spectrum
required for these technologies has, in many cases, already been awarded and
licensees have begun to build out and offer services through new wireless
systems. Examples of these systems include local loop networks operated by
WinStar and Teligent, wireless cable networks operated by companies such as
Cellular Vision and CAI Wireless, and data networks being constructed and
operated by RAM Mobile Data, MTEL and Ardis.
United Kingdom. As in the United States, the development of newer wireless
communications technologies, such as PCN and digital Terrestrial Trunked Radio
("TETRA"), provides tower operators with immediate opportunities for site
rental and new tower build out. The four existing national GSM/PCN carriers
continue to fill in "dead zones" and add capacity to their networks. Also, the
carrier that is using the TETRA standard, which is similar to GSM and has been
adopted throughout Europe, is deploying a network across the United Kingdom.
The United Kingdom's newly-licensed wireless local loop operators have the
potential to be important site rental customers. Wireless local loop operators
provide telephony services that are comparable to the range and quality of
services delivered over the fixed wire networks. This technology is being
rapidly deployed as a low-cost alternative to fixed networks. To date, a total
of seven spectrum licenses have been awarded to companies planning to deploy
wireless loop systems. In addition, the deployment of a new national digital
PMR system (using the TETRA standard) for the use of the U.K. emergency
services and the announced licensing in early 1999 by the U.K. Government of
UMTS (Universal Mobile Telecommunications Service) networks, which will be the
third generation of cellular, should create additional demand for antenna
space and tower sites.
Radio and Television Broadcasting
General. There are currently three main transmission delivery methods for
television and radio broadcasts: terrestrial, direct-to-home ("DTH") satellite
and cable. Terrestrial technology, the most common delivery method in the
United States and many other countries including the United Kingdom, relies on
signal transmission by wireless telegraphy from a network of terrestrial
transmitters for direct reception by viewers or listeners through an aerial
system. Satellite signals are transmitted to satellites that then beam the
signal over a target area (satellite footprint) for reception by a customer's
satellite dish. A satellite customer must either purchase or rent a dish and a
receiver/decoder and pay subscription fees to the relevant provider. A cable
television customer typically rents a receiver/decoder and pays a subscription
fee to receive services that are distributed to the home through co-axial or
fiber optic cable.
Until the 1990s, all three delivery methods used analog technology, which
remains the most widespread technology in use today. In the early 1990s,
digital technology was developed for radio and television broadcasting and has
begun to be introduced for the transmission of radio and television signals.
Digital transmission is now possible by terrestrial, satellite and cable
methods.
79
<PAGE>
Digital technology allows a number of signals to be compressed and
interleaved, using a technical process called "multiplexing", before the
combined signal is transmitted within a single frequency channel. This process
makes the signal more robust, allowing the use of parts of the spectrum
unavailable to analog. A greater quantity of audio-visual information can be
transmitted with the same amount of frequency spectrum allowing higher
resolution or multiple channels to be broadcast. At the point of reception,
the compression and interleaving are decoded and individual signals recovered.
Some of the principal advantages of digital compared to analog transmission
include: (1) greater number, choice and flexibility of broadcasting services
offered; (2) scope for greater interactivity on the part of viewers and
listeners; (3) greater capacity for pay-television (subscription and pay-per-
view) as well as free-to-air services; and (4) enhanced picture quality and
sound. The development and timing of implementation of digital transmission
technology to the general public is a function of several factors, including
technological advancement, cost of equipment and conversion process, quality
improvement of visual and sound transmission and demand for terrestrial
bandwidth. The transition to digital transmission will involve additional
costs to viewers and program and transmission service providers. Viewers will
require additional equipment such as set-top boxes or digital televisions.
Program providers have begun to re-equip their studios and production
facilities with digital technology.
United States. Prior to the introduction of digital transmission, the U.S.
broadcasting industry had generally been a mature one in terms of demand for
transmission tower capacity, although even then opportunities existed for
independent tower operators to purchase transmission networks, manage them on
behalf of broadcasters under long-term contracts and lease space on
broadcasting towers to wireless communications carriers.
The FCC-mandated introduction of digital television broadcasting will
provide new opportunities for independent tower operators. The conversion of
broadcasting systems from analog to digital technology will require a
substantial number of new towers to be constructed to accommodate the new
systems and analog equipment displaced from existing towers. Even with DTV
transmissions, television station owners will continue to broadcast the
existing analog signals for a number of years. Broadcasters that own their own
tower infrastructure may elect to remove third-party tenants from their towers
to make room for their own DTV equipment. These displaced tenants, and tower
owners that are unable to remove existing third party tenants from their
towers, will require new towers to accommodate their transmission equipment.
The National Association of Broadcasters projects that by the year 2010
approximately 1,400 tall towers will be required to be built, strengthened or
modified to support DTV, with 200 towers required in the top 50 markets within
the next five years. Further, because of the need for broadcasters to purchase
new transmission equipment to deploy DTV, they will have fewer resources to
devote to the build out of new tower infrastructure. The Company believes that
these circumstances, along with the relative scarcity of suitable sites and
prevalent NIMBY attitudes, will allow experienced tower operators to build and
operate multiple tenant broadcast towers to transmit DTV signals. These towers
will also be attractive sites for the distribution of FM radio broadcasts.
United Kingdom. The broadcasting industry in the United Kingdom has
generally been a mature one in terms of demand for transmission tower
capacity. Existing towers provide almost universal coverage for analog
transmission, which remains the primary mode of transmission for television
and radio programs in the United Kingdom. Most of the BBC's radio services,
three Independent National Radio services and many local services are
broadcast by analog terrestrial means. Some radio services are also available
by satellite and cable for reception on fixed installations, but not portable
or mobile sets.
Digital television services in the United Kingdom were launched in 1998 from
terrestrial transmitters (DTT) and satellite (DST). The Broadcasting Act of
1996 sets out a framework for the licensing of digital terrestrial multiplexes
and an industry interest group has been established to coordinate the
establishment of digital television in the United Kingdom. The British
Government has allocated six multiplexes for DTT: two and one-half of these
multiplexes were reserved for the BBC, ITV, Channel 4, S4C and Channel 5,
three were awarded
80
<PAGE>
to ONdigital (which is a joint venture of Carlton Communications PLC and
Granada Group PLC) and the other one-half was awarded to S4C Digital Network.
The Company has been awarded the digital transmission contract for the four
multiplexes held by the BBC and ONdigital, while NTL has been awarded the
digital transmission contract for the other two multiplexes.
Build-out of digital terrestrial transmission equipment in the United
Kingdom is being based on existing analog terrestrial infrastructure,
including transmission sites and towers. In the initial phase of the rollout
of digital terrestrial transmission equipment, 81 analog transmission sites
and towers will be upgraded with new transmitters and associated systems
required to support DTT. Digital broadcasts from these sites are expected to
reach approximately 90% of the U.K. population. It is expected that additional
sites will continue to be upgraded until the "vast majority" of viewers can
receive digital broadcasts.
While no formal timetable has been set for the discontinuation of analog
terrestrial television broadcasting, the British Government has announced its
intention to review, by 2002, the timing of analog "switch-off". When analog
television transmission ceases, large amounts of frequency spectrum will be
released. New uses for this spectrum have not yet been defined but
applications are likely to include other digital broadcasting applications and
mobile communications. The spectrum is inherently suitable for terrestrial
transmission, so it is likely that existing towers will be used to provide
many of the new services.
In September 1995, the BBC launched the United Kingdom's first digital radio
service, which is now broadcast to approximately 60% of the U.K. population
from 29 transmission sites. Independent Local Radio licenses for additional
digital radio multiplexes are expected to be issued by the end of 1999.
To date, existing broadcast towers have been used as transmission sites for
the BBC's digital radio service, and it is anticipated that existing towers
also will be used for the independent services, often sharing the antennas
used for the BBC's digital radio service. While digital radio has the
advantage of using a single frequency network, which enables expanded
geographic coverage as compared with the multiple frequency networks used for
analog radio, to replicate the coverage of analog radio it will be necessary
to broadcast digital radio from more sites than at present. Although detailed
planning has not yet begun, it is expected that existing towers will provide
the necessary sites. As with DTT, the Company believes that ownership of key
broadcasting sites across the United Kingdom will allow an experienced
operator to provide the infrastructure necessary to accommodate the growth in
digital radio at minimum cost.
81
<PAGE>
BUSINESS
The Company is a leading domestic and international provider of wireless
communications and broadcast transmission infrastructure and related services.
The Company's business is to own, operate and manage wireless communications
sites and broadcast transmission networks. In addition, the Company provides a
full range of complementary services to its customers including (1) network
design and site selection, (2) site acquisition, (3) site development and
construction, (4) antenna installation and (5) network management and
maintenance.
As of September 30, 1998, the Company owned or managed 1,302 towers,
including 548 towers in the United States and 754 towers in the United
Kingdom. In addition, on October 8, 1998, the Company added 102 towers in the
United Kingdom through its acquisition of Millenimum Communications Limited.
Assuming the Company had formed the proposed joint venture with BAM, as of
September 30, 1998, it would have owned an additional 1,427 towers, including
117 towers that we currently manage. These 1,427 towers form a significant
portion of BAM's 850 MHZ wireless communications network in the eastern and
southwestern United States.
Based on its industry position and experience, the Company believes it is
positioned to capitalize on global growth opportunities arising from:
. the expansion of existing networks and the introduction of new networks
in the wireless communications industry;
. the consolidation of tower ownership generally, including the transfer
of infrastructure ownership from major wireless communications carriers
to independent infrastructure providers;
. the ongoing privatization of state-run broadcast transmission networks
around the world; and
. the widespread introduction of digital transmission technology in the
broadcasting industry.
The Company's site rental business involves leasing antenna space to
customers on towers and rooftops it owns or manages. The Company generally
receives fees for installing a customer's equipment and antennas on a tower
and also receives monthly rental payments from customers under site leases
that typically range in term from three to five years. The Company's major
site rental customers include Aerial Communications, AT&T Wireless, Bell
Atlantic Mobile, BellSouth Mobility, Motorola, Nextel, PageNet and Sprint PCS
in the United States and Cellnet, National Transcommunications Limited,
One2One, Orange Personal Communications and Vodafone in the United Kingdom.
The Company's broadcast transmission business includes both the transmission
of analog and digital television and radio broadcasts and the construction of
new multiple tenant broadcast towers. In the United Kingdom, the Company
provides analog transmission services for two national television services,
seven national radio services and 37 local radio stations through its network
of 3,465 transmitters. These services are provided under long-term contracts
with the BBC and two national commercial radio companies. In addition, the
Company has long-term contracts to provide digital transmission services to
the BBC and ONdigital. In the United States, the Company plans to build new
multiple tenant broadcast towers in locations where additional tower capacity
is required to accommodate new digital transmission equipment and analog
transmission equipment displaced from existing towers.
The Company has developed extensive expertise in its core site rental and
broadcast transmission business. Further, its team of more than 300 engineers
has substantial experience in providing end-to-end services, including (1)
design of wireless communication and broadcast transmission networks, (2)
radio frequency engineering, (3) site acquisition, (4) site development and
construction and (5) antenna installation. The Company plans to leverage its
technical expertise and operational experience to take advantage of the
fundamental shift in strategy that is occurring among established wireless
communications carriers relating to infrastructure ownership. Such carriers
are beginning to seek to sell their wireless communications infrastructure to,
or establish joint ventures with, experienced infrastructure providers that
have the ability to manage networks. We believe that infrastructure providers
with a proven track record of providing end-to-end services will be best
positioned to successfully acquire access to such wireless communications
infrastructure.
82
<PAGE>
Background
Founded in 1994, the Company acquired 127 towers located in Texas, Colorado,
New Mexico, Arizona, Oklahoma and Nevada from PCI in 1995. Also in 1995, in
order to expand its geographic coverage, scope of services and client base,
the Company consummated the Spectrum Acquisition for a leading rooftop
management and engineering firm that manages rooftop sites. The Spectrum
Acquisition provided the Company with management revenues for 44 rooftop
sites, as well as important relationships with carriers, and gave the Company
an entry into the market for wireless network services.
In 1996, the Company acquired from Motorola a strategic cluster of 14 towers
located on mountaintops across Puerto Rico, as well as one rooftop site and an
island-wide microwave and SMR system. The Puerto Rico Acquisition gave the
Company a strategic tower footprint, and positioned the Company to be a
leading independent tower operator in the Puerto Rican market. In addition, in
July 1996, CCIC purchased an option to acquire 36% of TEA, which represented a
significant step for the Company towards becoming a full service provider of
wireless network services. TEA is a leading site acquisition firm offering
carriers specialized expertise in site selection, site acquisition, zoning,
permit procurement and project management. In May 1997, CCIC acquired all the
outstanding shares of TEA. In June 1997, the Company purchased a minority
interest in VISI, which intends to provide computerized geographic information
for a variety of business applications (including site acquisition and
telecommunication network design).
In February 1997, CCIC, along with Candover Investments plc, TdF and
Berkshire, formed CTI to purchase the BBC Home Service Transmission Business.
Following the CTI Investment, the Company owned 34.3% of CTI. The BBC Home
Service Transmission Business included ownership of approximately 730 towers
in the United Kingdom and rights to locate broadcast transmission equipment on
an additional 558 towers in the United Kingdom owned by NTL, CTI's primary
competitor. In addition, CTI entered into a 10-year contract with the BBC to
provide analog television and analog and digital radio transmission services
in the United Kingdom. With the acquisition of the BBC Transmission Business,
the Company, through its affiliation with CTI, gained access to an expertise
in broadcast transmission upon which the Company believes it can capitalize in
other markets.
In August 1997, CCIC expanded its tower footprints and enhanced its network
services offering in the United States by consummating the Crown Merger. The
assets acquired through the Crown Merger included 61 owned towers and
exclusive rights to lease antenna space on 147 other towers and rooftop sites,
most of which are located in and around the greater Pittsburgh area, giving
the Company a significant presence in that market. The remaining acquired
Crown communication sites are located in Pennsylvania, West Virginia,
Kentucky, Ohio and Delaware. The Crown assets included engineering and
operational expertise and management experience. The Crown Merger also
provided the Company with relationships with major wireless communications
carriers such as Aerial Communications, AirTouch Cellular, Bell Atlantic
Mobile, AT&T Wireless, PageNet, Nextel and Sprint PCS.
On August 21, 1998, the Company consummated a share exchange with certain
shareholders of CTSH. The result of this exchange was to increase the
Company's equity interest in CTI to 80%. The remaining 20% of CTSH's shares
are owned by TdF. Concurrently with the Roll-Up, the Company raised
$151,043,200 in an initial public offering of its Common Stock.
The Company's common stock is listed on the Nasdaq Stock Market's National
Market under the symbol "TWRS". Based on a last sales price of $15 11/16 on
December 7, 1998, the market value of our fully diluted common equity was
approximately $1.75 billion.
Business Strategy
The Company's objective is to become the premier global provider of wireless
communications and broadcast transmission infrastructure and related services.
The Company's experience in establishing and expanding its existing tower
footprints, its experience in owning and operating both analog and digital
transmission networks, its significant relationships with wireless
communications carriers and broadcasters and
83
<PAGE>
its ability to offer customers its in-house technical and operational
expertise, uniquely position it to capitalize on global growth opportunities.
The key elements of the Company's business strategy are to:
. Maximize Utilization of Tower Capacity. The Company is seeking to take
advantage of the substantial operating leverage of its site rental business
by increasing the number of antenna leases on its owned and managed
communications sites. The Company believes that many of its towers have
significant capacity available for additional antenna space rental and that
increased utilization of its tower capacity can be achieved at low
incremental cost. For example, prior to the Company's purchase of the BBC's
broadcast transmission network in 1997, the rental of available antenna
capacity on the BBC's premier tower sites was not actively marketed to
third parties. The Company believes there is substantial demand for such
capacity. In addition, the Company believes that the extra capacity on its
tower footprints in the United States and the United Kingdom will be highly
desirable to new entrants into the wireless communications industry. Such
carriers are able to launch service quickly and relatively inexpensively by
designing the deployment of their networks based on the Company's
attractive existing tower footprints. Further, the Company intends to
selectively build and acquire additional towers to improve the coverage of
its existing tower footprints to further increase their attractiveness. The
Company intends to use targeted sales and marketing techniques to increase
utilization of and investment return on its existing, newly constructed and
acquired towers.
. Leverage Expertise of CCI and CTI Personnel to Implement Global Growth
Strategy. The Company is seeking to leverage the skills of its personnel in
the United States and the United Kingdom. The Company believes that its
ability to manage networks, including the transmission of signals, will be
an important competitive advantage in its pursuit of global growth
opportunities. With its wireless communications and broadcast transmission
network design and radio frequency engineering expertise, the Company is
well positioned (1) to partner with major wireless communications carriers
to assume ownership of their existing towers, (2) to provide build-to-suit
towers for wireless communications carriers and broadcasters and (3) to
acquire existing broadcast transmission networks that are being privatized
around the world.
. Partner with Wireless Communications Carriers to Assume Ownership of Their
Existing Towers. In addition to the Proposed JV with BAM, the Company is
continuing to seek to partner with other major wireless communications
carriers to assume ownership of their existing towers directly or through
joint ventures. The Company believes the primary criteria of such carriers
in selecting a company to own and operate their wireless communications
infrastructure will be the company's perceived capability to maintain the
integrity of their networks, including their transmission signals.
Therefore, the Company believes that those companies with a proven track
record of providing end-to-end services will be best positioned to
successfully acquire access to such wireless communications infrastructure.
The Company believes that similar opportunities will arise globally as the
wireless communications industry further expands.
. Provide Build-to-Suit Towers for Wireless Communications Carriers and
Broadcasters. As wireless communications carriers continue to expand and
fill-in their service areas, they will require additional communications
sites and will have to build new towers where co-location is not available.
Similarly, the introduction of digital terrestrial television broadcasting
in the United States will require the construction of new broadcast towers
to accommodate new digital transmission equipment and analog transmission
equipment displaced from existing towers. The Company is aggressively
pursuing these build-to-suit opportunities, leveraging on its ability to
offer end-to-end services.
. Acquire Existing Broadcast Transmission Networks. In 1997, CTI successfully
acquired the privatized domestic broadcast transmission network of the BBC.
In addition, the Company is implementing the roll-out of digital television
transmission services throughout the United Kingdom. As a result of this
experience, the Company is well positioned to acquire other state-owned
analog and digital broadcast transmission networks globally when
opportunities arise. These state-owned broadcast transmission networks
typically enjoy premier sites giving an acquirer the ability to offer
unused antenna capacity to new and existing radio and television
broadcasters and wireless communications carriers, as well as to install
new technologies such
84
<PAGE>
as digital terrestrial transmission services. In addition, the Company's
experience in broadcast transmission services allows the Company to
consider, when attractive opportunities arise, acquiring wireless
transmission networks as well as the acquisition of associated wireless
communications infrastructure. The Company is currently pursuing
international acquisition and privatization opportunities.
. Capitalize on Management Experience. The Company has assembled and will
continue to build a strong management team that has extensive experience in
the tower industry and in the management of broadcast transmission
networks. Many of the senior executives have worked together for an
extended period, which enables them to leverage their collective strengths
in a rapidly changing industry environment. In addition, management is
highly motivated to produce strong operating results based on their stock
ownership in the Company.
The Company
CCIC is a holding company that conducts all of its business through its
subsidiaries. CCIC's two principal operating subsidiaries are CCI, through
which it conducts its U.S. operations, and CTI, through which it conducts its
U.K. operations. The Company's interest in the proposed joint venture with BAM
will be held and operated through a third subsidiary.
U.S. Operations
The Company's primary business focus in the United States is the leasing of
antenna space on multiple tenant towers and rooftops to a variety of wireless
communications carriers under long-term lease contracts. Supporting its
competitive position in the site rental business, the Company maintains in-
house expertise in, and offers its customers, infrastructure and network
support services that include network design and communication site selection,
site acquisition, site development and construction and antenna installation.
The Company leases antenna space to its customers on its owned and managed
towers. The Company generally receives fees for installing customers'
equipment and antennas on a tower and also receives monthly rental payments
from customers payable under site rental leases that generally range in length
from three to five years. The Company's U.S. customers include such companies
as Aerial Communications, AirTouch Cellular, Arch Communications, AT&T
Wireless, Bell Atlantic Mobile, BellSouth Mobility, Cellular One, Federal
Express, Lucent Technologies, Motorola, Nextel, Nokia, PageNet, Skytel, Sprint
PCS and TSR Wireless, as well as private network operators and various federal
and local government agencies, such as the Federal Bureau of Investigation,
the Internal Revenue Service and the U.S. Postal Service.
At September 30, 1998, the Company owned or managed 548 towers and 81
revenue producing rooftop sites in the United States and Puerto Rico. In
addition, the Company had 1,286 rooftop sites under management throughout the
United States that were not revenue producing but were available for leasing
to customers. The Company's major U.S. tower footprints are located in western
Pennsylvania (primarily in and around the greater Pittsburgh area), in the
southwestern United States (primarily in western Texas), across Puerto Rico
and along I-95 in North Carolina and South Carolina. The Company plans to
enhance and expand its tower footprints by building and acquiring multiple
tenant towers in locations attractive to site rental customers. To that end,
the Company has developed, maintains and deploys for its own use extensive
network design and radio frequency engineering expertise, as well as site
selection, site acquisition and tower construction capabilities. The Company
plans to leverage CCI's expertise and experience in building and acquiring new
towers by entering into build-out, purchase or management contracts with
various carriers and tower owners. For example, pursuant to an agreement with
Nextel, as of September 30, 1998, the Company had constructed or purchased 43
sites, was in the process of constructing or receiving permits for an
additional 63 sites, had identified 11 sites to purchase and has the option to
construct or purchase up to 69 additional multiple tenant towers with Nextel
as an anchor tenant along certain interstate corridors. In addition, pursuant
to this agreement, the Company purchased 48 of Nextel's existing towers
clustered in various markets, including Philadelphia, Houston, Dallas and San
Antonio and has the option to purchase two additional towers.
85
<PAGE>
Communication Site Footprints
At September 30, 1998, the Company owned 419 towers and managed an
additional 129 towers and 81 revenue producing rooftop sites in the United
States and Puerto Rico. The Company is in the process of building 66 towers.
The following table indicates, as of September 30, 1998, the type and
geographic concentration of CCI's owned and managed towers and revenue
producing rooftop sites:
<TABLE>
<CAPTION>
% of
Number Total
------ -----
<S> <C> <C>
Towers:
Pennsylvania................................................. 213 33.9%
Texas........................................................ 154 24.5
New Mexico................................................... 34 5.4
Louisiana.................................................... 24 3.8
Mississippi.................................................. 21 3.3
Ohio......................................................... 19 3.0
West Virginia................................................ 18 2.9
Puerto Rico.................................................. 14 2.2
Arizona...................................................... 12 1.9
South Carolina............................................... 12 1.9
North Carolina............................................... 11 1.7
All Others................................................... 16 2.6
--- -----
Rooftops(a).................................................... 81 12.9
--- -----
Total...................................................... 629 100.0%
=== =====
</TABLE>
- --------
(a) CCI manages an additional 1,286 rooftop sites throughout the United States
that do not currently produce revenue but are available for leasing to its
customers.
The Company expects to significantly broaden its existing U.S. tower
footprints and expand into new strategically clustered sites by building
additional towers. To that end, the Company, through CCI, has developed and
maintains and deploys for its own use extensive network design and radio
frequency engineering expertise and tower construction capabilities. The
Company plans to leverage CCI's network design expertise to build towers in
areas where carriers' signals fail to transmit in their coverage area. The
areas, commonly known as "dead zones", are attractive tower locations.
Building a tower only after securing an anchor tenant, the Company usually has
been able to add additional carriers that have the same "dead zone". The
Company also plans to leverage CCI's expertise and experience in building new
towers by entering into build-out or purchase contracts with various carriers,
such as the Nextel Agreement. As of September 30, 1998, the Company had
constructed 121 towers in western Pennsylvania, Ohio, Texas, South Carolina,
Virginia, Indiana, West Virginia, Louisiana and North Carolina to enhance its
regional presence in these areas. As part of the Nextel Agreement, the Company
had the option to build or purchase up to 250 towers along interstate highways
in the midwestern and eastern United States over the next two years. As of
September 30, 1998, 43 of these sites had been completed, an additional 63
sites were in various stages of permitting and construction, 11 sites had been
identified as candidates for purchase and 64 sites had been rejected because
they did not meet the Company's investment criteria. Pursuant to the Nextel
Agreement, 69 sites remain to be tendered to the Company. See "--Significant
Contracts--Nextel Agreement".
The Company plans to use the towers acquired in the Crown Merger as a model
for the towers it intends to build when population density and perceived
demand are such that the Company believes the economics of constructing such
towers are justified. Management believes the Crown towers are superior to
those of its competitors because of their capacity and quality engineering.
The multiple tenant design of the Crown towers obviates the need for expensive
and time consuming modifications to upgrade undersized towers, saving critical
capital and time for carriers facing time-to-market constraints. Using only
hot dipped galvanized structures
86
<PAGE>
exceeding the standards of the American National Standards Institute,
Electronics Industry Association and Telecommunications Industry Association,
the Company builds towers capable of accommodating a large number of wireless
antennas. The towers are also designed to easily add additional customers, and
the equipment shelters are built to accommodate another floor for new
equipment and air conditioning units when additional capacity is needed. The
tower site is zoned for multiple carriers at the time the tower is constructed
to allow new carriers to quickly utilize the site. In addition, the towers,
equipment shelters and site compounds are engineered to protect and maintain
the structural integrity of the site. Tower sites are designed to withstand
severe wind, lightning and icing conditions, have shelters with exclusive
security card access and are surrounded by ten foot barbed wire fences.
The Company also plans to acquire towers in order to develop new tower
footprints or to broaden its existing tower footprints. The Company believes
that wireless communications carriers have begun to seek to sell, or establish
joint ventures for the ownership of, their tower networks. See "Industry
Background". The Company is actively seeking to enter into such arrangements
with major wireless communications carriers. On a smaller scale, as part of
the Nextel Agreement, the Company has purchased 48 of Nextel's existing towers
and has the option to purchase an additional two towers. The Company believes
that these towers will provide it with a portfolio of strategic clusters in
Philadelphia, Houston, Dallas and San Antonio. The Company plans to continue
to acquire additional towers from carriers, such as Nextel, and other
independent tower operators as opportunities present themselves, although the
Company currently has no agreements with regard to any such acquisitions.
The Company generally believes it has significant capacity on a number of
its towers in the United States and Puerto Rico. Many of the towers it
acquired prior to the Crown Merger, however, may require significant
modifications and improvements to raise them to the quality specifications of
the Crown towers or to add additional customers. The Company intends to pursue
these upgrades where it believes it can achieve appropriate returns to merit
the necessary expenditure.
Products and Services
The Company's products and services can be broadly categorized as either
site rental, network services or broadcast site rental and services. Network
services provided through CCI include network design and site selection, site
acquisition, site development and construction and antenna installation.
Site Rental
In the United States, the Company rents antenna space on its owned and
managed towers and rooftops to a variety of carriers operating cellular, PCS,
SMR, ESMR, paging and other networks. The Company's U.S. site rental business
has its headquarters in Pittsburgh, with sales offices in Houston,
Albuquerque, Philadelphia and San Juan.
Tower Site Rental. The Company leases space to its customers on its owned
and managed towers. The Company generally receives fees for installing
customers' equipment and antennas on a tower (as provided in the Company's
network services programs) and also receives monthly rental payments from
customers payable under site leases. In the United States, the majority of the
Company's outstanding customer leases, and the new leases typically entered
into by the Company, have original terms of five years (with three or four
optional renewal periods of five years each) and provide for annual price
increases based on the Consumer Price Index.
The Company also provides a range of site maintenance services in order to
support and enhance its site rental business. The Company believes that by
offering services such as antenna, base station and tower maintenance and
security monitoring, it is able to offer quality services to retain its
existing customers and attract future customers to its communication sites.
The Company was the first site management company in the United States
selected by a major wireless communications company to exclusively manage its
tower network and market the network to other carriers for co-location.
87
<PAGE>
The following table describes, without giving effect to the Proposed JV, the
Company's top ten revenue producing towers in the United States and Puerto
Rico:
<TABLE>
<CAPTION>
September
Number of 1998
Tenant Number of Monthly
Name Location Height (ft) Leases Antennas Revenue
---- ------------ ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Crane................... Pennsylvania 450 101 132 $ 73,112
Bluebell................ Pennsylvania 300 110 98 54,210
Monroeville............. Pennsylvania 500 65 91 39,802
Lexington............... Kentucky 500 89 85 38,449
Cranberry............... Pennsylvania 400 45 86 27,955
Sandia Crest............ New Mexico 140 18 39 27,651
Greensburg.............. Pennsylvania 375 39 65 25,346
Cerro de Punta.......... Puerto Rico 220 37 58 24,835
Beaver.................. Pennsylvania 500 43 56 24,788
El Yunque............... Puerto Rico 200 35 77 23,820
--- --- --------
Total............... 582 787 $359,968
=== === ========
</TABLE>
The Company has entered into master lease agreements with Aerial
Communications, AT&T Wireless, Bell Atlantic Mobile, Nextel and Sprint PCS,
among others, which provide certain terms (including economic terms) that
govern new leases entered into by such parties during the term of their master
lease agreements, including the lease of space on towers in the Pittsburgh
major trading area ("Pittsburgh MTA"), which includes greater Pittsburgh and
parts of Ohio, West Virginia and western Pennsylvania. Each of the Aerial
Communications and Sprint PCS agreements has a 10-year master lease term
through December 2006, with one 10-year and one five-year renewal period.
Rents are adjusted periodically based on the cumulative Consumer Price Index.
Nextel's master lease agreement with the Company has a 10-year master lease
term through October 2006, with two 10-year renewal options. The Company has
also entered into an independent contractor agreement with Nextel. The Bell
Atlantic Mobile agreement has a 25-year master lease term through December
2020. The Company has also entered into a master lease agreement with Bell
Atlantic whereby the Company has the right to lease antenna space to customers
on towers controlled by Bell Atlantic Mobile. See "--Significant Contracts".
The Company has significant site rental opportunities arising out of its
agreements with Bell Atlantic Mobile and Nextel. In its lease agreement with
Bell Atlantic Mobile, the Company has exclusive leasing rights for 117
existing towers and currently has sublessees on 59 of these towers in the
greater Pittsburgh area. The lease agreement provides that CCI may sublet
space on any of these towers to another carrier subject to certain approval
rights of Bell Atlantic Mobile. To date, Bell Atlantic Mobile has never failed
to approve a sublease proposed by CCI. If the Proposed JV is formed, it is
expected that these 117 towers will be among the 1,427 towers to be
contributed to the joint venture by BAM. Because the Company would maintain
the right to put sublessees on those 117 towers, revenue resulting from the
addition of new tenants on those towers would continue to be realized by the
Company rather than the joint venture. In connection with the Nextel
Agreement, as of September 30, 1998, the Company has the option to own and
operate up to 69 additional towers. See "--Significant Contracts".
Rooftop Site Rental. The Company is a leading rooftop site management
company in the United States. Through its subsidiary, Spectrum, the Company
develops new sources of revenue for building owners by effectively managing
all aspects of rooftop telecommunications, including two-way radio systems,
microwave facilities, fiber optics, wireless cable, paging and rooftop
infrastructure services. Spectrum's staff includes radio frequency engineers,
managers, technicians and licensing personnel with extensive experience.
The Company generally enters into management agreements with building owners
and receives a percentage of the revenues generated from the tenant license
agreements. Specifically, the Company designs and contracts these sites,
actively seeks multiple wireless communications carriers, prepares end-user
license agreements, and
88
<PAGE>
then manages and enforces the agreements. In addition, the Company handles
billing and collections and all calls and questions regarding the site,
totally relieving the building's management of this responsibility.
Through Spectrum, the Company focuses on providing electronic compatibility
for antennas, and maximization of revenue for building owners. In the United
States, radio frequencies are assigned by the FCC but are not coordinated by
proposed site. For this reason, Spectrum has developed its own computerized
engineering program to determine the electronic compatibility of all users at
each site. This program enables Spectrum to maximize site usage. Spectrum
surveys each site and evaluates its location, height, physical and electronic
characteristics, and its engineers prepare a computer analysis to determine
the optimum location for different types of equipment and frequencies. Based
on this analysis, potential site users are identified.
In addition to the technical aspects of site management, the Company
provides operational support for both wireless communications carriers looking
to build out their wireless networks, and building owners seeking to out
source their site rental activities. CCI stores and regularly updates relevant
site data, such as the location of communications and broadcast equipment,
into a database, which can be utilized to help wireless communications
carriers plan and build out their networks.
Network Services
Through designing, building and operating its own communication sites, the
Company, through CCI, has developed an in-house expertise in certain value-
added services that it offers to the wireless communications and broadcasting
industries. Because the Company views CCI as a turn-key provider with "end-to-
end" design, construction and operating expertise, it offers its customers the
flexibility of choosing between the provision of a full ready-to-operate
network infrastructure or any of the component services involved therein. Such
services include network design and site selection, site acquisition, site
development and construction and antenna installation.
Network Design and Site Selection. The Company has extensive experience in
network design and engineering and site selection. While the Company maintains
sophisticated network design services primarily to support the location and
construction of Company-owned multiple tenant towers, the Company does from
time to time provide network design and site selection services to carriers
and other customers on a consulting contract basis. The Company's network
design and site selection services provide customers with relevant information
including recommendations regarding location and height of towers, appropriate
types of antennas, transmission power and frequency selection and related
fixed network considerations. In 1997, the Company provided network design
services primarily for its own footprints and also for certain customers,
including Triton Communications, Nextel, Aerial Communications and Sprint.
These customers were typically charged on a time and materials basis.
To capitalize on the growing concerns over tower proliferation, the Company
has developed a program called "Network Solutions" through which it will
attempt to form strategic alliances with local governments to create a single
communications network in their communities. To date the Company's efforts
have focused on western Pennsylvania, where it has formed alliances with three
municipalities. These alliances are intended to accommodate wireless
communications carriers and local public safety, emergency services and
municipal services groups as part of an effort to minimize tower
proliferation. By promoting towers designed for co-location, these alliances
will reduce the number of towers in communities while serving the needs of
wireless communications carriers and wireless customers.
Site Acquisition. In the United States, the Company is engaged in site
acquisition services for its own purposes and for third parties. Based on data
generated in the network design and site selection process, a "search ring",
generally of a one-mile radius, is issued to the site acquisition department
for verification of possible land purchase or lease deals within the search
ring. Within each search ring, Geographic Information Systems ("GIS")
specialists select the most suitable sites, based on demographics, traffic
patterns and signal characteristics. Once a site is selected and the terms of
an option to purchase or lease the site are completed, a
89
<PAGE>
survey is prepared and the resulting site plan is created. The plan is then
submitted to the local zoning/planning board for approval. If the site is
approved, the Company's construction department takes over the process of
constructing the site.
The Company provides solutions to the NIMBY dilemma of wireless companies by
building more environmentally neutral and aesthetically acceptable towers.
Designs have included a clock tower, bell tower and others that will allow
communications companies to build in areas that otherwise would not permit a
tower to be built.
CCI has provided site acquisition services to several customers, including
Aerial Communications, AirTouch Cellular, AT&T Wireless, Bell Atlantic Mobile,
BellSouth Mobility, GTE Mobilnet, Nextel, Omnipoint, Pagemart, Sprint PCS and
Teligent. These customers engage the Company for such site acquisition
services on either a fixed price contract or a time and materials basis.
Site Development and Construction and Antenna Installation. The Company has
provided site development and construction and antenna installation services
to the U.S. communications industry for over 14 years. The Company has
extensive experience in the development and construction of tower sites and
the installation of antenna, microwave dishes and electrical and
telecommunications lines. The Company's site development and construction
services include clearing sites, laying foundations and electrical and
telecommunications lines, and constructing equipment shelters and towers. The
Company has designed and built and presently maintains tower sites for a
number of its wireless communications customers and a substantial part of its
own tower network. The Company can provide cost-effective and timely
completion of construction projects in part because its site development
personnel are cross-trained in all areas of site development, construction and
antenna installation. A varied inventory of heavy construction equipment and
materials are maintained by the Company at its 45-acre equipment storage and
handling facility in Pittsburgh, which is used as a staging area for projects
in major cities in the eastern region of the United States. The Company
generally sets prices for each site development or construction service
separately. Customers are billed for these services on a fixed price or time
and materials basis and the Company may negotiate fees on individual sites or
for groups of sites. The Company has the capability and expertise to install
antenna systems for its paging, cellular, PCS, SMR, ESMR, microwave and
broadcasting customers. As this service is performed, the Company uses its
technical expertise to ensure that there is no interference with other
tenants. The Company typically bills for its antenna installation services on
a fixed price basis.
The Company's construction management capabilities reflect Crown's extensive
experience in the construction of networks and towers. For example, Crown was
instrumental in launching networks for Sprint PCS, Nextel and Aerial
Communications in the Pittsburgh MTA. In addition, Crown supplied these
carriers with all project management and engineering services which included
antenna design and interference analyses.
In 1997, the Company provided site development and construction and antenna
installation services to approximately 21 customers in the United States,
including Nextel, Sprint PCS, AT&T Wireless, Aerial Communications and Bell
Atlantic Mobile.
Broadcast Site Rental and Services
The Company also provides site rental and related services to customers in
the broadcasting industry in the United States. The launch of DTV in the
United States will require significant expansion and modification of the
existing broadcast infrastructure. Because of the significant cost involved in
the construction or modification of tall towers, along with the large capital
expenditures broadcasters will incur in acquiring digital broadcast equipment,
management believes that the television broadcasting industry, which has
historically been opposed to co-location and third party ownership of
broadcast infrastructure, will seek to outsource tower ownership due to cost
constraints. See "Industry Background".
The Company is in the process of forming a joint venture with TdF to pursue
tall tower build out and network ownership opportunities. This entity, which
is expected to be approximately 70%-owned by the
90
<PAGE>
Company, will seek to capitalize on CTI's and TdF's experience in the
broadcast transmission market. Management's objective is to become a leader in
the build out of the approximately 200 tall towers expected to be built in the
United States over the next five years. Management believes that the Company's
experience in providing digital transmission services in the United Kingdom
will make the joint venture an attractive provider of broadcast services to
the major networks and their affiliates. In addition, the joint venture will
seek to partner with public broadcasting stations that own property zoned for
tall towers, but that lack sufficient resources and expertise to build a
tower. After reaching agreement with the public broadcasting station, the
joint venture will attempt to co-locate on the tower the transmitters of major
and medium-sized commercial broadcast television stations and high powered FM
radio stations as well as wireless communications carriers.
Electronic news gathering ("ENG") systems benefit from the towers and
services offered by the Company. The ENG trucks, often in the form of local
television station news vans with telescoping antennas on their roofs, send
live news transmission back to the studio from the scene of an important
event. Typically, these vans cannot transmit signals beyond about 25 miles. In
addition, if they are shielded from the television transmitter site, they
cannot make the connection even at close range. The Company has developed an
ENG repeater system that can be used on many of its towers in western
Pennsylvania and expects to develop similar systems in other markets in which
it has or develops tower footprints. This system allows the ENG van to send a
signal to one of the Company's local towers where the signal is retransmitted
back to the television transmitter site. The retransmission of the signal from
the Company's tower to the various television transmitter sites is done via a
microwave link. The Company charges the station for the ENG receiver system at
the top of its tower and also charges them for the microwave dish they place
on its tower. The Company's ENG customers are affiliates of the NBC, ABC, CBS
and Fox networks.
The Company also has employees with considerable direct construction
experience and market knowledge in the U.S. broadcasting industry, having
worked with numerous television networks around the United States, and a
number of other local broadcasting companies. The Company has installed master
FM and television systems on buildings across the country. It has supervised
the construction and operation of the largest master FM antenna facility in
the United States and has engineered and installed two 2,000 foot broadcast
towers with master FM antennas. Management believes that this experience may
help the Company negotiate favorable antenna site lease rates and construction
contracts for both tower and rooftop sites, and to gain an expertise in the
complex issues surrounding electronic compatibility and RF engineering.
Significant Contracts
The Company has many agreements with telecommunications providers in the
United States, including leases, site management contracts and independent
contractor agreements. The Company's reciprocal leasing arrangements with Bell
Atlantic Mobile, its agreement with Nextel and the BellSouth Site Marketing
Agreement present unique opportunities for CCI to (i) acquire clusters of
towers in new markets, (ii) expand its existing tower footprints by
constructing multiple tenant towers with long-term anchor tenants and (iii)
increase utilization of existing towers and rooftop sites.
Bell Atlantic Mobile
On December 29, 1995, the Company and Bell Atlantic Mobile entered into two
separate 25-year master lease agreements relating to their towers in the
Pittsburgh MTA, one establishing certain terms and conditions of Bell Atlantic
Mobile's tenancy on the Company's towers and the other establishing certain
terms and conditions of the Company's sale of tenancy to other parties on
towers controlled by Bell Atlantic Mobile. In addition to providing site
rental revenue to the Company, the master leases allow each of the Company and
Bell Atlantic Mobile to sublease space on each other's towers in return for a
percentage of the rental revenue generated thereby.
Bell Atlantic Mobile's master lease of space on the Company's towers
provides that Bell Atlantic Mobile's monthly site rental payments per tower
depend on the size of the equipment installed on the tower, the size of
91
<PAGE>
the equipment building and the number of antennas. Rents are adjusted
periodically based on the Consumer Price Index. The Company performs all work
at Bell Atlantic Mobile's sites for tenants, including antenna installation,
grounding and foundations. Both of these master lease agreements included
rights of first refusal relating to certain spaces on towers leased by one of
the parties for which the other party had received a bona fide offer to buy.
In connection with the Crown Merger, the parties amended these master lease
agreements to eliminate the rights of first refusal, and Bell Atlantic waived
any such rights under these agreements that otherwise would have arisen in
connection with the Crown Merger.
The Company also leases space on all of Bell Atlantic Mobile's towers in the
Pittsburgh MTA (the "Bell Atlantic Agreement"). The terms and conditions of
the Company's master lease of space on towers controlled by Bell Atlantic
Mobile are substantially similar to Bell Atlantic Mobile's master lease with
the Company. The Company may sublease space on a tower controlled by Bell
Atlantic Mobile to another tenant, however, if the subtenant is to be AT&T,
the Company must receive the written consent of Bell Atlantic Mobile. To date,
the Company has 132 sublease contracts on Bell Atlantic Mobile-controlled
towers. If the Proposed JV is formed, it is expected that these towers will be
among the 1,427 towers to be contributed to the joint venture by BAM. Because
the Company would maintain the right to put sublessees on these towers,
revenue resulting from the addition of new tenants on those towers would
continue to be realized by the Company rather than the joint venture.
Nextel Agreement
On July 11, 1997, in connection with Nextel's proposed merger with PCI, the
Company and Nextel entered into the Nextel Agreement (the "Nextel Agreement"),
which establishes the framework under which the Company and Nextel will
conduct joint operations for the development of infrastructure within the
Nextel markets described below. Under the first part of this agreement, the
Company has purchased 48 existing towers from Nextel used in digital or analog
transmission in the greater metropolitan areas of Denver and Philadelphia and
in certain areas of the states of Texas and Florida, for a purchase price of
approximately $10.0 million, and has the option to purchase two additional
towers.
In addition to the tower purchase, the Nextel Agreement provides that the
Company has the exclusive right and option to (i) develop, construct, own and
operate or (ii) purchase and operate, up to 250 new towers within selected
metropolitan areas, including Dallas and Houston, and parts of the interstate
highway corridors traversing the following states: Texas, Oklahoma, Louisiana,
Arkansas, Mississippi, Alabama, Georgia, South Carolina, North Carolina,
Tennessee, Kentucky, Virginia, Pennsylvania, New York, Ohio, Maryland and New
Jersey. This option extends from July 1997 until a minimum of 250 potential
sites have been tendered to the Company. At September 30, 1998, Nextel had
tendered 181 sites to the Company, 117 of which met the Company's criteria for
investing in towers and, therefore, were accepted by the Company. Of these 117
sites, 63 sites are in some stage of the permitting process, 11 sites have
been identified as candidates for purchase and 43 sites have been completed.
Nextel has not yet tendered 69 of the 250 towers. Nextel will perform all site
acquisition work, including entering into agreements with the fee owners of
sites. If the Company waives its option to construct or purchase new towers
for an identified site tendered to it by Nextel, Nextel may construct the
tower itself or contract with a third party for the construction. If the
Company exercises its option to construct and own a tower, it will reimburse
Nextel for all costs of such site acquisition work. If Nextel constructs a
tower and the Company elects to purchase the constructed tower, the Company
will reimburse Nextel for all site acquisition and construction costs
associated with such towers. Following the completion of construction of each
tower, Nextel and the Company will, pursuant to Nextel's master lease
agreement, enter into a five-year lease contract with four five-year renewal
periods, at the option of Nextel. Nextel has a one-time right of first refusal
for a five-year period to lease additional space within one designated 20-foot
section of each tower.
If the Company elects to construct a new site, construction is to be
completed within a 60-day construction period that will not begin prior to
receipt of all regulatory permits and approvals (or a shorter period as
mutually agreed). In the event that the Company fails to complete any site
within the construction period, Nextel will be entitled to receive liquidated
damages for each such failure. If the Company fails to commence or complete
92
<PAGE>
construction or to complete the installation of towers and related equipment
within the construction period, Nextel may exercise its option to purchase
such site at cost (after giving the Company an opportunity to cure). Nextel
may terminate the Nextel Agreement if the Company fails to complete
construction within the prescribed construction period or if Nextel exercises
its purchase option following certain construction delays by the Company for
the greater of five towers or 5% of the aggregate number of total sites
committed to within a rolling eight-month period. In addition, the Nextel
Agreement provides that it may be terminated by Nextel upon the insolvency or
liquidation of CCI and it may be terminated by the Company upon the insolvency
or liquidation of Nextel. See "Risk Factors--Reliance on Nextel Agreement".
BellSouth Site Marketing Agreement
On June 25, 1998, CCI and BellSouth Mobility entered into a Site Marketing
Agreement (the "BellSouth Site Marketing Agreement") pursuant to which CCI was
designated as the exclusive marketing agent for BellSouth's tower sites in the
State of Kentucky. CCI will facilitate the processing of site leases and
customer equipment installation at BellSouth sites. By mutual agreement, CCI
and BellSouth may extend the contract to cover other states. The initial term
of the contract expires on January 31, 1999. After expiration of the initial
term, unless BellSouth and CCI shall have entered into an agreement to form a
permanent entity for the ownership, utilization and management of BellSouth's
tower sites, BellSouth may, at its election, either (1) extend the term of the
contract for five years or (2) grant CCI the right to purchase BellSouth's
tower sites in Kentucky at their fair market value (but at not less than $75.0
million). If the contract is not extended or CCI elects not to purchase such
tower sites, the contract will expire pursuant to its terms.
Customers
In both its site rental and network services businesses, the Company works
with a number of customers in a variety of businesses including PCS, ESMR,
paging and broadcasting. The Company works with both large national carriers
such as Sprint PCS, Nextel, AT&T/Cellular One, Omnipoint and BellSouth
Mobility, and smaller local regional or private operators such as Aerial
Communications and Crescent Communications. For the nine months ended
September 30, 1998, no customer accounted for more than 10.0% of CCI's
revenues, other than Sprint PCS and Nextel, which accounted for approximately
10.6% and 30.4%, respectively, of CCI's consolidated revenues. Nextel revenues
are expected to grow as CCI purchases Nextel towers and builds out Nextel
interstate corridor sites. The following is a list of some of CCI's leading
site rental customers by industry segment.
<TABLE>
<CAPTION>
Industry Selected Customers
-------- ------------------
<S> <C>
SMR/ESMR................ Nextel, SMR Direct
Paging.................. AirTouch Cellular, PageNet, TSR Wireless
PCS..................... Aerial Communications, Sprint PCS, Western Wireless
Private Industrial
Users.................. IBM, Phillips Petroleum
Cellular................ AT&T Wireless, Bell Atlantic Mobile
Governmental Agencies... FBI, INS, Puerto Rico Police
Data.................... Ardis, RAM Mobile Data
Broadcasting............ Hearst Argyle Television, Trinity Broadcasting
Utilities............... Equitable Resources, Nevada Power
Other................... WinStar
</TABLE>
Sales and Marketing
CCI's sales and marketing personnel, located in Pittsburgh, Houston,
Albuquerque, Atlanta, Philadelphia, Albany, San Juan, Puerto Rico and Sao
Paulo, Brazil, target carriers expanding their networks, entering new markets,
bringing new technologies to market and requiring maintenance or add-on
business. All types of wireless service providers are targeted including
broadcast, cellular, paging, PCS, microwave and two-way radio. CCI is also
interested in attracting 9-1-1, federal, state, and local government agencies,
as well as utility and
93
<PAGE>
transportation companies to locate on existing sites. CCI's objective is to
pre-sell capacity on CCI's towers by promoting sites prior to construction.
Rental space on existing towers is also aggressively marketed and sold.
CCI utilizes numerous public and proprietary databases to develop detailed
target marketing programs directed at auction block license awardees, existing
tenants and specific market groups. Mailings focus on regional build outs, new
sites and services. The use of databases, such as those with information on
sites, demographic data, licenses and deployment status, coupled with measured
coverage data and RF coverage prediction software, allows CCI's sales and
marketing personnel to target specific carriers' needs for specific sites. To
foster productive relationships with its major existing tenants and potential
tenants, CCI has formed a team of account relationship managers. These
managers work to develop build-to-suit, site leasing services and site
management opportunities, as well as ensure that customers' emerging needs are
translated into new site products and services.
The marketing department maintains CCI's visibility within the wireless
communications industry through regular advertising and public relations
efforts including actively participating in trade shows and generating regular
press releases, newsletters and targeted mailings (including promotional
flyers). CCI's promotional activities range from advertisements and site
listings in industry publications to maintaining a presence at national trade
shows. Potential clients are referred to CCI's Web site, which contains
Company information as well as site listings. In addition, CCI's sites are
listed on the Cell Site Express Web site. This Web site enables potential
tenants to locate existing structures by latitude, longitude or address.
Clients can easily contact CCI via e-mail through the Web site or Cell Site
Express. CCI's network services capabilities are marketed in conjunction with
its tower footprints.
To follow up on targeted mailings and to cold-call on potential clients, CCI
has established a telemarketing department. Telemarketers field inbound and
outbound calls and forward leads to local sales representatives or
relationship managers for closure. Local sales representatives are stationed
in each cluster to develop and foster close business relationships with
decision-makers in each customer organization. Sales professionals work with
marketing specialists to develop sales presentations targeting specific client
demands.
In addition to a dedicated, full-time sales and marketing staff, a number of
senior managers spend a significant portion of their efforts on sales and
marketing activities. These managers call on existing and prospective
customers and also seek greater visibility in the industry through speaking
engagements and articles in national publications. Furthermore, many of these
managers have been recognized as industry experts, are regularly quoted in
articles and are called on to testify at local hearings and to draft local
zoning ordinances.
Public and community relations efforts include coordinating community
events, such as working with amateur radio clubs to supply emergency and
disaster recovery communications, charitable event sponsorship, and promoting
charitable donations through press releases.
Competition
In the United States, the Company competes with other independent tower
owners, some of which also provide site rental and network services; wireless
communications carriers, which own and operate their own tower networks;
service companies that provide engineering and site acquisition services; and
other potential competitors, such as utilities, outdoor advertisers and
broadcasters, some of which have already entered the tower industry. Wireless
communications carriers that own and operate their own tower networks
generally are substantially larger and have greater financial resources than
the Company. The Company believes that tower location, capacity, price,
quality of service and density within a geographic market historically have
been and will continue to be the most significant competitive factors
affecting tower rental companies. The Company also competes for acquisition
and new tower construction opportunities with wireless communications
carriers, site developers and other independent tower operating companies and
believes that competition for tower site acquisitions will increase and that
additional competitors will enter the tower market, some of which may have
greater financial resources than the Company.
94
<PAGE>
The following is a list of certain of the tower companies that compete with
the Company in the United States: American Tower Corporation, Lodestar
Communications, Motorola, OmniAmerica, Pinnacle Tower, SBA Communications,
TeleCom Towers (an affiliate of Cox Communications), Unisite and SpectraSite.
The following companies are primarily competitors for the Company's rooftop
site management activities in the United States: AAT, APEX, Commsite
International, JJS Leasing, Inc., Motorola, Signal One, Subcarrier
Communications, Tower Resources Management and Unisite.
The Company believes that the majority of its competitors in the site
acquisition business operate within local market areas exclusively, while a
small minority of firms appear to offer their services nationally, including
SBA Communications Corporation, Whalen & Company and Gearon & Company (a
subsidiary of American Tower Corporation). The Company offers its services
nationwide and the Company believes it is currently one of the largest
providers of site development services to the U.S. and international markets.
The market includes participants from a variety of market segments offering
individual, or combinations of, competing services. The field of competitors
includes site acquisition consultants, zoning consultants, real estate firms,
right-of-way consulting firms, construction companies, tower owners/managers,
radio frequency engineering consultants, telecommunications equipment vendors
(which provide turnkey site development services through multiple
subcontractors) and carriers' internal staff. The Company believes that
carriers base their decisions on site development services on certain
criteria, including a company's experience, track record, local reputation,
price and time for completion of a project. The Company believes that it
competes favorably in these areas.
Proposed Joint Venture
On December 8, 1998, BAM, certain of the Transferring Partnerships, the
Company and CCA Investment Corp., a wholly owned indirect subsidiary of the
Company ("Company Sub"), entered into the Formation Agreement to form the
Proposed JV to own and operate a significant majority of BAM's towers. The
Company would own approximately 62.3% of the Proposed JV and BAM and certain
of its affiliates would own the remaining 37.7% along with a 0.001% interest
in the joint venture's operating subsidiary. For financial reporting purposes,
the Company intends to consolidate the Proposed JV's results of operations and
financial condition with its own.
The day-to-day operations of the Proposed JV will be managed by the Company.
The Proposed JV will actively seek to add additional tenants to its towers in
order to increase its revenues. The Proposed JV will also construct and own
new towers that are needed by BAM's wireless communications business. See "--
Build-to-Suit Agreement" and "--Global Lease". The Proposed JV will have
regional offices that will be staffed primarily with employees of the Company
to perform marketing, billing, operations and maintenance functions.
Although the Proposed JV is expected to be formed during the first quarter
of 1999, the Formation Agreement is subject to a number of significant
conditions. There can be no assurance that the Proposed JV will be formed on
the terms described in this document or at all. See "Risk Factors--The
Proposed Joint Venture May Not Occur".
95
<PAGE>
Communication Site Footprints
The following table indicates, as of September 30, 1998, the type and
geographic concentration of the Company's and the proposed joint venture's
owned and managed towers and revenue producing rooftop sites:
<TABLE>
<CAPTION>
U.S. Total
The Proposed After % of
Towers: CCIC JV Proposed JV U.S. Total
------- ---- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Pennsylvania........................ 213 212(a) 320 16.5
Texas............................... 154 43 197 10.2
South Carolina...................... 12 161 173 9.0
Arizona............................. 12 152 164 8.5
North Carolina...................... 11 137 148 7.6
New Jersey.......................... 1 142 143 7.4
New York............................ -- 119 119 6.1
Maryland............................ -- 108 108 5.6
Massachusetts....................... -- 81 81 4.2
New Mexico.......................... 34 36 70 3.6
Virginia............................ -- 57 57 2.9
Connecticut......................... -- 39 39 2.0
Louisiana........................... 24 13 37 1.9
Mississippi......................... 21 8 29 1.5
Delaware............................ -- 24 24 1.2
New Hampshire....................... -- 23 23 1.2
Georgia............................. -- 21 21 1.1
West Virginia....................... 18 13(b) 19 1.0
Ohio................................ 19 -- 19 1.0
Puerto Rico......................... 14 -- 14 0.7
Rhode Island........................ -- 13 13 0.7
All Others.......................... 15 25(c) 40 1.9
--- ----- ----- -----
548 1,427(d) 1,858 95.8
Rooftops(e)......................... 81 -- 81 4.2
--- ----- ----- -----
U.S. Total........................ 629 1,427(d) 1,939 100.0%
=== ===== ===== =====
</TABLE>
- --------
(a) Includes 105 towers currently managed by the Company.
(b) Includes 12 towers currently managed by the Company.
(c) Includes 13 towers that have not yet been identified.
(d) Includes 117 towers currently managed by the Company.
(e) The Company manages an additional 1,286 rooftop sites throughout the
United States that do not currently produce revenue but are available for
leasing to its customers.
The following descriptions of the agreements related to the Proposed JV are
summaries of the material portions of those agreements. These descriptions are
qualified in their entirety by reference to the complete texts of the
agreements, each of which is available as set forth under the heading
"Available Information".
Formation Agreement
Formation of the Proposed JV. Pursuant to the Formation Agreement, Company
Sub will contribute $250.0 million in cash and approximately 15.6 million
shares of common stock (valued at $197.0 million) of the Company to the
Proposed JV. BAM and the Transferring Partnerships will transfer approximately
1,427 towers along with related assets and liabilities to the Proposed JV. The
Proposed JV will borrow $180.0 million under a committed $250.0 million
revolving credit facility. The joint venture will make a $380.0 million cash
distribution to BAM.
96
<PAGE>
Concurrently with the formation of the joint venture, BAM and the Proposed
JV will enter into a master Build-to-Suit Agreement, a Global Lease and a
transitional services agreement and the Company and the Proposed JV will enter
into a services agreement.
Terms and Conditions. In connection with its contribution of assets and
liabilities to the Proposed JV, BAM is making certain representations and
warranties to the Proposed JV concerning the contributed assets and
liabilities. In general, the Proposed JV will have until June 30, 2000, to
raise any claims for indemnification for breaches of the representations and
warranties by BAM. However, BAM's indemnification obligations are subject to a
number of significant limitations including a per occurrence deductible of
$25,000, an aggregate deductible of $7.5 million and an absolute cap of $195.0
million.
The formation of the Proposed JV is subject to a number of significant
conditions. These conditions include:
. accuracy of the representations and warranties of BAM and the Company;
. receipt of bank financing by the Proposed JV;
. receipt of certain third party consents required for the transfer of the
tower assets to the Proposed JV;
. receipt of regulatory approvals;
. absence of litigation;
. receipt of certain environmental studies; and
. absence of any material adverse effect with respect to the business,
assets, operations, conditions (financial or otherwise) or prospects of
the Company and its subsidiaries taken as a whole.
There can be no assurance that these conditions will be satisfied or waived.
If they are not satisfied or waived, the Proposed JV may not be formed on the
terms described in this document or at all. See "Risk Factors--The Proposed
Joint Venture May Not Occur".
Build-to-Suit Agreement
In connection with the formation of the Proposed JV, BAM and the Proposed JV
will enter into the Build-to-Suit Agreement. Pursuant to the Build-to-Suit
Agreement and subject to certain conditions, BAM and the Proposed JV have
agreed that (i) the next 500 towers to be built for BAM's wireless
communications business will be constructed and owned by the Proposed JV and
(ii) immediately thereafter the Proposed JV will have a right of first refusal
to construct the next 200 additional towers to be built for BAM. BAM is
required to submit these 700 site proposals to the Proposed JV during the
five-year period following the formation of the joint venture; however, the
five-year period will be extended for additional one-year periods, until 700
site proposals are submitted to the Proposed JV. The Proposed JV will be
required to build towers in the general vicinity of the locations proposed by
BAM. Upon completion of a tower, it will become subject to the Global Lease
(as discussed below). Space not leased by BAM or its affiliates on each tower
is available for lease by the Proposed JV to third parties.
The Build-to-Suit Agreement sets out various time periods for BAM to
identify its tower needs within certain search areas, and for the Proposed JV
to locate sites and to thereafter complete site acquisition and development
work, including permitting and construction.
Global Lease
In connection with the formation of the Proposed JV, BAM and the Proposed JV
will enter into the Global Lease. All of the approximately 1,427 towers to be
acquired by the Proposed JV from BAM and the Transferring Partnerships
pursuant to the Formation Agreement, and all towers constructed by the
Proposed JV pursuant to the Build-to-Suit Agreement, will be governed by the
Global Lease. The average monthly rent paid by BAM on each of the 1,427 towers
contributed to the Proposed JV by BAM will be approximately $1,850. Minimum
monthly rents on the towers built pursuant to the Build-to-Suit Agreement will
range from $1,250 to $1,833
97
<PAGE>
depending on the region in which the tower is located. These rents may
increase based on the amount of BAM's equipment to be installed at a site.
Rents are subject to annual increase based on the consumer price index,
subject to certain adjustments. For all sites, the initial lease term is ten
years. BAM has the right to extend any lease for three additional five-year
terms and one additional term of four years and eleven months. Each lease will
automatically renew for an option term unless BAM notifies the Proposed JV at
least six months before the then current term expires. Space not leased by BAM
or its affiliates on each tower is available for lease by the Proposed JV to
third parties.
Operating Agreements
In connection with the formation of the Proposed JV, BAM and Company Sub
would enter into limited liability company operating agreements that will
establish and govern the limited liability companies comprising the Proposed
JV.
Governance. The business and affairs of the Proposed JV will be managed by
its managers under the supervision of a board of representatives. Each manager
will be selected by Company Sub. Members of the board of representatives will
be selected by each of BAM and Company Sub in proportion to their ownership
interests in the Proposed JV. The board of representatives initially will have
six members, with two selected by BAM and four selected by Company Sub. So
long as BAM maintains at least a 5.0% interest in the Proposed JV, it will
maintain the right to designate at least one member of the board of
representatives.
The managers will operate the Proposed JV on a day-to-day basis. In general,
the managers will have the power and authority to take all necessary or
appropriate actions to conduct the Proposed JV's business in accordance with
its then current business plan. Actions requiring the approval of the board of
representatives generally will be authorized upon the affirmative vote of a
majority of the members of the board of representatives. However, the
following actions will require the mutual consent of BAM and Company Sub,
either by written consent or by the approval of representatives of each of BAM
and Company Sub at a meeting of the board of representatives:
. engaging in any business other than owning, acquiring, constructing,
leasing and operating communications towers in the United States;
. taking any voluntary action that would cause the Proposed JV to be
insolvent or voluntarily entering into a bankruptcy proceeding;
. incurring any debt other than the Proposed JV Credit Facility and
ordinary course trade payables;
. incurring any liens;
. issuing any additional equity interests in the Proposed JV;
. becoming liable with respect to contingent obligations such as
guarantees or the obligation to make take-or-pay or similar payments;
. failing to preserve the Proposed JV's existence under Delaware law or
its qualification to do business in each jurisdiction in which such
qualification is necessary or desirable;
. mergers or consolidations;
. sales of assets outside the ordinary course;
. entry into contracts with affiliates except in the ordinary course and
on an arm's-length basis;
. any dividends or distributions; provided, if the Proposed JV has been
dissolved and the Proposed JV Credit Facility has been repaid in full,
BAM's consent will not be required;
. the determination of the methodology to be used in calculating payments
under the management agreement and the services agreement pursuant to
which the Company will manage and provide services to the Proposed JV;
98
<PAGE>
. approval of the business plan;
. entry into contracts that (1) restrict the business activities of the
Proposed JV in any geographic area, (2) contain exclusivity provisions,
(3) are inconsistent with any of the agreements entered into in
connection with the formation of the Proposed JV or (4) provide for the
purchase or sale of goods or services involving an amount in excess of
$10.0 million per year; and
. exercising any voting rights with respect to the shares of common stock
of the Company held by the Proposed JV; provided, if BAM and Company Sub
do not agree as to how the shares should be voted, the shares will be
voted pro rata with all shares of Common Stock of the Company voted on
the matter.
Restrictions on Transfers of Interests; Rights of First Refusal; Tag-Along
Rights. Except for transfers to wholly owned affiliates, neither BAM nor
Company Sub may transfer its interest in the Proposed JV to a third party
unless it first offers its interest to the other on terms and conditions,
including price, no less favorable than the terms and conditions on which it
proposes to sell its interest to the third party. In addition, if BAM or
Company Sub wishes to transfer its interest in the Proposed JV to a third
party, the other party will have the right to require the third party, as a
condition to the sale, to purchase a pro rata portion of its interest in the
Proposed JV on the same terms and conditions, including price. BAM may only
transfer its 0.001% interest in the operating subsidiary of the Proposed JV to
its wholly owned affiliates or in connection with a merger or consolidation
transaction to which BAM or Bell Atlantic Corporation is a party.
Dissolution of the Proposed JV. BAM and the Company have agreed that upon a
dissolution of the Proposed JV, in satisfaction of their respective interests
in the Proposed JV, the Company would receive all the assets and liabilities
of the Proposed JV other than the approximately 15.6 million shares of its
common stock held by the Proposed JV and BAM would receive all of the shares
of common stock of the Company held by the Proposed JV and a payment from the
Company, equal to 14.0% of the fair market value of the assets and liabilities
of the joint venture (other than the Company's common stock), to be made in
cash or common stock of the Company (as elected by the Company). BAM would
continue to retain its 0.001% interest in the joint venture's operating
subsidiary. For so long as it retains such interest, the operations formerly
included in the Proposed JV would remain subject to the operating restrictions
set forth under "--Governance". A dissolution of the Proposed JV may be
triggered (1) by BAM at any time following the third anniversary of the
formation of the Proposed JV and (2) by the Company at any time following the
fourth anniversary of its formation; however, if the Company triggers the
dissolution prior to the seventh anniversary, it may be required to make
additional cash payments to BAM.
Transitional Services Agreement; Services Agreement
In connection with the formation of the Proposed JV, BAM and the Proposed JV
are expected to enter into a transitional services agreement pursuant to which
BAM will provide the Proposed JV with services necessary to ensure a smooth
transition of the business to the Proposed JV. In addition, the Company and
the Proposed JV are expected to enter into the services agreement pursuant to
which the Company will provide the Proposed JV with certain services.
U.K. Operations
The Company, through its 80% interest in CTI, owns and operates one of the
world's most established television and radio transmission networks and is
expanding its leasing of antenna space on its towers to a variety of wireless
communications carriers. The Company provides transmission services for two
BBC television services, six national BBC radio services (including the first
digital audio broadcast service in the United Kingdom), 37 local BBC radio
stations and two national commercial radio services through its network of
transmitters, which reach 99.4% of the U.K. population. These transmitters are
located on approximately 1,300 towers, more than half of which are Company-
owned (or leased or licensed to it by third parties) and the balance of which
are licensed to the Company under a site-sharing agreement (the "Site-Sharing
Agreement") with
99
<PAGE>
NTL, the Company's principal competitor in the United Kingdom. The Company has
also secured long-term contracts to provide digital television transmission
services to the BBC and ONdigital. See "--Significant Contracts". In addition
to providing transmission services, the Company also leases antenna space on
its transmission infrastructure to various communications service providers
and provides telecommunications network installation and maintenance services
and engineering consulting services.
The Company's core revenue generating activity in the United Kingdom is the
analog terrestrial transmission of radio and television programs broadcast by
the BBC. CTI's business, which was formerly owned by the BBC, was privatized
under the Broadcasting Act 1996 and sold to CTI in February 1997. At the time
the BBC Home Service Transmission Business was acquired, CTI entered into a
10-year transmission contract with the BBC for the provision of terrestrial
analog television and analog and digital radio transmission services in the
United Kingdom. In the twelve months ended September 30, 1998, approximately
60% of CTI's consolidated revenues were derived from the provision of services
to the BBC.
Communication Site Footprints
At September 30, 1998, the Company owned, leased or licensed 750
transmission sites on which it operated 754 towers, was constructing eight new
towers on existing sites and had 49 site acquisition projects in process for
new tower sites. The Company has 54 revenue producing rooftop sites that are
occupied by the Company's transmitters but are not available for leasing to
customers. The Company's sites are located throughout England, Wales, Scotland
and Northern Ireland. The following table indicates, as of September 30, 1998,
the type and geographic concentration of the Company's U.K. towers and rooftop
sites.
<TABLE>
<CAPTION>
% of
Number Total
------ -----
<S> <C> <C>
Towers:
England...................................................... 442 54.7%
Wales........................................................ 128 15.8
Scotland..................................................... 139 17.2
Northern Ireland............................................. 45 5.6
--- -----
754 93.3
Rooftops....................................................... 54 6.7
--- -----
Total...................................................... 808 100.0%
=== =====
</TABLE>
The Company expects to significantly expand its existing tower footprints in
the United Kingdom by building and acquiring additional towers. The Company
believes its existing tower network encompasses many of the most desirable
tower locations in the United Kingdom for wireless communications. However,
due to the shorter range over which communications signals carry (especially
newer technologies such as PCN) as compared to broadcast signals, wireless
communications providers require a denser footprint of towers to cover a given
area. Therefore, in order to increase the attractiveness of its tower
footprints to wireless communications providers, the Company will seek to
build or acquire new communications towers. Using its team of over 300
engineers with state-of-the-art network design and radio frequency engineering
expertise, the Company locates sites and designs towers that will be
attractive to multiple tenants. The Company seeks to leverage such expertise
by entering into build-to-suit contracts with various carriers, such as BT,
Cable & Wireless Communications, Cellnet, Dolphin, Energis, Highway One,
Ionica, One2One, Orange and Scottish Telecom, thereby securing an anchor
tenant for a site before incurring capital expenditures for the site build
out. As of September 30, 1998, the Company was building eight towers that it
will own. In addition, the Company expects to make strategic acquisitions of
existing communications sites (primarily those owned by wireless
communications operators) in order to expand its infrastructure and to further
leverage its site management experience.
The Company believes that it generally has significant capacity on its
towers in the United Kingdom. Although approximately 160 of its towers are
poles with limited capacity, the Company typically will be able to
100
<PAGE>
build new towers that will support multiple tenants on these sites (subject to
the applicable planning process). The Company intends to upgrade these limited
capacity sites where it believes it can achieve appropriate returns to merit
the necessary capital expenditure. For example, in connection with a contract
with Vodafone, the Company is upgrading 68 of these sites with limited
capacity. See "--Significant Contracts--Vodafone". Approximately 59 of the
Company's sites are used for Medium Frequency ("MF") broadcast transmissions.
At this frequency, the entire tower is used as the transmitting antenna and is
therefore electrically "live". Such towers are therefore unsuitable for
supporting other tenant's communications equipment. However, MF sites
generally have substantial ground area available for the construction of new
multiple tenant towers.
Products and Services
Transmission Business
Analog. For the three months ended September 30, 1998, CTI generated
approximately 52% of its revenues from the provision of analog broadcast
transmission services to the BBC. Pursuant to the BBC Analog Transmission
Contract, the Company provides terrestrial transmission services for the BBC's
analog television and radio programs and certain other related services
(including BBC digital radio) for an initial 10-year term through March 31,
2007. See "--Significant Contracts". For the twelve months ended September 30,
1998, the BBC Analog Transmission Contract generated revenues of approximately
(Pounds)49.0 million ($83.3 million) for the Company.
In addition to the BBC Analog Transmission Contract, the Company has
separate contracts to provide maintenance and transmission services for two
national radio stations, Virgin Radio and Talk Radio. These contracts are for
periods of eight years commencing from, respectively, March 31, 1993 and
February 4, 1995.
The Company owns all of the transmission equipment used for broadcasting the
BBC's domestic radio and television programs, whether located on one of CTI's
sites or on an NTL or other third-party site. As of September 30, 1998, CTI
had 3,465 transmitters, of which 2,196 were for television broadcasting and
1,269 were for radio.
A few of the Company's most powerful transmitters together cover the
majority of the U.K. population. The coverage achieved by the less powerful
transmitters is relatively low, but is important to the BBC's ambition of
attaining universal coverage in the United Kingdom. This is illustrated by the
following analysis of the population coverage of the Company's analog
television transmitters:
<TABLE>
<CAPTION>
Combined
population
Number of sites (ranked by coverage) coverage
------------------------------------ ----------
<S> <C>
1 (Crystal Palace)............................................... 21%
top 16........................................................... 79
top 26........................................................... 86
top 51........................................................... 92
all.............................................................. 99.4
</TABLE>
All of the Company's U.K. transmitters are capable of unmanned operation and
are maintained by mobile maintenance teams from 27 bases located across the
United Kingdom. Access to the sites is strictly controlled for operational and
security reasons, and buildings at 140 of the sites are protected by security
alarms connected to CTI's Technical Operations Centre at Warwick. The Site-
Sharing Agreement provides the Company with reciprocal access rights to NTL's
broadcast transmission sites on which the Company has equipment.
Certain of the Company's transmitters that serve large populations or
important geographic areas have been designated as priority transmitters.
These transmitters have duplicated equipment so that a single failure will not
result in total loss of service but will merely result in an output-power
reduction that does not significantly degrade the service to most viewers and
listeners.
101
<PAGE>
Digital. The Company has entered into contracts with the holders (including
the BBC) of four of the six DTT multiplexes allocated by the U.K. government
to design, build and operate their digital transmission networks. In
connection with the implementation of DTT, new transmission infrastructure
will be required. The Company is committed to invest approximately
(Pounds)100.0 million ($170.0 million) for the build out of new infrastructure
to support DTT over the next two years. By the year 2000, 81 transmission
sites will need to be upgraded with new transmitters and associated systems to
support DTT. Of these sites, 49 are owned by the Company with the remainder
owned by NTL. An arrangement similar to that of the Site-Sharing Agreement is
being negotiated to govern the particular issues arising out of the sharing of
digital transmission sites between the Company and NTL.
The Company successfully began commercial operation of the DTT network from
an initial 22 transmission sites on November 15, 1998.
The Company currently is the sole provider of transmission services for
digital radio broadcasts in the United Kingdom. In September 1995, the BBC
launched its initial DAB scheme over the Company's transmission network, and
this service is now broadcast to approximately 60% of the U.K. population. A
licence for an independent national digital radio network was awarded to the
Digital One consortium during 1998 and it is expected that this service will
commence during 1999. the company is in negotiations to provide accommodation
and access to masts and antennas at 24 transmission sites to support the
launch of Digital One. In addition, local digital radio licences will be
awarded during 1999. The company believes it is well positioned to become the
transmission service provider to the winners of such licences.
Site Rental
The BBC transmission network provides a valuable initial footprint for the
creation of wireless communications networks. As of September 30, 1998,
approximately 200 companies rented antenna space on approximately 405 of CTI's
808 towers and rooftops. These site rental agreements have normally been for
three to 12 years and are generally subject to rent reviews every three years.
Site sharing customers are generally charged annually in advance, according to
rate cards that are based on the antenna size and position on the tower. The
Company's largest site rental customer in the United Kingdom is NTL under the
Site-Sharing Agreement. This agreement generated (Pounds)551,000 ($936,424) of
site rental revenue in June 1998.
The Company also provides a range of site maintenance services in order to
support and enhance its U.K. site rental business. The Company believes that
by offering services such as antenna, base station and tower maintenance and
monitoring, it is able to offer quality services to retain its existing
customers and attract future customers to its communications sites. The
Company complements its U.K. transmission experience with its site management
experience in the United States to provide customers with a top-of-the-line
package of service and technical support.
The following table describes the Company's top ten revenue producing towers
in the United Kingdom:
<TABLE>
<CAPTION>
CTI's CTI's
September September
Number of 1998 1998
Height Tenant Monthly Monthly
Name Location (ft) Leases Revenue Revenue
---- ------------ ------ --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Brookmans Park.......... S.E. England 147 14 (Pounds) 21,286 $ 36,176
Bow Brickhill........... S.E. England 197 12 16,574 28,168
Mendip.................. S.W. England 924 18 16,097 27,357
Crystal Palace.......... London 653 14 13,875 23,581
Hannington.............. S. England 440 15 12,237 20,797
Waltham................. C. England 954 10 10,750 18,270
Wrotham................. S. England 379 13 10,678 18,147
Heathfield.............. S. England 443 15 10,177 17,296
Oxford.................. C. England 507 14 10,007 17,007
Midhurst................ S. England 350 16 9,731 16,538
--- --------------- --------
Total................. 141 (Pounds)131,412 $223,337
=== =============== ========
</TABLE>
102
<PAGE>
Other than NTL, CTI's largest (by revenue) site rental customers consist
mainly of wireless communications carriers such as Cellnet, One2One, Orange
and Vodafone. Revenues from these non-BBC sources are expected to become an
increasing portion of CTI's total U.K. revenue base, as the acquired BBC Home
Service Transmission Business is no longer constrained by governmental
restrictions on the BBC's commercial activities. The Company believes that the
demand for site rental from communication service providers will increase in
line with the expected growth of these communication services in the United
Kingdom.
The Company has master lease agreements with all of the major U.K.
telecommunications site users including BT, Cable & Wireless Communications,
Cellnet, Dolphin, Energis, Highway One, One2One, Orange, Scottish Telecom and
Vodafone. These agreements typically specify the terms and conditions
(including pricing and volume discount plans) under which these customers have
access to all sites within the Company's U.K. portfolio. Customers make orders
for specific sites using the standard terms included in the master lease
agreements. As of September 30, 1998 there were approximately 250 applications
in process for installations at existing sites under such agreements.
Network Services
CTI provides broadcast and telecommunications engineering services to
various customers in the United Kingdom. All the BBC Home Service Transmission
Business employees were retained by the Company upon CTI's acquisition.
Accordingly, the Company has engineering and technical staff of the caliber
and experience necessary not only to meet the requirements of its current
customer base, but also to meet the challenges of developing digital
technology. Within the United Kingdom, CTI has worked with several
telecommunications operations on design and build projects as they roll-out
their networks. CTI has had success in bidding for broadcast consulting
contracts, including, over the last three years, in Thailand, Taiwan, Poland
and Sri Lanka.
With the expertise of its engineers and technical staff, the Company is a
turn-key provider to the wireless communications and broadcast industries. The
Company can provide customers with a ready-to-operate network infrastructure
or any of the component services involved therein. Such services include
network design and site selection, site acquisition, site development and
antenna installation.
Network Design and Site Selection. The Company has extensive experience in
network design and engineering and site selection. While the Company maintains
sophisticated network design services primarily to support the location and
construction of Company-owned multiple tenant towers, the Company does from
time to time provide network design and site selection services to carriers
and other customers on a consulting contract basis. The Company's network
design and site selection services provide customers with relevant information
including recommendations regarding location and height of towers, appropriate
types of antennas, transmission power and frequency selection and related
fixed network considerations.
Site Acquisition. In the United Kingdom, the Company is involved in site
acquisition services for its own purposes and for third parties. The Company
recognizes that the site acquisition phase often carries the highest risk for
a project. To ensure the greatest possible likelihood of success and timely
acquisition, the Company combines a desktop survey of potential barriers to
development with a physical site search that includes initial design analyses,
CDM assessments and, where necessary, line-of-sight surveys. The Company
leverages off its experience in site acquisition and co-location when meeting
with local planning authorities.
Site Development and Antenna Installation. The Company uses a combination of
external and internal resources for site construction. The Company's engineers
are experienced in both construction techniques and construction management,
ensuring an efficient and simple construction phase. Selected civil
contractors are managed by CTI staff for the ground works phase. Specialist
erection companies, with whom the Company has a long association, are used for
tower installation. Final antenna installation is undertaken by the Company's
own experienced teams.
Site Management and Other Services. The Company also provides complete site
management, preventive maintenance, fault repair and system management
services to the Scottish Ambulance Service. It also maintains
103
<PAGE>
a mobile radio system for the Greater Manchester Police and provides
maintenance and repair services for transmission equipment and site
infrastructure.
Significant Contracts
CTI's principal analog broadcast transmission contract is the BBC Analog
Transmission Contract. CTI also has entered into two digital television
transmission contracts, the BBC Digital Transmission Contract and the
ONdigital Digital Transmission Contract (as defined). CTI also provides
facilities to NTL (in its capacity as a broadcast transmission provider to
non-CTI customers) under the Site-Sharing Agreement. The Company also has
long-term service agreements with broadcast customers such as Virgin Radio and
Talk Radio. In addition, CTI has several agreements with telecommunications
providers, including leases, site management contracts and independent
contractor agreements. The Company has entered into contracts to design and
build communications equipment and related infrastructure for customers such
as Cellnet, One2One, Orange, Scottish Telecom and Vodafone.
BBC Analog Transmission Contract
CTI entered into a 10-year transmission contract with the BBC for the
provision of terrestrial analog television and analog and digital radio
transmission services in the United Kingdom at the time the BBC Home Service
Transmission Business was acquired, which contract was subsequently amended on
July 16, 1998 (the "BBC Analog Transmission Contract") to incorporate a small
number of minor modifications requested by the BBC. The BBC Analog
Transmission Contract provides for charges of approximately (Pounds)46.5
million ($79.0 million) to be payable by the BBC to CTI for the year ended
March 31, 1998 and each year thereafter to the termination date, adjusted
annually at the inflation rate less 1%. In addition, for the duration of the
contract an annual payment of (Pounds)300,000 ($509,850) is payable by the BBC
for additional broadcast-related services. At the BBC's request, since October
1997, the number of television broadcast hours has been increased to 24 hours
per day for the BBC's two national television services, which has added over
(Pounds)500,000 ($849,750) annually to the payments made by the BBC to the
Company.
The BBC Analog Transmission Contract also provides for CTI to be liable to
the BBC for "service credits" (i.e., rebates of its charges) in the event that
certain standards of service are not attained as a result of what the contract
characterizes as "Accountable Faults" or the failure to meet certain "response
times" in relation to making repairs at certain key sites. The Company
believes that CTI is well-equipped to meet the BBC's service requirements by
reason of the collective experience its existing management gained while
working with the BBC. Following completion of three formal six-month
performance reviews, CTI achieved a 100% "clean sheet" performance, incurring
no service credit penalties.
The initial term of the BBC Analog Transmission Contract ends on March 31,
2007. Thereafter, the BBC Analog Transmission Contract may be terminated with
12 months' prior notice by either of the parties, expiring on March 31 in any
contract year, from and including March 31, 2007. It may also be terminated
earlier (i) by mutual agreement between CTI and the BBC, (ii) by one party
upon the bankruptcy or insolvency of the other party within the meaning of
section 123 of the Insolvency Act 1986, (iii) upon certain force majeure
events with respect to the contract as a whole or with respect to any site (in
which case the termination will relate to that site only), (iv) by the non-
defaulting party upon a material breach by the other party and (v) upon the
occurrence of certain change of control events (as defined in the BBC Analog
Transmission Contract).
BBC Commitment Agreement
On February 28, 1997, in connection with the acquisition of the BBC Home
Service Transmission Business, the Company, TdF, TeleDiffusion de France S.A.,
which is the parent company of TdF and DFI ("TdF Parent"), and the BBC entered
into the BBC Commitment Agreement (the "BBC Commitment Agreement"), whereby
the Company and TdF agreed (i) not to dispose of any shares in CTSH or any
interest in such shares (or enter into any agreement to do so) until February
28, 2000; and (ii) to maintain various minimum indirect ownership
104
<PAGE>
interests in CTI and CTSH for periods ranging from three to five years
commencing February 28, 1997. These provisions restrict the ability of CCIC
and TdF to sell, transfer or otherwise dispose of their respective CTSH shares
(and, indirectly, their CTI shares). The restrictions do not apply to
disposals of which the BBC has been notified in advance and to which the BBC
has given its prior written consent, which, subject to certain exceptions,
consent shall not be unreasonably withheld or delayed. The BBC has consented
to waive the above restrictions (i) to enable the Company and TdF to enter
into the Governance Agreement and the CTSH Shareholders' Agreement and (ii) to
allow the exercise of rights under such agreements and (iii) to permit the
roll-up of CTI immediately prior to the IPO.
The BBC Commitment Agreement also required TdF Parent and the Company to
enter into a services agreements with CTI. The original services agreement
entered into by TdF Parent and CTI on February 28, 1997 (pursuant to which TdF
makes available certain technical consultants, executives and engineers to
CTI) was amended on August 21, 1998 to extend the original minimum term of
services provided from three years to seven years, commencing February 28,
1997, thereafter terminable on 12-month's prior notice given by CTI to TdF
after February 28, 2003. See "The Roll-Up--Roll-Up Arrangements--CTI Series
Agreement".
ONdigital Digital Transmission Contract
In 1997, the Independent Television Commission awarded ONdigital three of
the five available commercial digital terrestrial television multiplexes for
new program services. The Company bid for and won the 12 year contract from
ONdigital to build and operate its digital television transmission network
(the "ONdigital Digital Transmission Contract"). The contract provides for
approximately (Pounds)20.0 million ($34.0 million) of revenue per year from
2001 to 2008, with lesser amounts payable before and after these years and
with service credits repayable for performance below agreed thresholds.
BBC Digital Transmission Contract
In 1998, the Company bid for and won the 12 year contract from the BBC to
build and operate its digital terrestrial television transmission network (the
"BBC Digital Transmission Contract"). This contract provides for approximately
(Pounds)10.5 million ($17.8 million) of revenue per year (assuming the BBC
commits to the full DTT roll-out contemplated by the BBC Digital Transmission
Contract) during the 12 year period, with service credits repayable for
performance below agreed thresholds. There is a termination provision during
the three-month period following the fifth anniversary of the Company's
commencement of digital terrestrial transmission services for the BBC
exercisable by the BBC but only if the BBC's Board of Governors determines, in
its sole discretion, that DTT in the United Kingdom does not have sufficient
viewership to justify continued DTT broadcasts. Under this provision, the BBC
will pay the Company a termination fee in cash that substantially recovers the
Company's capital investment in the network, and any residual ongoing
operating costs and liabilities. Like the BBC Analog Transmission Contract,
the contract is terminable upon the occurrence of certain change of control
events (as defined in the BBC Digital Transmission Contract).
BT Digital Distribution Contract
Under the BBC Digital Transmission Contract and the ONdigital Digital
Transmission Contract, in addition to providing digital terrestrial
transmission services, CTI has agreed to provide for the distribution of the
BBC's and ONdigital's broadcast signals from their respective television
studios to CTI's transmission network. Consequently, in May 1998, CTI entered
into a 12 year distribution contract (the "BT Digital Distribution Contract")
with British Telecommunications plc ("BT") (with provisions for extending the
term), in which BT has agreed to provide fully duplicated, fiber-based,
digital distribution services, with penalties for late delivery and service
credits for failure to deliver 99.99% availability.
Site-Sharing Agreement
In order to optimize service coverage and enable viewers to receive all
analog UHF television services using one receiving antenna, the BBC, as the
predecessor to CTI, and NTL made arrangements to share all UHF
105
<PAGE>
television sites. This arrangement was introduced in the 1960s when UHF
television broadcasting began in the United Kingdom. In addition to service
coverage advantages, the arrangement also minimizes costs and avoids the
difficulties of obtaining additional sites.
Under the Site-Sharing Agreement, the party that is the owner, lessee or
licensee of each site is defined as the "Station Owner". The other party (the
"Sharer") is entitled to request a license to use certain facilities at that
site. The Site-Sharing Agreement and each site license provide for the Station
Owner to be paid a commercial license fee in accordance with the Site-Sharing
Agreement ratecard and for the Sharer to be responsible, in normal
circumstances, for the costs of accommodation and equipment used exclusively
by it. The Site-Sharing Agreement may be terminated with five years' prior
notice by either of the parties and expires on December 31, 2005 or on any
tenth anniversary of that date. It may also be terminated (i) following a
material breach by either party which, if remediable, is not remedied within
30 days of notice of such breach by the non-breaching party, (ii) on the
bankruptcy or insolvency of either party and (iii) if either party ceases to
carry on a broadcast transmission business or function.
Negotiations are in progress between the Company and NTL to amend the Site-
Sharing Agreement to account for the build-out of digital transmission sites
and equipment, a new rate card related to site sharing fees for new digital
facilities and revised operating and maintenance procedures related to digital
equipment.
Vodafone
On April 16, 1998, under Vodafone's master lease agreement with the Company,
Vodafone agreed to locate antennas on 122 of the Company's existing
communication sites in the United Kingdom. The first 35 sites had been
completed by the end of November 1998. This included 4 sites at which a new
tower had been constructed to replace an existing structure of limited
capacity. The remaining sites are expected to be completed by end of July 1999
and will include the construction of a further 60 replacement towers. After
their upgrade, these sites will be able to accommodate additional tenants.
Customers
For the nine months ended September 30, 1998, the BBC accounted for
approximately 59% of CTI's revenues. This percentage has decreased from 63% in
1997 and is expected to continue to decline as CTI continues to expand its
site rental business and as DTT begins to be transmitted. CTI provides all
four U.K. PCN/cellular operators (Cellnet, One2One, Orange and Vodafone) with
infrastructure services and also provides fixed telecommunications operators,
such as BT, Cable & Wireless Communications, Energis and Scottish Telecom,
with microwave links and backhaul infrastructure. The following is a list of
some of CTI's leading site rental customers by industry segment.
<TABLE>
<CAPTION>
Industry Selected Customers
-------- ------------------
<S> <C>
Paging Page One, Hutchinson
Public Telecommunications BT, Cable & Wireless Communications
PCN Orange, One2One
Cellular Cellnet, Vodafone
PMR/TETRA National Band 3, Dolphin
Governmental Agencies Ministry of Defense
Broadcasting XFM, BBC, NTL
Data RAM Mobile Data, Cognito
Other Aerial Sites, Health Authorities
Utilities Welsh Water, Southern Electric
</TABLE>
Sales and Marketing
The Company has 22 sales and marketing personnel in the United Kingdom who
identify new revenue-generating opportunities, develop and maintain key
account relationships, and tailor service offering to meet the
106
<PAGE>
needs of specific customers. An excellent relationship has been maintained
with the BBC, and successful new relationships have been developed with many
of the major broadcast and wireless communications carriers in the United
Kingdom. The Company has begun to actively cross-sell its products and
services so that, for example, site rental customers are also offered build-
to-suit services.
Competition
NTL, the privatized engineering division of the IBA and now a subsidiary of
NTL Inc. (formerly International CableTel Inc.), is CTI's primary competition
in the terrestrial broadcast transmission market in the United Kingdom. NTL
provides analog transmission services to ITV, Channels 4 and 5, and S4C. It
also has been awarded the transmission contract for the new DTT multiplex
service from Digital 3 & 4 Limited, and a similar contract for the DTT service
for SDN (CTI has been awarded similar contracts for the BBC and ONdigital--
serving a total of four multiplexes compared with NTL's two). Since its
creation in 1991, NTL has diversified from its core television broadcasting
business using its transmission infrastructure to enter into the radio
transmission and telecommunications sectors.
Although CTI and NTL are direct competitors, they have reciprocal rights to
the use of each others' sites for broadcast transmission usage in order to
enable each of them to achieve the necessary country-wide coverage. This
relationship is formalized by the Site-Sharing Agreement entered into in 1991,
the time at which NTL was privatized.
NTL also offers site rental on approximately 1,000 of its sites (some of
which are managed on behalf of third parties). Like CTI, NTL offers a full
range of site-related services to its customers, including installation and
maintenance. CTI believes its towers to be at least as well situated as NTL's
and that it will be able to expand its own third-party site-sharing
penetration. CTI also believes that its penetration of this market has to date
lagged behind NTL only because of the governmental restrictions on the
commercial activities of CTI's business prior to its privatization.
All four U.K. mobile operators own site infrastructure and lease space to
other users. Their openness to sharing with direct competitors varies by
operator. Cellnet and Vodafone have agreed to cut site costs by jointly
developing and acquiring sites in the Scottish Highlands. BT and Cable &
Wireless Communications are both major site sharing customers but also compete
by leasing their own sites to third parties. BT's position in the market is
even larger when considered in combination with its interest in Cellnet.
Several other companies compete in the market for site rental. These include
British Gas, Racal Network Systems, Aerial Sites Plc, Simoco, Relcom Aerial
Services and the Royal Automobile Club. Some companies own sites initially
developed for their own networks, while others are developing sites
specifically to exploit this market.
CTI faces competition from a large number of companies in the provision of
network services. The companies include NTL, specialty consultants and
equipment manufacturers such as Nortel and Ericsson.
Properties
In the United States, the Company's interests in its tower sites are
comprised of a variety of fee interests, leasehold interests created by long-
term lease agreements, private easements and easements, licenses or rights-of-
way granted by government entities. In rural areas, a tower site typically
consists of a three- to five-acre tract, which supports towers, equipment
shelters and guy wires to stabilize the structure. Less than 3,000 square feet
are required for a self-supporting tower structure of the kind typically used
in metropolitan areas. The Company's land leases generally have five- or ten-
year terms and frequently contain one or more renewal options. Some land
leases provide "trade-out" arrangements whereby the Company allows the
landlord to use tower space in lieu of paying all or part of the land rent. As
of September 30, 1998, the Company had approximately 384 land leases. Pursuant
to the Senior Credit Facility, the Company's senior lenders have liens on a
substantial number of the Company's land leases and other property interests
in the United States.
107
<PAGE>
In the United Kingdom, tower sites range from less than 400 square feet for
a small rural TV booster station to over 50 acres for a high-power radio
station. As in the United States, the site accommodates the towers, equipment
buildings or cabins and, where necessary, guy wires to support the structure.
Land is either owned freehold, which is usual for the larger sites, or is held
on long-term leases that generally have terms of 21 years or more.
Legal Proceedings
The Company is occasionally involved in legal proceedings that arise in the
ordinary course of business. Most of these proceedings are appeals by
landowners of zoning and variance approvals of local zoning boards. While the
outcome of these proceedings cannot be predicted with certainty, management
does not expect any pending matters to have a material adverse effect on the
Company's financial condition or results of operations.
Employees
At December 1, 1998, the Company employed 883 people worldwide. Other than
in the United Kingdom, the Company is not a party to any collective bargaining
agreements. In the United Kingdom, the Company is party to a collective
bargaining agreement with the Broadcast, Entertainment, Cinematographic and
Technicians Union. This agreement establishes bargaining procedures relating
to the terms and conditions of employment for all of CTI's non-management
staff. The Company has not experienced any strikes or work stoppages, and
management believes that the Company's employee relations are good.
Regulatory Matters
United States
Federal Regulations. Both the FCC and FAA regulate towers used for wireless
communications transmitters and receivers. Such regulations control the siting
and marking of towers and may, depending on the characteristics of particular
towers, require registration of tower facilities. Wireless communications
devices operating on towers are separately regulated and independently
licensed based upon the particular frequency used.
The FCC, in conjunction with the FAA, has developed standards to consider
proposals for new or modified antenna structures. These standards mandate that
the FCC and the FAA consider the height of proposed antenna structures, the
relationship of the structure to existing natural or man-made obstructions and
the proximity of the antenna structures to runways and airports. Proposals to
construct or to modify existing antenna structures above certain heights are
reviewed by the FAA to ensure the structure will not present a hazard to
aviation. The FAA may condition its issuance of a no-hazard determination upon
compliance with specified lighting and/or marking requirements. The FCC will
not license the operation of wireless telecommunications devices on towers
unless the tower has been registered with the FCC or a determination has been
made that such registration is not necessary. The FCC will not register a
tower unless it has been cleared by the FAA. The FCC may also enforce special
lighting and painting requirements. Owners of wireless transmissions towers
may have an obligation to maintain painting and lighting to conform to FCC
standards. Tower owners may also bear the responsibility of notifying the FAA
of any tower lighting outage. The Company generally indemnifies its customers
against any failure to comply with applicable regulatory standards. Failure to
comply with the applicable requirements may lead to civil penalties.
The 1996 Telecom Act preempted certain state and local zoning authorities'
jurisdiction over the construction, modification and placement of towers. The
new law prohibits any action that would (i) discriminate between different
providers of personal wireless services or (ii) ban altogether the
construction, modification or placement of radio communications towers.
Finally, the 1996 Telecom Act requires the federal government to help
licensees for wireless communications services gain access to preferred sites
for their facilities. This may
108
<PAGE>
require that federal agencies and departments work directly with licensees to
make federal property available for tower facilities.
Local Regulations. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers. These regulations vary greatly, but typically require tower owners
to obtain approval from local officials or community standards organizations
prior to tower construction. Local zoning authorities generally have been
hostile to construction of new transmission towers in their communities
because of the height and visibility of the towers.
Licenses Under the Communications Act of 1934. The Company, through certain
of its subsidiaries, holds licenses for radio transmission facilities granted
by the FCC, including licenses for common carrier microwave and paging
services and commercial mobile radio services ("CMRS"), which are subject to
additional regulation by the FCC. The Company is required to obtain the FCC's
approval prior to the transfer of control of any of its FCC licenses.
Consummation of the IPO and the Roll-Up would have resulted in a transfer of
control of the Company under the FCC's rules and policies if, after such
transactions, over 50% of the voting stock of the Company would have been
owned by new stockholders. As a precautionary measure, the Company applied to
the FCC for consent to transfer of control of the Company to the post-Roll-Up
and IPO stockholders to the extent such transactions would have required prior
FCC approval.
The Company, as the parent company of the licensees of common carrier and
CMRS facilities, is also subject to Section 310(b)(4) of the Communications
Act of 1934, as amended, which would limit the Company to a maximum of 25%
foreign ownership absent a ruling from the FCC that foreign ownership in
excess of 25% is in the public interest. In light of the World Trade
Organization Agreement on Basic Telecommunications Services ("WTO Agreement"),
which took effect on February 5, 1998, the FCC has determined that such
investments are generally in the public interest if made by individuals and
entities from WTO-member nations. The Company is over 25% foreign owned by
companies headquartered in France, the United Kingdom and New Zealand. See
"Principal and Selling Stockholders". Each of these nations is a signatory to
the WTO Agreement. The FCC has granted approval of up to 49.9% foreign
ownership of the Company, at least 25% of which will be from WTO-member
nations.
United Kingdom
Telecommunications systems and equipment used for the transmission of
signals over radio frequencies have to be licensed in the United Kingdom.
These licenses are issued on behalf of the British Government by the Secretary
of State for Trade and Industry under the Telecommunications Act 1984 and the
Wireless Telegraphy Acts 1949, 1968 and 1998. CTI has a number of such
licenses under which it runs the telecommunications distribution and
transmission systems which are necessary for the provision of its transmission
services. CTI's operations are subject to comprehensive regulation under the
laws of the United Kingdom.
Licenses under the Telecommunications Act 1984
CTI has the following three licenses under the Telecommunications Act 1984:
Transmission License. The Transmission License is a renewable license to run
telecommunications systems for the transmission via wireless telegraphy of
broadcasting services. This license is for a period of at least twenty-five
years from January 23, 1997, and is CTI's principal license. Its main
provisions include:
(i) a price control condition covering the provision of all analog radio
and television transmission services to the BBC under the BBC Analog
Transmission Agreement (for an initial price of approximately (Pounds)44
million for regulated elements of the services provided by CTI under the
BBC Analog Transmission Agreement in the year ended March 31, 1997, subject
to an increase cap which is 1% below the rate of increase in the Retail
Price Index over the previous calendar year). The current price control
condition applies until March 31, 2006;
109
<PAGE>
(ii) a change of control provision which requires notification of
acquisitions of interest in CTI of more than 20% by a public
telecommunications operator or any Channel 3 or Channel 5 licensee, which
acquisitions entitle the Secretary of State to revoke the license;
(iii) a site sharing requirement requiring CTI to provide space on its
towers to analog and digital broadcast transmission operators and including
a power for the Director General of Telecommunications ("OFTEL"), as the
regulator, to determine prices if there is failure between the site owner
and the prospective site sharer to agree to a price;
(iv) a fair trading provision enabling OFTEL to act against anti-
competitive behavior by the licensee; and
(v) a prohibition on undue preference or discrimination in the provision
of the services it is required to provide third parties under the
Transmission License.
OFTEL has made a determination with respect to a complaint made by Classic
FM and NTL in respect of certain charges, imposed previously by the BBC under
the Site-Sharing Agreement with NTL for the use by Classic FM of BBC radio
antennas and passed on to Classic FM by NTL. OFTEL's position is that the
Site-Sharing Agreement did not cover charges for new services to customers
such as Classic FM, thereby enabling OFTEL to intervene and determine the
appropriate rate under the "Applicable Rate" mechanism in CTI's Transmission
License. This procedure could result in an amendment to the Site-Sharing
Agreement and could in turn lead to a diminution of CTI's income of
approximately (Pounds)300,000 per annum (equivalent to approximately 0.4% of
revenues and 1.0% of EBITDA for the fiscal year ended March 31, 1997). CTI has
applied for leave to obtain a judicial review of this decision. In addition,
CTI has made a provision of approximately (Pounds)1.9 million relating to any
rate adjustment imposed by OFTEL with respect to previous charges for Classic
FM under the Site-Sharing Agreement.
CTI is discussing with OFTEL certain amendments to CTI's Telecommunications
Act Transmission License to ensure that the price control condition
accommodates the provision by CTI of additional contractually agreed upon
services to the BBC in return for additional agreed upon payments. See "Risk
Factors--Regulatory Compliance and Approval".
The Secretary of State has designated the Transmission License a public
telecommunications operator ("PTO") license in order to reserve to himself
certain emergency powers for the protection of national security. The PTO
designation is, however, limited to this objective. CTI does not have a full
domestic PTO license and does not require one for its current activities. The
Department of Trade and Industry has, nevertheless, indicated that it would be
willing to issue CTI such a license. As a result CTI would gain wider powers
to provide services to third parties including public switched voice telephony
and satellite uplink and would grant CTI powers to build out its network over
public property (so-called "code powers").
General Telecom License. The General Telecom License is a general license to
run telecommunications systems and authorizes CTI to run all the necessary
telecommunications systems to convey messages to its transmitter sites (e.g.,
via leased circuits or using its own microwave links). The license does not
cover the provision of public switched telephony networks (which would require
a PTO license as described above).
Satellite License. The Satellite License is a license to run
telecommunications systems for the provision of satellite telecommunication
services and allows the conveyance via satellite of messages, including data
and radio broadcasting. The license excludes television broadcasting direct to
the home via satellite although distribution via satellite of television
broadcasting services which are to be transmitted terrestrially is permitted.
Licenses under the Wireless Telegraphy Acts 1949, 1968 and 1998
CTI has three licenses under the Wireless Telegraphy Acts 1949, 1968 and
1998, authorizing the use of radio equipment for the provision of certain
services over allocated radio frequencies:
110
<PAGE>
(i) a Broadcasting Services License in relation to the transmission
services provided to the BBC, Virgin Radio and Talk Radio;
(ii) a Fixed Point-to-Point Radio Links License;
(iii) two DAB Test and Development Licenses; and
(iv) a DTT Test & Development License.
All the existing licenses under the Wireless Telegraphy Acts 1949, 1968 and
1998 have to be renewed annually with the payment of a significant fee. The
BBC, Virgin Radio and Talk Radio have each contracted to pay their portion of
these fees. ONdigital is obligated under the Ondigital Digital Transmission
Contract to pay most of these fees.
Environmental Matters
The Company's operations are subject to foreign, federal, state and local
laws and regulations relating to the management, use, storage, disposal,
emission, and remediation of, and exposure to, hazardous and nonhazardous
substances, materials and wastes ("Environmental Laws"). As an owner and
operator of real property, the Company is subject to certain Environmental
Laws that impose strict, joint and several liability for the cleanup of on-
site or off-site contamination relating to existing or historical operations,
and also could be subject to personal injury or property damage claims
relating to such contamination. The Company is potentially subject to cleanup
liabilities in both the United States and the United Kingdom.
The Company also is subject to regulations and guidelines that impose a
variety of operational requirements relating to RF emissions. The potential
connection between RF emissions and certain negative health effects, including
some forms of cancer, has been the subject of substantial study by the
scientific community in recent years. To date, the results of these studies
have been inconclusive. Although the Company has not been subject to any
claims relating to RF emissions, it has established operating procedures
designed to reduce employee exposures to RF emissions and is presently
evaluating certain of its towers and transmission equipment in the United
States and the United Kingdom to determine whether RF emission reductions are
possible.
In addition, the Company is subject to licensing, registration and related
requirements concerning tower siting, construction and operation. In the
United States, the FCC's decision to license a proposed tower may be subject
to environmental review pursuant to the National Environmental Policy Act of
1969 ("NEPA"), which requires federal agencies to evaluate the environmental
impacts of their decisions under certain circumstances. The FCC regulations
implementing NEPA place responsibility on each applicant to investigate any
potential environmental effects of a proposed operation and to disclose any
significant effects on the environment in an environmental assessment prior to
commencing construction. In the event the FCC determines that a proposed tower
would have a significant environmental impact, the FCC would be required to
prepare an environmental impact statement. This process could significantly
delay or prevent the registration or construction of a particular tower, or
make tower construction more costly. In certain jurisdictions, local laws or
regulations may impose similar requirements.
The Company believes that it is in substantial compliance with all
applicable Environmental Laws. Nevertheless, there can be no assurance that
the costs of compliance with existing or future Environmental Laws will not
have a material adverse effect on the Company's business, results of
operations, or financial condition.
111
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information, as of December 31, 1998,
with respect to persons who serve as directors or executive officers and other
key personnel of the Company:
<TABLE>
<CAPTION>
Name Age Positions with the Company
---- --- --------------------------
<S> <C> <C>
Ted B. Miller, Jr. ........... 47 Chief Executive Officer and Vice Chairman
of the Board of Directors
David L. Ivy.................. 51 President and Director
Charles C. Green, III......... 52 Executive Vice President and Chief
Financial Officer
John L. Gwyn.................. 50 Executive Vice President
Wesley D. Cunningham.......... 38 Vice President, Corporate Controller and
Chief Accounting Officer
John Kelly.................... 40 President and Chief Operating Officer of
CCI
Alan Rees..................... 55 Chief Operating Officer and Director of
CTSH
George E. Reese............... 47 Chief Financial Officer, Secretary and
Director of CTSH
Michel Azibert................ 43 Director
Bruno Chetaille............... 44 Director
Robert A. Crown............... 44 Director
Carl Ferenbach................ 56 Chairman of the Board of Directors
Randall A. Hack............... 51 Director
Edward C. Hutcheson, Jr. ..... 53 Director
Robert F. McKenzie............ 55 Director
William A. Murphy............. 30 Director
Jeffrey H. Schutz............. 47 Director
</TABLE>
Pursuant to the Certificate of Incorporation and By-laws of the Company, the
Board of Directors, other than those directors who may be elected by holders
of any series of Preferred Stock or holders of the Class A Common Stock, are
classified into three classes of directors, denoted as Class I, Class II and
Class III. Messrs. Ferenbach, Schutz and McKenzie are Class I directors.
Messrs. Crown, Murphy and Ivy are Class II directors, and Messrs. Hack,
Hutcheson, and Miller are Class III directors. The terms of Class I, Class II
and Class III directors expire at the annual meetings of stockholders to be
held in 1999, 2000 and 2001, respectively. See "Description of Capital Stock--
Certificate of Incorporation and Bylaws--Classified Board of Directors and
Related Provisions". Messrs. Azibert and Chetaille were elected to the Board
of Directors by the holders of the Class A Common Stock upon consummation of
the Roll-Up.
Ted B. Miller, Jr. has been the Chief Executive Officer since November 1996,
Vice Chairman of the Board of Directors since August 1997 and a director of
the Company since 1995. Mr. Miller co-founded CTC in 1994. He was the
President of the Company and CTC from November 1996 to August 1997. Since
February 1997, Mr. Miller has been the Managing Director, Chief Executive
Officer of CTI and has served as Chairman of the Board of Directors of CTI
since August 1998. Mr. Miller is a founding member of InterComp Technologies,
L.C., a company providing payroll tax services in the former Soviet Union, and
has served on its Board of Managers since 1994. In 1986, Mr. Miller founded
Interstate Realty Corporation ("Interstate"), a real estate development and
consulting company, and has been its President and Chief Executive Officer
since inception. Mr. Miller is a director and/or an officer of each wholly
owned subsidiary of the Company.
David L. Ivy has been the President of the Company since August 1997, and
was elected as a director of the Company in June 1997. From October 1996 to
August 1997, he served as Executive Vice President and Chief Financial Officer
of the Company. Since 1995, he has been the President of DLI, Inc., a real
estate consulting
112
<PAGE>
company. From 1993 to 1995, Mr. Ivy was a senior executive with, and later the
President and Chief Operating Officer of, J.E. Robert Companies, where he
managed a joint venture with Goldman, Sachs & Co. that was established to
acquire distressed assets from financial institutions. From 1987 to 1993, Mr.
Ivy served as Chairman of the Board of Directors of Interstate. Mr. Ivy is a
director of each wholly owned subsidiary of the Company.
Charles C. Green, III has been an Executive Vice President and Chief
Financial Officer of the Company since September 1997. Mr. Green was the
President and Chief Operating Officer of Torch Energy Advisors Incorporated
("Torch"), a major energy asset management and outsourcing company, from 1993
to 1995, and Vice Chairman of the Board of Directors and Chief Investment
Officer from 1995 to 1996. From 1992 to September 1997, he was an officer, and
later the Executive Vice President and Chief Financial Officer, of Bellwether
Exploration Company, an oil and gas exploration and production company and an
affiliate of Torch. From 1982 to 1992, Mr. Green was President, Chief
Operating Officer and Chief Financial Officer of Treptow Development Company,
a real estate development company. Mr. Green currently serves on the Board of
Directors of Teletouch Communications, Inc. He has been a Chartered Financial
Analyst since 1974. Mr. Green is a director and/or officer of each wholly
owned subsidiary of the Company.
John L. Gwyn has been an Executive Vice President of the Company since
August 1997. From February to August 1997, Mr. Gwyn served as Senior Vice
President of the Company and CTC. From 1994 to February 1997, Mr. Gwyn was a
Vice President and Director of Commercial Real Estate Asset Management of
Archon Group, L.P., a real estate asset management company and a wholly owned
subsidiary of Goldman, Sachs & Co. From 1989 to 1993, he was a Senior Vice
President of The Robert C. Wilson Company, a mortgage banking company.
Wesley D. Cunningham has been a Vice President and Chief Accounting Officer
of the Company since April 1998. He has been the Corporate Controller of the
Company since February 1997. Mr. Cunningham was the Assistant Corporate
Controller of Drilex International Inc., an oilfield services company, from
1996 to January 1997. From 1990 to 1996, he was the Manager of Financial
Reporting of Maxxam Inc., an aluminum, forest products and real estate
company. He has been a Certified Public Accountant since 1984. Mr. Cunningham
is an officer of each wholly owned subsidiary of the Company.
John P. Kelly has been the President of CCI since December 1998. From
January 1990 to July 1998, Mr. Kelly was the President and Chief Operating
Officer of Atlantic Cellular Company L.P. ("Atlantic Cellular"). From December
1995 to July 1998, Mr. Kelly was also President and Chief Operating Officer of
Hawaiian Wireless, Inc., an affiliate of Atlantic Cellular. Mr. Kelly has
served on the board of directors of the Cellular Association of California as
well as the Vermont Telecommunications Application Center.
Alan Rees has been the Chief Operating Officer of CTSH and each of its
wholly owned subsidiaries since February 1997. He was elected as a director of
CTSH and each of its wholly owned subsidiaries in May 1997. From 1994 to 1997,
Mr. Rees served as the General Manager of Transmission for the broadcast
transmission division of the BBC.
George E. Reese has been the Chief Financial Officer and Secretary of CTSH
and each of its wholly owned subsidiaries since February 1997. He was elected
as a director of CTSH and each of its wholly owned subsidiaries in May 1997.
Since April 1995, Mr. Reese has served as President of Reese Ventures, Inc.,
an international investment consulting firm, which he established in 1995.
From 1972 to 1995, Mr. Reese was employed by Ernst & Young, L.L.P. where he
was named Partner In Charge of the Houston office's energy department and was
appointed Managing Partner of the firm's operations in the former Soviet
Union. Mr. Reese was a founder of the Council on Foreign Investment in Russia
and was a founding member of the American Chamber of Commerce in Russia.
Michel Azibert has been a director of the Company since August 1998. Mr.
Azibert has been International Director of TdF Parent since 1989 and Chief
Executive Officer of TdF since 1994. Mr. Azibert took an active
113
<PAGE>
role in the preparation of the Media Law enacted in France in 1986. Pursuant
to the Governance Agreement, Mr. Azibert was elected as one of the two
directors elected by the holders of the Class A Common Stock.
Bruno Chetaille has been as a director of the Company since August 1998. Mr.
Chetaille has been Chairman and Chief Executive Officer of TdF Parent since
1992. Prior to 1992, Mr. Chetaille was a technical advisor to the President of
the French Republic as one of the two directors elected for four years.
Pursuant to the Governance Agreement, Mr. Chetaille was elected by the holders
of the Class A Common Stock.
Robert A. Crown founded the Crown Business in 1980 and was President from
its inception until December 1998. Mr. Crown is Chairman of the Board of Crown
Communication and was elected as a director of the Company in August 1997. Mr.
Crown has been responsible for the initial construction in Pittsburgh of the
Cellular One system, as well as a substantial portion of the Bell Atlantic
Mobile system in Pittsburgh. He also negotiated one of the first complete end-
to-end build-outs for Nextel for the Pittsburgh MTA. Pursuant to the
Stockholders Agreement, Mr. Crown was the nominee of the Crown Parties for
election as a director of the Company. Mr. Crown is a director of CCI and each
of its wholly owned subsidiaries.
Carl Ferenbach was elected as the Chairman of the Board of Directors of the
Company in April 1997. Since its founding in 1986, Mr. Ferenbach has been a
Managing Director of Berkshire Partners LLC, a private equity investment firm
that manages five investment funds with approximately $1.6 billion of capital.
Mr. Ferenbach has also served as: a Managing Director of Berkshire Investors
LLC ("Berkshire Investors") since its formation in 1996; a Managing Director
of Third Berkshire Managers LLC ("Third Berkshire Managers"), the general
partner of Third Berkshire Associates Limited Partnership ("Third Berkshire
Associates"), the general partner of Berkshire Fund III, A Limited Partnership
(Berkshire Fund III), since its formation in 1997 (and was previously an
individual general partner of Berkshire Fund III since its formation in 1992);
and a Managing Director of Fourth Berkshire Associates LLC ("Fourth Berkshire
Associates") the general partner of Berkshire Fund IV, Limited Partnership
("Berkshire Fund IV", collectively with Berkshire Fund III and Berkshire
Investors, the "Berkshire Group") since formation in 1996. In addition, Mr.
Ferenbach currently serves on the Board of Directors of Wisconsin Central
Transportation Corporation, Tranz Rail Limited, English, Welsh & Scottish
Railway Limited, Australian Transport Network Limited and U.S. Can
Corporation. Pursuant to the Stockholders Agreement, Mr. Ferenbach was the
nominee of Berkshire Group for election as a director of the Company.
Randall A. Hack was elected as a director of the Company in February 1997.
Since January 1995, Mr. Hack has been a member of Nassau Capital L.L.C., an
investment management firm. From 1990 to 1994, he was the President and Chief
Executive Officer of Princeton University Investment Company, which manages
the endowment for Princeton University. Mr. Hack also serves on the Board of
Directors of several private companies. Pursuant to the Stockholders
Agreement, Mr. Hack was the nominee of Nassau Group for election as a director
of the Company.
Edward C. Hutcheson, Jr. has been a director of the Company since 1995, was
the Chief Executive Officer of the Company from its inception to October 1996
and was the Chairman of the Board of Directors of the Company from its
inception to March 1997. Mr. Hutcheson co-founded CTC in 1994. Since 1997, Mr.
Hutcheson has been a principal with HWG Capital, an affiliate of the Houston
investment banking firm of Harris Webb & Garrison. During 1994, he was
involved in private investment activities leading to the creation of the
Company. From 1990 to 1993, he was the President, Chief Operating Officer and
a director of Baroid Corporation ("Baroid"), a company engaged the petroleum
services business. Mr. Hutcheson also serves on the Board of Directors of
Trico Marine Services and Titanium Metals Corporation ("Timet").
Robert F. McKenzie was elected as a director of the Company in 1996. From
1990 to 1994, Mr. McKenzie was the Chief Operating Officer and a director of
OneComm, Inc., a mobile communications provider that he helped found in 1990.
From 1980 to 1990, he held general management positions with Northern Telecom,
Inc. and was responsible for the marketing and support of its Meridian
Telephone Systems and Distributed
114
<PAGE>
Communications networks to businesses throughout the western United States.
Mr. McKenzie also serves on the Board of Directors of Centennial
Communications Corporation.
William A. Murphy has been a director of the Company since August 1998. Mr.
Murphy has been a Director of Mergers & Acquisitions at Salomon Smith Barney
since 1997. From 1990 to 1997, Mr. Murphy held various positions in Mergers &
Acquisitions with Salomon Smith Barney.
Jeffrey H. Schutz was elected as a director of the Company in 1995. Mr.
Schutz has been a General Partner of Centennial Fund IV and Centennial Fund V,
each a venture capital investing fund, since 1994 and 1996, respectively. Mr.
Schutz also serves on the Board of Directors of Preferred Networks, Inc. and
several other private companies. Pursuant to the Stockholders Agreement, Mr.
Schutz was the nominee of Centennial Group for election as a director of the
Company.
Board Committees
The Company's Board of Directors has an Executive Committee, a Compensation
Committee, a Finance and Audit Committee and a Nominating and Corporate
Governance Committee. The Executive Committee, composed of Messrs. Azibert,
Crown, Ferenbach, Hack, Miller and Schutz, acts in lieu of the full Board in
emergencies or in cases where immediate and necessary action is required and
the full Board cannot be assembled. The Compensation Committee, composed of
Messrs. Ferenbach, McKenzie and Schutz, establishes salaries, incentives and
other forms of compensation for executive officers and administers incentive
compensation and benefit plans provided for employees. The Finance and Audit
Committee, composed of Messrs. Hack, Hutcheson, McKenzie and Murphy, reviews
the Company's audit policies and oversees the engagement of the Company's
independent auditors, as well as developing financing strategies for the
Company and approving outside suppliers to implement these strategies. The
Nominating and Corporate Governance Committee, composed of Messrs. Azibert,
Hutcheson and Miller, is responsible for nominating new Board members and for
an annual review of Board performance. Pursuant to the Stockholders Agreement,
the holders of the Class A Common Stock have the right to appoint at least one
member to each of the Executive and Nominating and Corporate Governance
Committees.
Directors' Compensation and Arrangements
All non-management directors of the Company receive compensation for their
service as directors ($15,000 and options for 5,000 shares of Common Stock per
year), and are reimbursed for expenses incidental to attendance at such
meetings. In September 1997, CCIC's Board of Directors approved a fee of
$150,000 per annum to the Berkshire Group (half of which is to be paid by CTI)
for general consulting services and for the services of Mr. Ferenbach as
Chairman of the Board. In addition, Mr. McKenzie received approximately
$10,000 in 1996 for specific consulting assignments requested by the Chief
Executive Officer. Messrs. Ferenbach and Schutz are indemnified by the
respective entities which they represent on CCIC's Board of Directors.
115
<PAGE>
Executive Compensation
The following table sets forth the cash and non-cash compensation paid by or
incurred on behalf of the Company to its Chief Executive Officer and the four
other executive officers (collectively, the "named executive officers") for
each of the three years ended December 31, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Number of
Securities
Underlying All Other
Options/ Compensation
Name and Principal Position Year Salary ($) Bonus ($) SARs (#)(a) ($)
- --------------------------- ---- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Ted B. Miller, Jr. ....... 1997 $281,575 $626,250 625,000 $ --
Chief Executive Officer 1996 152,600 75,000 -- --
and Vice Chairman of the 1995 146,154 -- 345,000 --
Board of Directors
David L. Ivy.............. 1997 200,000 300,000 250,000 --
President and Director 1996 37,500(b) -- 175,000 35,000(c)
1995 -- -- -- --
Charles C. Green, III..... 1997 75,000(d) -- 250,000 --
Executive Vice President 1996 -- -- -- --
and 1995 -- -- -- --
Chief Financial Officer
John L. Gwyn.............. 1997 160,424(e) -- 225,000 --
Executive Vice President 1996 -- -- -- --
1995 -- -- -- --
John P. Kelly............. 1997 -- -- -- --
President and Chief 1996 -- -- -- --
Operating Officer 1995 -- -- -- --
of Crown Communication
</TABLE>
- --------
(a) All awards are for options to purchase the number of shares of Common
Stock indicated.
(b) Mr. Ivy began working for CCIC on October 1, 1996, at an annual salary of
$150,000.
(c) Mr. Ivy worked as a consultant to CCIC from May 1996 to September 1996
before joining the Company as an employee in October 1996.
(d) Mr. Green began working for CCIC on September 1, 1997, at an annual salary
of $225,000.
(e) Mr. Gwyn began working for CCIC on February 3, 1997, at an annual salary
of $175,000.
(f) Mr. Kelly began working for the Company on July 6, 1998, at an annual
salary of $235,000.
Option/SAR Grants In Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Potential Realizable
Number of % of Total Value at Assumed
Securities Options/ Annual Rates of Stock
Underlying SARs Price Appreciation
Options/ Granted to Exercise for Option Term(a)
SARs Employees in or Base Expiration ---------------------
Name Granted (#) Fiscal Year Price ($/Sh) Date 5% ($) 10% ($)
---- ----------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ted B. Miller, Jr. ..... 625,000 20.5% $4.20 5/31/07 $1,650,848 $4,183,574
David L. Ivy............ 250,000 8.2 4.20 5/31/07 660,339 1,673,430
Charles C. Green, III... 250,000 8.2 4.20 8/3/07 660,339 1,673,430
John L. Gwyn............ 225,000 7.4 4.20 5/31/07 594,305 1,506,087
John P. Kelly........... -- -- -- -- -- --
</TABLE>
- --------
(a) The potential realizable value assumes a per-share market price at the
time of the grant to be approximately equal to the exercise price with an
assumed rate of appreciation of 5% and 10%, respectively, compounded
annually for 10 years.
116
<PAGE>
The following table details the December 31, 1997 year end estimated value
of each named executive officer's unexercised stock options. All unexercised
options are to purchase the number of shares of Common Stock indicated.
Aggregated Option/SAR Exercises In Last Fiscal Year
And Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised In-the-
Underlying Unexercised Money Options/ SARs
Shares Options/ SARs at Year- at Year- End ($)
Acquired Value End(#) Exercisable(E)/ Exercisable(E)/
Name on Exercise (#) Realized ($) Unexercisable (U)(a) Unexercisable (U)(b)
---- --------------- ------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
Ted B. Miller, Jr. ..... -- -- 407,500(E) $2,659,010(E)
562,500(U) 1,860,750(U)
David L. Ivy............ -- -- 68,750(E) 306,175(E)
356,250(U) 1,414,725(U)
Charles C. Green, III... -- -- --(E) --(E)
250,000(U) 827,000(U)
John L. Gwyn............ -- -- --(E) --(E)
225,000(U) 744,300(U)
John P. Kelly........... -- -- --(E) --(E)
--(U) --(U)
</TABLE>
- --------
(a) Fifty percent of the options to purchase Common Stock granted in 1994,
1995 and 1996 become exercisable at 10% per year from the date of grant.
The other fifty percent of the options vest upon achievement of a stated
internal rate of return.
(b) The estimated value of exercised in-the-money stock options held at the
end of 1997 assumes a per-share fair market value of $7.50 and per-share
exercise prices of $.40, $2.40 and $4.20, as applicable.
Severance Agreements
The Company has entered into severance agreements (the "Severance
Agreements") with Messrs. Miller, Ivy, Green, Gwyn, Rees and Reese (the
"Executives"). Pursuant to the Severance Agreements, the Company is required
to provide severance benefits to the Executives if they are terminated by the
Company without Cause (as defined in the Severance Agreements) or the
Executives terminate with Good Reason (as defined in the Severance Agreements)
(collectively, a "Qualifying Termination"). The Severance Agreements provide
for enhanced severance benefits if the Executives incur a Qualifying
Termination within the two-year period following a Change in Control (as
defined in the Severance Agreements) of the Company (the "Change in Control
Period"). Upon a Qualifying Termination that does not occur during the Change
in Control Period, an eligible Executive is entitled to (i) a lump sum payment
equal to two times the sum of his base salary and annual bonus, (ii) continued
coverage under specified welfare benefit programs for two years and (iii)
immediate vesting of any outstanding options and restricted stock awards. Upon
a Qualifying Termination during the Change in Control Period, an eligible
Executive is entitled to (i) receive a lump sum payment equal to three times
the sum of his base salary and annual bonus, (ii) continued coverage under
specified welfare benefit programs for three years and (iii) immediate vesting
of any outstanding options and restricted stock awards.
Crown Arrangements
In connection with the implementation of a management transition at CCI
intended to develop and promote the existing management team of CCI and to
reduce the dependence on Mr. Crown for day-to-day management at CCI, the
Company and Mr. Crown have entered into a Memorandum of Understanding and a
related Services Agreement with respect to, among other things, the sale by
the Crown Parties of Common Stock in the IPO, the management transition at
CCI, continuing service by a designee of the Crown Parties on the Company's
117
<PAGE>
Board of Directors and compensation and severance arrangements for Mr. Crown
following such time as a successor President and Chief Executive Officer of
CCI is appointed. Pursuant to the Services Agreement, Mr. Crown has agreed to
continue to serve in a consulting capacity to (and as Chairman of) CCI for a
two-year period following the appointment of his successor, and the Company
has agreed, for such two-year period, to pay Mr. Crown cash compensation of
$300,000 annually, along with certain executive perquisites. At the end of
such two-year period, the Company will pay Mr. Crown a severance benefit of
$300,000. The Company also agreed to vest all of Mr. Crown's existing stock
options; to immediately grant Mr. Crown options to purchase 50,000 shares of
Common Stock at $7.50 per share; and, upon the closing of the IPO, to grant
Mr. Crown options to purchase 625,000 shares of Common Stock at the price to
public in the IPO.
Stock Option Plans
1995 Stock Option Plan
The Company has adopted the 1995 Stock Option Plan, which was reamended on
July 1, 1998 (the "1995 Stock Option Plan"). The purpose of the 1995 Stock
Option Plan is to advance the interests of the Company by providing additional
incentives and motivations which help the Company to attract, retain and
motivate employees, directors and consultants. The description set forth below
summarizes the general terms of the 1995 Stock Option Plan and the options
granted pursuant to the 1995 Stock Option Plan.
Pursuant to the 1995 Stock Option Plan, the Company can grant options to
purchase up to 18,000,000 shares of Common Stock. Options granted under the
1995 Stock Option Plan may either be incentive stock options ("ISOs") under
Section 422 of the Code or nonqualified stock options. The price at which a
share of Common Stock may be purchased upon exercise of an option granted
under the 1995 Stock Option Plan will be determined by the Board of Directors
and, in the case of nonqualified stock options, may be less than the fair
market value of the Common Stock on the date that the option is granted. The
exercise price may be paid in cash, in shares of Common Stock (valued at fair
market value at the date of exercise), in option rights (valued at the excess
of the fair market value of the Common Stock at the date of exercise over the
exercise price) or by a combination of such means of payment, as may be
determined by the Board.
Employees, directors or consultants of the Company (including its
subsidiaries and affiliates) are eligible to receive options under the 1995
Stock Option Plan (although only certain employees are eligible to receive
ISOs). The 1995 Stock Option Plan is administered by the Board and the Board
is authorized to interpret and construe the 1995 Stock Option Plan. Subject to
the terms of the 1995 Stock Option Plan, the Board is authorized to select the
recipients of options from among those eligible, to establish the number of
shares that may be issued under each option and to take any actions
specifically contemplated or necessary or advisable for the administration of
the 1995 Stock Option Plan.
No options may be granted under the 1995 Stock Option Plan after July 31,
2005, which is ten years from the date the 1995 Stock Option Plan was
originally adopted and approved by the Board and stockholders of the Company.
The 1995 Stock Option Plan will remain in effect until all options granted
under the 1995 Stock Option Plan have been exercised or expired. The Board, in
its discretion, may terminate the 1995 Stock Option Plan at any time with
respect to any shares of Common Stock for which options have not been granted.
The 1995 Stock Option Plan may be amended by the Board without the consent of
the stockholders of the Company, other than as to a material increase in
benefits, an increase in the number of shares that may be subject to options
under the 1995 Stock Option Plan or a change in the class of individuals
eligible to receive options under the 1995 Stock Option Plan. However, no
change in any option previously granted under the 1995 Stock Option Plan may
be made which would impair the rights of the holder of such option without the
approval of the holder.
Pursuant to the 1995 Stock Option Plan, options are exercisable during the
period specified in each option agreement or certificate; provided, however,
that no option is exercisable later than ten years from the date the option is
granted. Options generally have been exercisable over a period of ten years
from the grant date and vested in equal installments over a four or five year
period of service with the Company as an employee. A change in control
generally accelerates the vesting of options granted to employees and some of
the options vest
118
<PAGE>
upon the achievement of specific business goals or objectives. An option
generally must be exercised within 12 months of a holder ceasing to be
involved with the Company as an employee, director or consultant as a result
of death and within three months if the cessation is for other reasons;
however, these periods can be extended by decision of the Board (other than in
the case of an ISO). Shares of Common Stock subject to forfeited or terminated
options again become available for option awards. The Board may, subject to
certain restrictions in the 1995 Stock Option Plan (and, in the case of an
ISO, in Section 422 of the Code), extend or accelerate the vesting or
exercisability of an option or waive restrictions in an option agreement or
certificate.
The 1995 Stock Option Plan provides that the total number of shares covered
by the 1995 Stock Option Plan, the number of shares covered by each option,
and the exercise price per share under each option will be proportionately
adjusted in the event of a recapitalization, stock split, dividend, or a
similar transaction.
No grant of any option will constitute realized taxable income to the
grantee. Upon exercise of a nonqualified option, the holder will recognize
ordinary income in an amount equal to the excess of the fair market value of
the stock received over the exercise price paid therefor and the tax basis in
any shares of Common Stock received pursuant to the exercise of such option
will be equal to the fair market value of the shares on the exercise date if
the exercise price is paid in cash. The Company will generally have a
deduction in parity with the amount realized by the holder. The Company has
the right to deduct and withhold applicable taxes relating to taxable income
realized by the holder upon exercise of a nonqualified option and may withhold
cash, shares or any combination in order to satisfy or secure its withholding
tax obligation. An ISO is not subject to taxation as income to the employee at
the date of grant or exercise and the Company does not get a business
deduction as to an ISO; provided, the stock is not sold within two years after
the ISO was granted and one year after the ISO was exercised. The ISO is
effectively taxed at capital gain rates upon the sale of the stock by the
employee. However, if the stock acquired upon exercise of an ISO is sold
within two years of the ISO grant date or one year exercise of the date, then
it is taxed the same as a Nonqualified Option. Upon the exercise of an ISO,
the difference between the value of the stock and the exercise price is
recognized as a preference item for alternative minimum tax purposes.
As of December 31, 1998, options to purchase a total of 13,082,220 shares of
Common Stock have been granted. Options for 572,825 shares of Common Stock
have been exercised, options for 278,250 shares have been forfeited and
options for 12,231,145 shares remain outstanding. The outstanding options are
for (i) 345,000 shares with an exercise price of $0.40 per share, (ii) 43,750
shares with an exercise price of $1.20 per share, (iii) 50,000 shares with an
exercise price of $1.60 per share, (iv) 175,000 shares with an exercise price
of $2.40 per share, (v) 5,385 shares with an exercise price of $3.09 per
share, (vi) 5,385 shares with an exercise price of $4.03 per share, (vii)
1,630,625 shares with an exercise price of $4.20 per share, (viii) 23,135
shares with an exercise price of $4.76 per share, (ix) 5,385 shares with an
exercise price of $5.24 per share, (x) 28,000 shares with an exercise price of
$5.97 per share; (xi) 107,200 shares with an exercise price of $6.00 per
share, (xii) 5,085,530 shares with an exercise price of $7.50 per share,
(xiii) 28,000 shares with an exercise price of $7.77 per share, (xiv) 28,000
shares with an exercise price of $10.08 per share, (xv) 75,000 shares with an
exercise price of $11.31 per share, (xvi) 75,000 shares with an exercise price
of $11.50 per share, (xvii) 125,000 shares with an exercise price of $11.98
per share, (xviii) 253,750 shares with an exercise price of $12.50 per share
and (xix) 4,136,500 shares with an exercise price of $13.00 per share. The
options exercisable at $0.40 per share are fully vested and held by Ted B.
Miller, Jr. Vested and exercisable options also include options for (i) 43,750
shares at $1.20 per share, (ii) 50,000 shares at $1.60 per share, (iii)
175,000 shares at $2.40 per share, (iv) 1,463,625 shares at $4.20 per share,
(v) 23,135 shares at $4.76 per share, (vi) 107,200 shares at $6.00 per share,
(vii) 2,805,630 shares at $7.50 per share, (viii) 128,750 shares at $12.50 per
share and (ix) 90,000 shares at $13.00 per share. Except for the options for
23,135 shares with an exercise price of $4.76 per share and options for
3,036,250 shares with an exercise price of $7.50, the exercise prices for all
of the options were equal to or in excess of the estimated fair value of the
Common Stock at the dates on which the numbers of shares and the exercise
prices were determined; as such, in accordance with the "intrinsic value based
method" of accounting for stock options, the Company did not recognize
compensation cost related to the grant of these options. The options for
23,135 shares with an exercise price of $4.76 were issued in 1998 in exchange
for services received from nonemployees; as such, the Company will account for
the issuance of these options in 1998 based on the
119
<PAGE>
fair value of the services received. Options for 3,036,250 shares granted at
an exercise price of $7.50 per share (which is below the estimated fair market
value at the date of grant) were included in the group of options which vested
at the consummation of the initial public offering of common stock. The
Company will account for these options in 1998 based upon the fair market
value of services received. The remaining options for 2,731,230 shares granted
at an exercise price of $7.50 per share (which is below the estimated fair
market value at the date of grant) were granted in 1998 and generally are
taken into account and vest over five years. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Compensation
Charges Related to Stock Option Grants".
Since January 1, 1998, the Company has granted to its executive officers and
directors options for a total of 2,515,500 shares at an exercise price of
$7.50, 250,000 shares at an exercise price of $12.50 and 3,235,000 shares at
an exercise price of $13.00 under the 1995 Stock Option Plan. Mr. Miller
received options for 928,000 shares, Mr. Ivy received options for 560,000
shares, Mr. Green received options for 425,000 shares, Mr. Gwyn received
options for 75,000 shares, Mr. Kelly received options for 250,000 shares, Mr.
Rees received options for 90,000 shares, Mr. Crown received options for
137,500 shares and Messrs. Hutcheson and McKenzie each received 25,000 shares,
in each case at an exercise price of $7.50 per share. Mr. Miller received
options for 1,035,000 shares, Mr. Ivy received options for 545,000 shares, Mr.
Green received options for 515,000 shares, Mr. Gwyn received options for
175,000 shares, Mr. Rees received options for 250,000 shares, Mr. Crown
received options for 625,000 shares, Messrs. Ferenbach, Hack and Schutz each
received options for 25,000 shares and Messrs. Azibert, Chetaille and Murphy
each received options for 5,000 shares, in each case at an exercise price of
$13.00 per share. Mr. Kelly received options for 250,000 shares at an exercise
price of $12.50 per share.
CTSH Stock Option Plans
CTSH has established certain stock option plans for the benefit of its
employees (the "CTSH Stock Option Plans"). Upon consummation of the Roll-Up in
August 1998, all of the outstanding options to purchase shares of capital
stock of CTSH ("CTSH Options") granted pursuant to the CTSH Stock Option Plans
were converted into and replaced by options to purchase shares of the
Company's Common Stock ("CCIC Options"). The Company's Board of Directors has
adopted each of the CTSH Option Plans. Options granted under the CTSH Stock
Options Plans may be adjusted at the discretion of the Company or, in the case
of options granted under the CTSH Share Bonus Plan (as defined), the CTSH
Trustee (as defined) to take into account any variation of the share capital
of the Company subject to the written confirmation of the auditors of the
Company that the adjustment in their opinion is fair and reasonable. The
description set forth below summarizes the general terms of each of the
various plans that constitute the CTSH Stock Options Plans.
Included in CTI's operating expenses for the nine months ended September 30,
1998 are noncash compensation charges for (Pounds)2.5 million ($4.3 million)
related to the issuance of stock options to certain executives and employees.
CTSH All Employee Share Option Scheme. All outstanding options granted
pursuant to the Castle Transmission Services (Holdings) Ltd. All Employee
Share Option Scheme (the "CTSH All Employee Plan") are vested. These options
may only be exercised in full and on one occasion. Outstanding options granted
pursuant to the CTSH All Employee Plan will lapse if not exercised by the
earlier of (i) the first anniversary of the option holder's death, (ii) six
months following the termination of the option holder's employment with the
Company, (iii) six months following the earlier of (a) a change of control of
the Company, (b) the sanctioning by the U.K. courts of a compromise or
arrangement pursuant to U.K. Companies Act 1985 section 425 that affects the
Common Stock of the Company, (c) a person becoming bound or entitled to
acquire the Common Stock of the Company under U.K. Companies Act 1985 sections
428-430 or (d) notice of a general meeting of the stockholders of the Company
at which a resolution will be proposed for the purpose of a voluntary winding-
up of the Company (each of the foregoing, a "Corporate Event"), (iv) the
option holder being adjudicated bankrupt under U.K. law, (v) the surrender of
the option or (vi) the seventh anniversary of the grant. At the time of the
Roll-up there were outstanding options to purchase 285,250 shares of Common
Stock at a price of $2.37 per share, of which an initial refundable deposit of
$1.20 per share has already been paid by each participant. No additional
options will be granted under the CTSH All Employee Plan in the future.
120
<PAGE>
CTSH Management Plan. All outstanding options granted pursuant to the Castle
Transmission Services (Holdings) Ltd. Unapproved Share Option Scheme (the
"CTSH Management Plan") will vest on the earlier of (i) March 1, 2000 or, if
the option holder was not an Eligible Employee (as defined in the CTSH
Management Plan) on March 1, 1997, the third anniversary of the date on which
the option was granted, (ii) the death of the option holder, (iii) the
termination of the option holder's employment with the Company (other than a
termination for cause, or the voluntary resignation of the option holder),
(iv) a Corporate Event or (v) the sale of the subsidiary or business of the
Company in which the option holder is employed. Once vested, these options may
be exercised in whole or in part at the discretion of the option holder prior
to the lapsing of the option. All options granted pursuant to the CTSH
Management Plan will lapse on the earlier of (i) the first anniversary of the
option holder's death, (ii) six months after the termination of the option
holder's employment with the Company (other than a termination for cause, or
the voluntary resignation of the option holder), (iii) immediately upon any
other termination of employment, (iv) six months following a Corporate Event,
(v) the option holder being adjudicated bankrupt under U.K. law, (vi) the
surrender of the option, (vii) failure to satisfy any performance condition
established by the board of directors of CTI or (viii) the seventh anniversary
of the grant of the option. Currently, there are outstanding options to
purchase 1,649,844 shares of Common Stock at prices ranging from (Pounds)1.43
($2.39) to (Pounds)6.04 ($10.08) per share. No additional options will be
granted under the CTSH Management Plan in the future.
CTSH Bonus Share Plan. In connection with the Castle Transmission Services
(Holdings) Ltd. Bonus Share Plan (the "CTSH Bonus Share Plan"), CTSH has
executed the Employee Benefit Trust (the "CTSH Trust"), a discretionary
settlement for the benefit of past and present CTI employees, directors and
their families. CTI employees and directors are able to participate in the
CTSH Bonus Share Plan by foregoing a portion of their annual bonuses awarded
by the Company in consideration for options to purchase shares of the
Company's Common Stock held by the CTSH Trust at predetermined prices per
share depending upon the year in which the investment is made. The
predetermined price for 1997 investment was (Pounds)13.00 ($21.70) per unit
(each of which will be converted into seven shares of Common Stock upon
consummation of the Roll-Up), and the CTI board has determined that the
predetermined price for any investment in 1998 and 1999 will be (Pounds)16.90
($28.21) and (Pounds)21.97 ($36.68) respectively.
All outstanding options granted pursuant to the CTSH Bonus Share Plan are
vested and may be exercised in whole or in part at the discretion of the
option holder prior to the lapsing of the option. All options will lapse on
the earlier of (i) the first anniversary of the option holder's death, (ii)
six months after the termination of the option holder's employment with the
Company, (iii) six months following a Corporate Event, (iv) the option holder
being adjudicated bankrupt under U.K. law, (v) the surrender of the option or
(vi) the seventh anniversary of the grant of the option. In order to satisfy
the demand created by the exercise of options granted pursuant to the CTSH
Bonus Share Plan, the CTSH Trustee has been granted a call option by the
Company ("the U.K. Option Agreement") to purchase up to 149,709 shares of
Common Stock from the Company at a price of (Pounds)1.86 ($3.11) per share,
the funds for which are to be contributed to the CTSH Trust by CTSH (which has
already provided for such payment in its financial statements). Currently
there are outstanding options to purchase 149,709 shares of Common Stock from
the CTSH Trustee for a nominal sum upon exercise. Following the Offering, CTI
employees and directors will continue to be able to effectively invest a
proportion of their annual bonuses in Common Stock of the Company under the
CTSH Bonus Share Plan for the fiscal years 1998 and 1999. Thereafter, no
additional options will be granted under the CTSH Share Bonus Plan. Grants
under the CTSH Bonus Share Plan are determined by converting monetary awards
into options to purchase shares at predetermined prices.
CTSH Option Grants to Certain Executives. In January and April of 1998, CTSH
granted options to purchase a total of 300,000 ordinary shares and 299,700,000
preference shares of CTSH to Ted B. Miller, Jr., David L. Ivy and George E.
Reese. Upon consummation of the IPO, these options vested in full and
converted into options to purchase 1,890,000 shares of the Company's Common
Stock at an exercise price of (Pounds)1.43 ($2.39) and 210,000 shares of the
Company's Common Stock at an exercise price of (Pounds)3.57 ($5.96). In
addition, the exercise prices of such options will be set in U.S. dollars,
converted from pounds sterling at the Noon Buying Rate on the date of the
consummation of the Offering.
121
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1995 Investments
On January 11, 1995, Ted B. Miller, Jr. and Edward C. Hutcheson, Jr.
(collectively, the "Initial Stockholders") acquired 1,350,000 shares of CTC
Class A Common Stock, par value $.01 per share, for $270,000. Also, on January
11, 1995, pursuant to a Securities Purchase and Loan Agreement, dated as of
January 11, 1995, among CTC, Centennial Fund IV, Berkshire Fund III, A Limited
Partnership (via Berkshire Fund III Investment Corp.), and certain trusts and
natural persons which are now members of Berkshire Investors LLC
(collectively, the "Berkshire Fund III Group") and J. Landis Martin
(collectively, the "CTC Purchasers"), CTC issued to the CTC Purchasers (i)
1,350,000 shares of CTC Class B Common Stock, par value $.01 per share, for
$270,000, (ii) 730,380 shares of CTC Series A Convertible Preferred Stock, par
value $.01 per share, for $4,382,280 and (iii) $3,867,720 principal amount of
CTC Convertible Secured Subordinated Notes for $3,867,720. As of February
1997, all the CTC Convertible Secured Subordinated Notes had been converted
into 644,620 shares of Company Series A Convertible Preferred Stock. The
proceeds received on January 11, 1995 were used by the Company for the
acquisition of towers and ancillary assets from PCI and for working capital.
Pursuant to a Securities Exchange Agreement (the "Securities Exchange
Agreement"), dated as of April 27, 1995, among the Company, CTC, the Initial
Stockholders and the CTC Purchasers, such parties effectively made CCIC the
holding company of CTC and converted some of the obligations of CTC into
capital stock of CCIC. Transactions pursuant to the Securities Exchange
Agreement included (i) Centennial Fund IV transferring 208,334 shares of CTC
Series A Convertible Preferred Stock to Berkshire Fund III Group in exchange
for $1,250,004 principal amount of CTC Convertible Secured Subordinated Notes,
(ii) Berkshire Fund III Group and J. Landis Martin converting all remaining
CTC Convertible Secured Subordinated Notes held by them ($742,452 principal
amount) into 123,742 shares of CTC Series A Convertible Preferred Stock, (iii)
each of the outstanding shares of capital stock of CTC being exchanged for one
share of similar stock of CCIC and (iv) the remaining CTC Convertible Secured
Subordinated Notes ($3,125,268 principal amount) becoming convertible into
shares of CCIC Series A Convertible Preferred Stock, par value $.01 per share
("Series A Convertible Preferred Stock") (all of which notes were subsequently
converted in February 1997).
As a result of the exchange of CTC capital stock for CCIC capital stock,
each Initial Stockholder received 675,000 shares of Existing Class A Common
Stock, par value $.01 per share, of CCIC, Centennial Fund IV received
1,080,000 shares of Common Stock and 145,789 shares of Series A Convertible
Preferred Stock, Mr. Martin received 41,666 shares of Series A Convertible
Preferred Stock and Berkshire Fund III Group received 270,000 shares of Common
Stock and 666,667 shares of Series A Convertible Preferred Stock. In July 21,
1995, Robert F. McKenzie became a party by amendment to the Securities
Exchange Agreement and received 8,333 shares of Series A Preferred Stock.
1996 Investments
Pursuant to a Securities Purchase Agreement, dated as of July 15, 1996,
among the Company, Berkshire Fund III Group, Centennial Fund IV, J. Landis
Martin, Edward C. Hutcheson, Jr. and Robert F. McKenzie, the Company privately
placed 864,568 shares of its Series B Convertible Preferred Stock, par value
$.01 per share ("Series B Convertible Preferred Stock"), for an aggregate
purchase price of $10,374,816. Berkshire Fund III Group paid $6,000,000 for
500,000 shares, Centennial Fund IV paid $3,724,812 for 310,401 shares, Mr.
Martin paid $500,004 for 41,667 shares, Mr. Hutcheson paid $99,996 for 8,333
shares and Mr. McKenzie paid $50,004 for 4,167 shares. The proceeds received
on July 15, 1996 were used for (i) the purchase of the towers and microwave
and SMR businesses from Motorola in Puerto Rico, (ii) an option payment
relating to the acquisition of TEA and TeleStructures and (iii) working
capital.
1997 Investments
Pursuant to a Securities Purchase Agreement, dated as of February 14, 1997,
among the Company, Centennial Fund V and Centennial Entrepreneurs Fund V, L.P.
(collectively, the "Centennial Fund V
122
<PAGE>
Investors"), Berkshire Fund IV, Limited Partnership (via Berkshire Fund IV
Investment Corp.), and certain trusts and natural persons which are members of
Berkshire Investors LLC (collectively, the "Berkshire Fund IV Group" and,
together with Berkshire Fund III Group, the "Berkshire Partners Group"), PNC
Venture Corp., Nassau Capital Partners II L.P. ("Nassau Capital"), NAS
Partners I L.L.C. ("NAS Partners"), Fay, Richwhite Communications Limited
("Fay Richwhite"), J. Landis Martin and Robert F. McKenzie, the Company
privately placed 3,529,832 shares of its Series C Convertible Preferred Stock,
par value $.01 per share ("Series C Convertible Preferred Stock"), for an
aggregate purchase price of $74,126,472. Centennial Fund V Investors paid
$15,464,001 for 736,381 shares, Berkshire Fund IV Group paid $21,809,991 for
1,038,571 shares, PNC Venture Corp. paid $6,300,000 for 300,000 shares, Nassau
Group paid an aggregate of $19,499,991 for 928,571 shares, Fay Richwhite paid
$9,999,990 for 476,190 shares, Mr. Martin paid $999,999 for 47,619 shares and
Mr. McKenzie paid $52,500 for 2,500 shares. The proceeds received on February
14, 1997 were used by the Company to fund a portion of its investment in CTI.
In March 1997, Edward C. Hutcheson, Jr. exercised stock options for 345,000
shares of Common Stock. The Company repurchased these shares and 308,435
shares of his Existing Class A Common Stock for $3,422,118.
In May 1997, in connection with the Company's acquisition of the stock of
TeleStructures, TEA and TeleShare, Inc. (the "TEA Companies"), the Company
issued 535,710 shares of Common Stock to the shareholders of the TEA
Companies: 241,070 shares to Bruce W. Neurohr, 241,070 shares to Charles H.
Jones and 53,570 shares to Terrel W. Pugh.
In June 1997, Messrs. Miller and Ivy received special bonuses, related to
their services in structuring and negotiating the CTI Investment, including
arranging the consortium partners who participated with the Company in the CTI
transaction, of $600,000 and $300,000, respectively.
In August 1997, Robert A. Crown and Barbara Crown sold the assets of Crown
Communications to, and merged CNSI and CMSI with, subsidiaries of the Company.
As consideration for these transactions, the Crowns received a cash payment of
$25.0 million, a promissory note of the Company aggregating approximately
$76.2 million, approximately $2.3 million to pay certain taxes (part of which
amount was paid in September 1997 as a dividend to stockholders of record of
CNSI on August 14, 1997), and 7,325,000 shares of Common Stock. In addition,
the Company assumed approximately $26.0 million of indebtedness of the Crown
Business. The Company repaid the Seller Note in full on October 31, 1997.
Robert A. Crown and Barbara Crown are both parties to the Stockholders
Agreement and are subject to its restrictions.
Pursuant to a Securities Purchase Agreement, dated as of August 13, 1997,
among the Company, American Home Assurance Company ("AHA"), New York Life
Insurance Company ("New York Life"), The Northwestern Mutual Life Insurance
Company ("Northwestern Mutual"), PNC Venture Corp., J. Landis Martin and
affiliates of AHA, the Company privately placed of 292,995 shares of its
Senior Convertible Preferred Stock for an aggregate purchase price of
$29,299,500, together with warrants to purchase 585,990 shares of Common Stock
at $7.50 per share (subject to adjustment, including weighted average
antidilution adjustments). AHA and its affiliates paid $15,099,500 for 150,995
shares and warrants to purchase 301,990 shares of Common Stock. New York Life
and Northwestern Mutual each paid $6,000,000 for 60,000 shares and warrants to
purchase 120,000 shares of Common Stock. PNC Venture Corp. paid $2,000,000 for
20,000 shares and warrants to purchase 40,000 shares of Common Stock. Mr.
Martin paid $200,000 for 2,000 and warrants to purchase 4,000 shares of Common
Stock. The proceeds received on August 13, 1997 were used by the Company to
fund a portion of the Crown Merger and working capital.
Pursuant to a Securities Purchase Agreement, dated as of October 31, 1997,
among the Company, Berkshire Partners Group, Centennial Fund V Investors,
Nassau Group, Fay Richwhite, Harvard Private Capital Holdings, Inc.
("Harvard"), Prime VIII, L.P. ("Prime") and the prior purchasers of Senior
Convertible Preferred Stock (other than affiliates of AHA), an additional
364,500 shares of Senior Convertible Preferred Stock were issued
123
<PAGE>
for an aggregate purchase price of $36,450,000, together with warrants to
purchase 729,000 shares of Common Stock at $7.50 per share (subject to
adjustment, including weighted average antidilution adjustments). Berkshire
Partners Group paid $3,500,000 for 35,000 shares and warrants to purchase
70,000 shares of Common Stock. Centennial V Investors paid $1,000,000 for
10,000 shares and warrants to purchase 20,000 shares of Common Stock. Nassau
Group and Fay Richwhite each paid $2,500,000 for 25,000 shares and warrants to
purchase 50,000 shares of Common Stock. Harvard paid $14,950,000 for 149,500
shares and warrants to purchase 299,000 shares of Common Stock. Prime paid
$5,000,000 for 50,000 shares and warrants to purchase 100,000 shares of Common
Stock. AHA paid $1,500,000 for 15,000 shares and warrants to purchase 30,000
shares of Common Stock. New York Life paid $300,000 for 3,000 shares and
warrants to purchase 6,000 shares of Common Stock. Northwestern Mutual paid
$4,000,000 for 40,000 shares and warrants to purchase 80,000 shares of Common
Stock. PNC Venture Corp. paid $1,000,000 for 10,000 shares and warrants to
purchase 20,000 shares of Common Stock. J. Landis Martin paid $200,000 for
2,000 shares and warrants to purchase 4,000 shares of Common Stock.
Other Transactions
Robert J. Coury, a former director of Crown Communication, and Crown
Communication have entered into a management consulting agreement beginning in
October 1997. Pursuant to a Memorandum of Understanding dated July 3, 1998,
the compensation payable pursuant to such consulting agreement was increased
to $20,000 per month and Mr. Coury was granted options to purchase 60,000
shares of Common Stock at $7.50 per share. See "Management--Executive
Compensation--Crown Arrangements". The Company expects to record a noncash
compensation charge of $0.3 million related to the issuance of these stock
options. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Compensation Charges Related to Stock Option Grants".
In addition, pursuant to a Memorandum of Understanding Regarding Management
and Governance of CCIC and Crown Communication, dated as of August 15, 1997,
Mr. Coury received options for 75,000 shares of Common Stock. Upon
consummation of the IPO, all of these options will have vested. In connection
with the Crown Merger, Mr. Coury acted as financial advisor to the Crowns and
received a fee for such services, paid by the Crowns.
The Company leases office space in a building formerly owned by its Vice
Chairman and Chief Executive Officer. Lease payments for such office space
amounted to $130,000, $50,000 and $22,000 for the years ended December 31,
1997, 1996 and 1995, respectively. The amount of space leased increased from
6,497 square feet at $23.80 per square foot (or $154,836 in annual rent) to
19,563 square feet at $16.00 per square foot (or $313,008 in annual rent)
pursuant to a lease agreement effective November 1, 1997. The lease term is
for a period of five years with an option to terminate in the third year or to
renew at $18.40 per square foot. The lease also provides the Company a right
of first refusal on the entire fifth floor of the building. Interstate Realty
Corporation, a company owned by the Company's Vice Chairman and Chief
Executive Officer, received a commission of $62,000 in connection with this
new lease.
Crown Communication leases its equipment storage and handling facility in
Pittsburgh from Idlewood Road Property Company ("Idlewood"), a Pennsylvania
limited partnership. HFC Development Corp., a Pennsylvania corporation owned
by Mr. Crown's parents, is the general partner of Idlewood. The annual rent
for the property is $180,000.
On August 10, 1998, Michel Azibert, who was elected as a director of the
Company in August 1998, acquired 50,000 shares of Common Stock from an
existing stockholder of the Company for $6.26 per share pursuant to a purchase
right assigned to him by the Company. The Company recorded a noncash
compensation charge of $0.3 million related to the transfer of the purchase
right. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Compensation Charges Related to Stock Option Grants".
On February 28, 1997, CTI and TdF Parent entered into the CTI Services
Agreement pursuant to which TdF Parent agreed to provide certain consulting
services to CTI in consideration for a minimal annual fee of (Pounds)400,000
($679,800) and reimbursement for reasonable out-of-pocket expenses. TdF Parent
has agreed to, among
124
<PAGE>
other things, provide the services of ten executives or engineers to CTI on a
part-time basis and to provide a benchmarking review of CTI. In addition, TdF
Parent has agreed to provide additional services relating to research,
development and professional training on terms (including as to price) to be
determined.
The term of the CTI Services Agreement is expected to be extended for four
additional years (to February 28, 2004) and thereafter will be terminable on
12-month's prior notice given by CTI to TdF after February 28, 2003.
In connection with the financing arrangements relating to the Proposed JV,
the Company paid an aggregate of $100,000 to Centennial Fund IV, L.P.,
Centennial Fund V, L.P. and Centennial Entrepreneurs Fund V, L.P.
Crown Arrangements
In connection with the implementation of a management transition at CCI
intended to develop and promote the existing management team of CCI and to
reduce the dependence on Mr. Crown for day-to-day management at CCI, the
Company and Mr. Crown entered into a Memorandum of Understanding and a related
Services Agreement with respect to, among other things, the sale by the Crown
Parties of Common Stock in the IPO, the management transition at CCI,
continuing service by a designee of the Crown Parties on the Company's Board
of Directors and compensation and severance arrangements for Mr. Crown.
Pursuant to the Services Agreement, Mr. Crown agreed to continue to serve in a
consulting capacity to (and as Chairman of) CCI for a two-year period
following the appointment of his successor, which took place on December 9,
1998, and the Company has agreed, for such two-year period, to pay Mr. Crown
cash compensation of $300,000 annually, along with certain executive
perquisites. At the end of the two-year period, the Company will pay Mr. Crown
a severance benefit of $300,000.
Governance Agreement
On August 21, 1998, the Company TdF and DFI entered into a Governance
Agreement (the "Governance Agreement") to provide for certain rights and
obligations of the Company, TdF and DFI with respect to the governance of the
Company.
Super-Majority Voting Requirements
In general, until August 21, 2003, a super majority vote of the Company's
Board of Directors is required for the Company or any of its subsidiaries to
take any of the following actions:
. amendments to the certificate of incorporation or by-laws;
. acquisitions or investments of more than $20.0 million;
. dispositions for more than $20.0 million;
. significant strategic alliances;
. the incurrence of debt unless certain leverage ratios have been met;
. any transaction with a party to the Stockholders Agreement or any
affiliate of the Company;
. the issuance of any equity securities;
. any transaction that would result in any person holding 50% or more of
the Company's voting securities or equity interests;
. any sale of all or substantially all of the Company's assets;
. any action by the Company relating to its dissolution or bankruptcy; and
. any amendments to the Company's Rights Plan.
125
<PAGE>
Veto Rights
In general, until August 21, 2003, TdF's consent will be required for the
Company or any of its subsidiaries to take any of the following actions:
. significant acquisitions or investments;
. strategic alliances with certain third parties; and
. significant dispositions.
In addition, until August 21, 2008, TdF's consent generally will be required
for the Company or any of its subsidiaries to take any of the following
actions:
. amendments to the certificate of incorporation or bylaws;
. the issuance of any new class of security or of additional shares of
Class A Common Stock;
. any transaction that would result in any person holding 50% or more of
the Company's voting securities or equity interests;
. any sale of all or substantially all of the Company's assets; and
. the issuance to any person of equity securities representing 25% or more
of the Company outstanding equity securities.
Antidilution
Except in certain circumstances, if the Company issues any equity securities
(other than equity that is mandatorily exchangeable for debt, such as the
Exchangeable Preferred Stock) to any person, it must offer TdF the right to
purchase, at the same cash price and on the same other terms proposed, up to
the amount of such equity securities as would be necessary for TdF and its
affiliates to maintain their consolidated ownership percentage in the Company.
Standstill; Transfer Restrictions; Voting
TdF and its affiliates will not, without the prior written consent of the
Board; (1) acquire beneficial ownership of any voting securities of the
Company if their ownership interest would be greater than the Relevant
Percentage; (2) propose that TdF or any of its affiliates enter into any
business combination involving the Company; (3) make any "solicitation" of
"proxies" (as such terms are used in Regulation 14A promulgated under the
Exchange Act) to vote or consent with respect to any voting securities of the
Company in opposition to the recommendation of a super majority vote of the
Board; (4) except in accordance with the terms of the Stockholders Agreement,
seek election to or seek to place a representative on the Board or seek the
removal of any member of the Board; (5) (A) solicit, seek to effect, negotiate
with or provide nonpublic information to any other person with respect to or
(B) otherwise make any public announcement or proposal with respect to, any
form of business combination (with any person) involving a change of control
of the Company or the acquisition of a substantial portion of the voting
securities and/or equity securities or assets of the Company or any subsidiary
of the Company; or (6) publicly disclose any intention, plan or arrangement,
or provide advice or assistance to any person, inconsistent with the
foregoing.
In general, if TdF or any of its affiliates seek to transfer 5% or more of
the voting securities of the Company, the Company will have the right to
purchase all, or any part in excess of such 5%, of such voting securities for
cash at the price at which they are to be transferred. These limitations do
not apply to certain transactions including underwritten public offerings and
sales under Rule 144.
Whenever TdF has the right to vote any voting securities of the Company and
a "proxy-contest" exists or any proposal for the election of any member to the
Board has received a negative vote, which in either case, had been recommended
by a super majority vote of the Board, TdF has agreed to vote all of its
voting securities of the Company in the manner recommended by a super majority
vote of the Board.
126
<PAGE>
The standstill, transfer restriction and voting provisions described above
will cease to apply on or before August 21, 2003. In addition, the standstill
and voting provisions will be suspended during any period from the date of the
commencement by any person (other than TdF or any of its affiliates) of an
unsolicited offer to the date of closing, abandonment or termination of all
such offers (including any offer commence by TdF or any member of the TdF
Group following such suspension) and will thereafter be reinstated as in
effect prior to the commencement of any such unsolicited offer.
CTSH Option
If (1) the Board overrides a veto by TdF of a business combination or (2) an
unsolicited offer by any person (other than TdF or any of its affiliates) has
commenced or occurred, TdF will have the option (the "CTSH Option") to (x)
acquire for cash all of the CTSH shares beneficially owned by the Company at
their fair market value or (y) sell for cash to the Company all of the CTSH
shares and warrants beneficially owned by TdF at their fair market value.
Immediately prior to the consummation of any business combination or
unsolicited offer, TdF may require the Company to purchase one-half of the
shares of Class A Common Stock held by TdF and its affiliates for cash at the
offer price per share of Common Stock pursuant to the business combination or
unsolicited offer.
Put and Call Rights
TdF Put Right. TdF will have the right to require the Company (1) to
purchase all (except for one CTSH Ordinary Share) of the CTSH Shares
beneficially owned by TdF and its affiliates in exchange for shares of Class A
Common Stock at the Exchange Ratio and (2) to issue in exchange for the TdF
CTSH Warrants for a number of shares of Class A Common Stock at the Exchange
Ratio and 100,000 shares of Class A Common Stock, subject to adjustment in
certain circumstances.
Company Call Right. On August 21, 2000, unless the weighted average price
per share of Common Stock over the five trading days immediately preceding
August 21, 2000, is less than or equal to $12 (as adjusted for any stock split
or similar transaction), the Company will have the right to require TdF to
transfer and deliver to the Company all (except for one CTSH Ordinary Share)
of the TdF CTSH Shares and the TdF CTSH Warrants beneficially owned by TdF and
its affiliates in exchange for a number of shares of Class A Common Stock at
the Exchange Ratio and 100,000 shares of Class A Common Stock, subject to
adjustment in certain circumstances.
Stockholders Agreement
On August 21, 1998, the Company entered into the Stockholders Agreement (the
"Stockholders Agreement") with certain stockholders of the Company (the
"Stockholders") to provide for the certain rights and obligations of the
Company and the Stockholders with respect to the governance of the Company and
the Stockholders' shares of Common Stock or Class A Common Stock, as the case
may be.
Governance
Board Representation. (i) So long as the TdF Group holds at least 5.0% of
the Company's common stock, TdF will have the right to appoint one director
and generally will have the right to appoint two directors; (ii) so long as
Robert A. Crown, Barbara Crown, certain trusts established by them and their
permitted transferees (the "Crown Group") has beneficial ownership of at least
555,555 shares of common stock, the Crown Group will have the right to elect
one director (the "Crown Designee"); (iii) so long as Ted B. Miller, Jr. and
his permitted transferees (the "Initial Stockholder Group") maintains an
ownership interest, they will have the right to elect one director (the
"Initial Stockholder Designee"); (iv) the Chief Executive Officer of the
Company will have the right to elect one director (the "CEO Designee"); (v) so
long as the ownership interest of Centennial Fund IV, L.P., Centennial Fund V,
L.P., Centennial Entrepreneurs Fund V, L.P., their affiliates and respective
partners
127
<PAGE>
(the "Centennial Group") is at least 5.0%, the Centennial Group will have the
right to elect one director (the "Centennial Designee"); (vi) so long as the
ownership interest of the Berkshire Group is at least 5.0%, the Berkshire
Group will have the right to elect one director (the "Berkshire Designee");
(vii) so long as the ownership interest of Nassau Capital Partners II, L.P.,
NAS Partners I, L.L.C., their affiliates and their respective partners (the
"Nassau Group") is not less than the ownership interest of the Nassau Group
immediately following the closing of the IPO, the Nassau Group will have the
right to elect one director (the "Nassau Designee"); and (viii) all directors
other than the Designees ("General Directors") will be nominated in accordance
with the Certificate of Incorporation and By-laws.
Solicitation and Voting of Shares. With respect to each meeting of
stockholders of the Company at which directors are to be elected, the Company
will use its best efforts to solicit from the stockholders of the Company
eligible to vote in the election of directors proxies in favor of the nominees
selected in accordance with the provisions of the Stockholders Agreement
(including without limitation the inclusion of each director nominee in
management's slate of nominees and in the proxy statement prepared by
management of the Company in respect of each annual meeting, vote or action by
written consent).
Each Stockholder will vote its shares in favor of the election of the
persons nominated pursuant to the provisions described in "--Board
Representation" above to serve the Board and against the election of any other
person nominated to be a director.
Committees of the Board. Each of the Nominating and Corporate Governance
Committee and the Executive Committee will contain, so long as TdF is
Qualified at least one TdF Designee.
Registration Rights; Tag-Along Rights
Subject to certain exceptions, limitations and the suspension of such rights
by the Company under certain conditions, the Stockholders have been granted
certain piggy-back registration rights, demand registration rights, S-3
registration rights and tag-along rights with respect to their shares of
Common Stock.
Subject to certain exceptions, if at any time Stockholders holding at least
2% of the voting securities of the Company (the "Initiating Stockholder(s)")
determine to sell or transfer 2% or more of the voting securities then
issuable or outstanding to a third party who is not an affiliate of any of the
Initiating Stockholders, Stockholders may have the opportunity and the right
to sell to the purchasers in such proposed transfer (upon the same terms and
conditions as the Initiating Stockholders) up to that number of Shares owned
by such Stockholder equaling the product of (i) a fraction, the numerator of
which is the number of Shares owned by such Stockholder as of the date of such
proposed transfer and the denominator of which is the aggregate number of
Shares owned by the Initiating Stockholders and by all Stockholders exercising
tag-along rights multiplied by (ii) the number of securities to be offered.
CTSH Shareholders' Agreement
On August 21, 1998, CCIC, TdF and CTSH entered into a Shareholders'
Agreement to govern the relationship between CCIC and TdF as Shareholders of
CTSH (the "CTSH Shareholders' Agreement).
Corporate Governance. The Board of CTSH will be comprised of six directors,
of which CCIC and TdF will each have the right to appoint and remove two
directors with the remaining two directors to be mutually agreed upon by CCIC
and TdF. CCIC has the right to nominate the chairman, chief executive officer,
chief operating officer and chief financial officer of CTSH, subject to
approval buy a super majority vote of the Board of CCIC.
The affirmative vote of a majority of the Board, including a director
nominated by CCIC and a director nominated by TdF, is necessary for the
adoption of a resolution. Further, the prior written consent of each of CCIC
and TdF, in their capacities as shareholders, is required for the following
actions, among others, significant acquisitions and dispositions; issuance of
new shares; entry into transactions with shareholders, except pursuant
128
<PAGE>
to the CTI Services Agreement and/or the CTI Operating Agreement; entry into
new lines of business; capital expenditures outside the budget; entry into
banking and other financing facilities; entry into joint venture arrangements;
payment of dividends, except for (1) dividends payable in respect of CTSH's
redeemable preferred shares and (2) dividends permitted by CTSH's financing
facilities; and establishing a public market for CTSH shares. Similar
governance arrangements also apply to CTSH's subsidiaries.
If either CCIC or TdF vetoes a transaction (either at Board or shareholder
level), the other shareholder is entitled to pursue that transaction in its
own right and for its own account.
Transfer Provisions. Subject to certain exceptions, neither CCIC nor TdF may
transfer any interest in shares held in CTSH to a third party. Transfers of
shares to affiliated companies are permitted, subject to certain conditions.
No shares may be transferred if such transfer would (a) entitle the BBC to
terminate either of the BBC contracts, (b) subject CTSH to possible revocation
of its licenses under the Telecommunications Act 1984 or the Wireless
Telegraphy Acts 1949, 1968 and 1998 or (c) cause CCIC or TdF to be in breach
of the Commitment Agreement between the Company, TdF, TdF Parent and the BBC
(under which the Company and TdF have agreed to maintain certain minimum
ownership levels in CTSH for a period of five years). See "Business--U.K.
Operations--Significant Contracts--BBC Commitment Agreement".
In addition, shares may be sold to a third party, subject to a right of
first refusal by the other party, after the later of (a) the second
anniversary of the closing of the Roll-up, and (b) the expiration of the
period for the completion of the TdF Put Right (as defined) or the Company
Call Right (as defined). If CCIC purchases TdF's shares pursuant to such right
of first refusal, it may elect (instead of paying the consideration in cash)
to discharge the consideration by issuing its Common Stock at a discount of
15% to its market value. If the right of first refusal is not exercised, the
selling shareholder must procure and offer on the same terms for the shares
held by the other party. If the Company elects to issue Common Stock to TdF
pursuant to the right of first refusal, TdF will be entitled to certain demand
registration rights and tag along rights.
TdF Put Right. TdF has the right to put its shares of CTSH to CCIC for cash
(the "TdF Put Right") if there is a change of control of CCIC. Such right is
exercisable if (a) TdF has not exchanged its shares pursuant to the Governance
Agreement by the second anniversary of the closing of the Roll-Up, or (b)
prior to the second anniversary of the closing of the Roll-Up, if TdF has
ceased to be Qualified for the purposes of the Governance Agreement.
The consideration payable on the exercise of the TdF Put Right will be an
amount agreed between CCIC and TdF or, in the absence of agreement, the fair
market value as determined by an independent appraiser.
TdF Exit Right. TdF also has the right after the earlier of (a) the second
anniversary of the closing of the Roll-Up, or (b) TdF ceasing to be Qualified
for purposes of the Governance Agreement, to require CCIC, upon at least six
months' notice, to purchase all, but not less than all, of the shares it
beneficially owns in CTSH (the "TdF Exit Right").
The consideration to be paid to TdF, and the manner in which it is
calculated, upon exercise of the TdF Exit Right is substantially the same as
described upon exercise of the TdF Put Right.
CCIC is entitled to discharge the consideration payable on the exercise of
the TdF Exit Right either in cash or by issuing Common Stock to TdF at a
discount of 15% to its market value. If CCIC elects to issue Common Stock to
TdF on the exercise of the TdF Exit Right, TdF will be entitled to certain
demand registration rights and tag-along rights.
CCIC Deadlock Right. CCIC has the right to call TdF's shares of CTSH,
subject to certain procedural requirements, for cash if, after the third
anniversary of the closing of the Roll-Up, TdF refuses on three occasions
during any consecutive six-month period to agree to the undertaking by CTSH of
certain types of transactions (including acquisitions and disposals) that
would fall within CTSH's core business (the "CCIC Deadlock
129
<PAGE>
Right"). The consideration due on the exercise of the CCIC Deadlock Right is
payable in cash, the fair market value of the TdF interest to be determined in
the same manner described above upon exercise of the TdF Put or Exit Rights.
CCIC Shotgun Right. Provided that TdF has not, pursuant to the Governance
Agreement, exchanged its share ownership in CTSH for shares of CCIC, CCIC may
(a) by notice expiring on August 21, 2003, or (b) at any time within 45 days
of CCIC becoming aware of a TdF Change of Control (as defined in the
Governance Agreement) offer to purchase TdF's shares in CTSH. TdF is required
to either sell its shares or agree to purchase CCIC's shares in CTSH at the
same price contained in CCIC's offer for TdF's shares of CTSH.
The consummation of any transfer of shares between CCIC and TdF pursuant to
any of the transfer provisions described above is subject to the fulfillment
of certain conditions precedent, including obtaining all necessary
governmental and regulatory consents.
Termination. The Shareholders' Agreement terminates if either CCIC or TdF
ceases to be qualified. CCIC remains qualified on the condition that it holds
at least 10% of the share capital of CTSH.
CTI Services Agreement
On February 28, 1997, CTI and TdF Parent entered into a Services Agreement
pursuant to which TdF Parent agreed to provide certain consulting services to
CTI in consideration for a minimum annual fee of (Pounds)400,000 ($667,800)
and reimbursement for reasonable out-of-pocket expenses. This agreement was
amended and restated on August 21, 1998 (the "CTI Services Agreement"). TdF
Parent has agreed to, among other things, provide the services of ten
executives or engineers to CTI on a part-time basis and to provide a
benchmarking review of CTI. In addition, TdF Parent has agreed to provide
additional services relating to research, development and professional
training on terms (including as to price) to be determined. Following February
28, 2003, the CTI Services Agreement will be terminable on 12-month's prior
notice given by CTI to TdF.
CTI Operating Agreement
The following summary of the terms of the CTI Operating Agreement is subject
to the negotiation of definitive documentation, although the Company expects
such agreement to have the general terms described herein. Under the CTI
Operating Agreement (the "CTI Operating Agreement"), the Company will be
permitted to develop business opportunities relating to terrestrial wireless
communications (including the transmission of radio and television
broadcasting) anywhere in the world except the United Kingdom. CTI will be
permitted to develop such business opportunities solely in the United Kingdom.
The Company and TdF also intend to establish, pursuant to the CTI Operating
Agreement, a joint venture to develop digital terrestrial transmission
services in the United States. See "Business--U.S. Operations--Network
Services--Broadcast Site Rental and Services".
The CTI Operating Agreement will also establish a framework for the
provision of business support and technical services to the Company and its
subsidiaries (other than CTI) in connection with the development of any
international business by the Company. TdF will have the right, if called upon
to do so by the Company or CTSH, to provide all or part of such services to
the Company and its subsidiaries (other than CTI) in connection with the
provision of broadcast transmission services.
130
<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth certain information, as of December 31, 1998,
with respect to the beneficial ownership of Capital Stock by (1) each person
who is known by the Company to be the beneficial owner of more than 5% of any
class or series of Capital Stock of the Company, (2) each of the directors and
executive officers of the Company and all directors and executive officers as
a group and (3) this table also gives effect to shares that may be acquired
pursuant to options and warrants, as described in the footnotes below.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Total
Executive Officers and Owned Voting
Directors(a) Title of Class Number(b) Percent Power(c)
- ---------------------- -------------- ------------ ------- ----------
<S> <C> <C> <C> <C>
Ted B. Miller, Jr. ...... Common Stock(d) 4,036,097 4.7 4.1
David L. Ivy............. Common Stock(e) 1,395,000 1.7 1.5
Charles C. Green, III.... Common Stock(f) 675,000 * *
John L. Gwyn............. Common Stock(g) 173,000 * *
Robert A. Crown(h)....... Common Stock(i) 5,782,500 7.0 6.1
Michel Azibert(j)........ Common Stock(k) 55,000 * *
Bruno Chetaille(l)....... Common Stock(m) 5,000 * *
Carl Ferenbach(n)........ Common Stock(o) 20,735,805 24.9 21.9
Randall A. Hack(p)....... Common Stock(q) 5,080,080 6.1 5.4
Edward C. Hutcheson,
Jr.(r).................. Common Stock(s) 650,000 * *
John P. Kelly(t)......... Common Stock -- * *
Robert F. McKenzie(u).... Common Stock(v) 197,500 * *
William A. Murphy(w)..... Common Stock(x) 5,000 * *
Alan Rees(y)............. Common Stock(z) 188,308 * *
Jeffrey H. Schutz(aa).... Common Stock(bb) 9,837,040 11.8 10.4
Directors and Executive
Officers as a group
(15 persons total)...... Common Stock(cc) 48,815,330 58.5 51.5
Berkshire(dd)
Berkshire Fund III, A
Limited Partnership..... Common Stock(ee) 6,095,450 7.3 6.5
Berkshire Fund IV,
Limited Partnership..... Common Stock(ff) 12,996,055 15.6 13.8
Berkshire Investors LLC.. Common Stock(gg) 1,619,300 1.9 1.7
Candover(hh)
Candover Investments,
plc..................... Common Stock 2,329,318 2.8 2.5
Candover (Trustees)
Limited................. Common Stock 208,317 * *
Candover Partners
Limited................. Common Stock 8,792,565 10.6 9.3
Centennial(ii)
Centennial Fund IV,
L.P.(jj)................ Common Stock 5,965,340 7.2 6.3
Centennial Fund V,
L.P.(kk)................ Common Stock 3,731,285 4.5 3.9
Centennial Entrepreneurs
Fund V, L.P.(ll)........ Common Stock 115,415 * *
Nassau(mm)
Nassau Capital Partners
II, L.P.(nn)............ Common Stock 5,023,825 6.0 5.3
NAS Partners I,
L.L.C.(oo).............. Common Stock 31,255 * *
Digital Future
Investments B.V.(pp).... Class A Common Stock 11,340,000 100.0 12.0
</TABLE>
* Less than 1%.
- --------
(a) Except as otherwise indicated, the address of each person in this table is
c/o Crown Castle International Corp., 510 Bering Drive, Suite 500,
Houston, TX 77057.
(b) In determining the number and percentage of shares beneficially owned by
each person, shares that may be acquired by such person pursuant to
options, warrants or convertible stock exercisable or convertible within
60 days of the date hereof are deemed outstanding for purposes of
determining the total number of outstanding shares for such person and are
not deemed outstanding for such purpose for all other stockholders. To the
best of the Company's knowledge, except as otherwise indicated, beneficial
ownership includes sole voting and dispositive power with respect to all
shares.
131
<PAGE>
(c) In determining Percentage of Total Voting Power, shares of Common Stock
that may be acquired upon conversion of the Class A Common Stock into
shares of Common Stock are taken into account.
(d) Includes options for 2,868,000 shares of Common Stock. A trust for the
benefit of Mr. Miller's children holds 99,995 shares of Common Stock.
(e) Includes options for 1,275,000 shares of Common Stock.
(f) Represents options for 675,000 shares of Common Stock.
(g) Includes options for 170,500 shares of Common Stock.
(h) Mr. Crown's principal business address is c/o Crown Communication Inc.,
375 Southpointe Blvd., Canonsburg, PA 19317.
(i) Includes 1,939,375 shares of Common Stock owned by Mr. Crown, 1,749,375
shares of Common Stock owned by his spouse, over which she has sole voting
and dispositive power, 125,000 shares of Common Stock that are jointly
owned, 915,625 shares of Common Stock owned by a grantor retained annuity
trust for Mr. Crown, 915,625 shares of Common Stock owned by a grantor
retained annuity trust for Ms. Crown and options for 137,500 shares of
Common Stock.
(j) Mr. Azibert's principal business address is c/o TeleDiffusion de France
International S.A., 10 Rue d'Oradour sur Glane, 75732 Paris 15 France.
(k) Includes options for 5,000 shares of Common Stock.
(l) Mr. Chetaille's principal business address is c/o TeleDiffusion de France
International S.A., 10 Rue d'Oradour sur Glane, 75732 Paris 15 France.
(m) Represents options for 5,000 shares of Common Stock.
(n) Mr. Ferenbach's principal business address is c/o Berkshire Partners LLC,
One Boston Place, Suite 3300, Boston, MA 02108.
(o) Represents options for 25,000 shares of Common Stock and 20,710,805 shares
of Common Stock beneficially owned by members of the Berkshire Group. Mr.
Ferenbach disclaims beneficial ownership of such shares, except to the
extent of his pecuniary interest therein.
(p) Mr. Hack's principal business address is c/o Nassau Capital LLC, 22
Chambers St., Princeton, NJ 08542.
(q) Represents options for 25,000 shares of Common Stock and 5,055,080 shares
of Common Stock beneficially owned by members of the Nassau Group. Mr.
Hack disclaims beneficial ownership of such shares.
(r) A trust for the benefit of Mr. Hutcheson's children holds 50,000 shares.
Mr. Hutcheson is a limited partner of Centennial Entrepreneurs Fund V,
L.P., but disclaims beneficial ownership of the Company's securities
directly beneficially held by such fund. Mr. Hutcheson's principal
business address is 5599 San Felipe, Suite 301, Houston, TX 77056.
(s) Includes options for 50,000 shares of Common Stock.
(t) Mr. Kelly's principal business address is c/o Crown Communication Inc.,
375 Southpointe Blvd., Canonsburg, PA 19317.
(u) Mr. McKenzie's principal business address is P.O. Box 1133, 1496 Bruce
Creek Road, Eagle, CO 81631.
(v) Includes options for 104,375 shares of Common Stock.
(w) Mr. Murphy's principal business address is c/o Salomon Smith Barney,
Victoria Plaza, 111 Buckingham Palace Road, London, England.
(x) Represents options for 5,000 shares of Common Stock.
(y) Mr. Rees's principal business address is c/o Castle Transmission
International Ltd., Warwick Technology Park, Heathcote Lane, Warwick
CV346TN, United Kingdom.
(z) Includes options for 118,308 shares of Common Stock.
(aa) Mr. Schutz's principal business address is c/o The Centennial Funds, 1428
Fifteenth Street, Denver, CO 80202-1318. Mr. Schutz is a general partner
of each of Holdings IV and Holdings V. However, neither Mr. Schutz nor
any other general partner of either Holdings IV or Holdings V, acting
alone, has voting or investment power with respect to the Company's
securities directly beneficially held by Centennial Fund IV, Centennial
Fund V and Centennial Entrepreneurs Fund, and, as a result, Mr. Schutz
disclaims beneficial ownership of the Company's securities directly
beneficially owned by such funds, except to the extent of his pecuniary
interest therein.
(bb) Represents options for 25,000 shares of Common Stock and 9,812,040 shares
of Common Stock beneficially owned by members of the Centennial Group.
Mr. Schutz disclaims beneficial ownership of such shares.
(cc) Includes options for 5,488,683 shares of Common Stock and warrants for
740,000 shares of Common Stock.
(dd) Berkshire Group has approximately 22.0% of the total voting power of
Common Stock. Carl Ferenbach, Chairman of the Board of Directors of the
Company and a director of the Company, is a Managing Director of
Berkshire Investors; a Managing Director of Third Berkshire Managers the
general partner of Third Berkshire Associates, the general partner of
Berkshire Fund III; and a Managing Director of Fourth Berkshire
Associates, the general partner of Berkshire Fund IV. The principal
business address of the Berkshire Group is c/o Berkshire Partners LLC,
One Boston Place, Suite 3300, Boston, MA 02108-401.
(ee) Includes warrants for 35,935 shares of Common Stock.
(ff) Includes warrants for 29,255 shares of Common Stock.
(gg) Includes warrants for 4,810 shares of Common Stock.
(hh) Candover Group has approximately 12.0% of the total voting power of
Common Stock. G. Douglas Fairservice is a Director of each entity in the
Candover Group. The principal business address of Candover Partners is 20
Old Bailey, London EC4M 7LM, United Kingdom.
(ii) Centennial Fund IV, Centennial Fund V and Centennial Enterpreneurs Fund
collectively have had approximately 10.4% of the total voting power of
Common Stock.
(jj) Holdings IV is the sole general partner of Centennial Fund IV, and,
accordingly, Holdings IV may be deemed to control Centennial Fund IV and
possess indirect beneficial ownership of the securities of the Company
directly beneficially held by Fund IV. The principal business address of
Centennial Fund IV and Holdings IV is 1428 Fifteenth Street, Denver,
Colorado 80202-1318.
132
<PAGE>
(kk) Holdings V is the sole general partner of Centennial Fund V, and,
accordingly, Holdings V may be deemed to control Centennial Fund V and
possess indirect beneficial ownership of the securities of the Company
directly beneficially held by Centennial Fund V. The Common Stock
indicated as held by Centennial Fund V includes 19,400 shares obtainable
upon exercise of warrants. The principal business address of Centennial
Fund V and Holdings V is 1428 Fifteenth Street, Denver, Colorado 80202-
1318.
(ll) Holdings V is the sole general partner of Centennial Entrepreneurs Fund
V, and, accordingly, may be deemed to control Centennial Entrepreneurs
Fund V and possess indirect beneficial ownership of the securities of the
Company directly beneficially held by Centennial Entrepreneurs Fund V.
The Common Stock indicated as held by Centennial Entrepreneurs Fund V
includes 600 shares obtainable upon exercise of warrants. The principal
business address of Centennial Entrepreneurs V is 1428 Fifteenth Street,
Denver, Colorado 80202-1318.
(mm) Nassau Group has approximately 5.3% of the total voting power of Common
Stock. Randall Hack, a director of the Company, is a member of Nassau
Capital L.L.C., an affiliate of Nassau Group. The principal business
address of Nassau Capital Partners II, L.P. is 22 Chambers Street,
Princeton, NJ 08542.
(nn) Includes warrants for 49,690 shares of Common Stock.
(oo) Includes warrants for 310 shares of Common Stock.
(pp) Digital Future Investments B.V. is an affiliate of TeleDiffusion de
France International S.A. TdF will retain ownership of 20% of the shares
of capital stock of CTSH. Pursuant to the Share Exchange Agreement and
subject to certain conditions, TdF has the right to exchange its shares
of capital stock of CTSH for 17,443,500 shares of Class A Common Stock of
the Company (which is convertible into 17,443,500 shares of Common
Stock). DFI currently has 12.0% of the total voting power of Common
Stock. Combined, TdF and DFI would have 25.7% of the Voting Power of
Common Stock. The principal business address of DFI is c/o TeleDiffusion
de France International S.A., 10 Rue d'Oradour sur Glane, 75732 Paris 15
France.
133
<PAGE>
DESCRIPTION OF SECURITIES
This description of the securities being offered has five parts:
. Description of the Exchangeable Preferred Stock;
. Description of the Exchange Debentures;
. Certain Definitions;
. Book-Entry, Delivery and Form; and
. Registration Rights and Liquidated Damages.
You should read all five parts of this Description of Securities for a
description of the provisions of the instruments governing the securities, the
form in which the securities are expected to be issued and certain mechanics
for trading of the securities. Although this description is provided for your
reference, you are strongly encouraged to read the Certificate of Designations
governing the Exchangeable Preferred Stock, and the Exchange Indenture
governing the Exchange Debentures for the complete terms and provisions of the
securities being offered. In addition, you should be aware that the General
Corporation Law of the State of Delaware also governs the Exchangeable
Preferred Stock and the ability of the Company to pay dividends on the
Exchangeable Preferred Stock. See "Description of Capital Stock" and "Risk
Factors--Ability to Pay Dividends on the Exchangeable Preferred Stock".
Description of the Exchangeable Preferred Stock
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions". In this description, the word "Company"
refers only to Crown Castle International Corp. and not to any of its
subsidiaries.
The Old Preferred Stock was and the New Preferred Stock will be issued under
a Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof (the "Certificate of Designations"), a
copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
The following description is a summary of the material provisions of the
Certificate of Designations and does not restate that agreement in its
entirety. We urge you to read the Certificate of Designations because it, and
not this description, defines your rights as holders of the Exchangeable
Preferred Stock. Copies of the Certificate of Designations are available as
set forth below under the subheading "Additional Information". This
description is qualified in its entirety by reference to the Company's Amended
and Restated Certificate of Incorporation, which will include the Certificate
of Designations and the definitions therein of certain terms used below.
The Certificate of Designations authorized the Company to issue 400,000
shares of Exchangeable Preferred Stock with a liquidation preference of $1,000
per share (the "Liquidation Preference"). The Old Preferred Stock was and the
New Preferred Stock will, when issued, be fully paid and nonassessable and
Holders will have no preemptive rights in connection therewith.
The liquidation preference of the Exchangeable Preferred Stock is not
necessarily indicative of the price at which shares of the Exchangeable
Preferred Stock will actually trade at or after the time of their issuance,
and the Exchangeable Preferred Stock may trade at prices below its liquidation
preference. The market price of the Exchangeable Preferred Stock can be
expected to fluctuate with changes in the financial markets and economic
conditions, the financial condition and prospects of the Company and other
facts that generally influence the market prices of securities.
134
<PAGE>
As of the Issue Date, all of our subsidiaries other than (1) CTSH and its
subsidiaries and (2) Crown Castle Investment Corp. and Crown Castle Investment
Corp. (II) and their subsidiaries, through which we intend to hold our
interest in the Proposed JV, were "Restricted Subsidiaries". However, under
the circumstances described below under the subheading "Certain Covenants--
Restricted Payments," we will be permitted to designate certain of our other
subsidiaries as "Unrestricted Subsidiaries". Unrestricted Subsidiaries will
not be subject to most of the restrictive covenants in the Certificate of
Designations.
Transfer Agent
The transfer agent for the Exchangeable Preferred Stock is ChaseMellon
Shareholder Services, L.L.C. unless and until a successor is selected by the
Company (the "Transfer Agent").
Ranking
The Exchangeable Preferred Stock ranks senior in right of payment to all
classes or series of the Company's capital stock as to dividends and upon
liquidation, dissolution or winding up of the Company.
Without the consent of the Holders of at least two-thirds of the then
outstanding Exchangeable Preferred Stock, the Company may not authorize,
create (by way of reclassification or otherwise) or issue:
(1) any class or series of capital stock of the Company ranking senior to
the Exchangeable Preferred Stock ("Senior Securities");
(2) any obligation or security convertible or exchangeable into, or
evidencing a right to purchase, shares of any class or series of Senior
Securities.
Notwithstanding the foregoing, the Company may, without the consent of the
Holders of the Exchangeable Preferred Stock, authorize, create (by way of
reclassification or otherwise) or issue:
(1) any class or series of capital stock of the Company ranking on a
parity with the Exchangeable Preferred Stock ("Parity Securities"); or
(2) any obligation or security convertible or exchangeable into, or
evidencing a right to purchase, shares of any class or series of Parity
Securities.
Dividends
When the Board of Directors declares dividends out of legally available
Company funds, the Holders of the Exchangeable Preferred Stock, who are
Holders of record as of the preceding March 1, June 1, September 1, and
December 1 (each, a "Record Date"), will be entitled to receive cumulative
preferential dividends at the rate per share of 12 3/4% per annum. Dividends
on the Exchangeable Preferred Stock will be payable quarterly in arrears on
March 15, June 15, September 15 and December 15 of each year (each, a
"Dividend Payment Date"), commencing on March 15, 1999.
On or prior to December 15, 2003, the Company may, at its option, pay
dividends:
(1) in cash; or
(2) in additional fully-paid and non-assessable shares of Exchangeable
Preferred Stock (including fractional stock) having an aggregate
Liquidation Preference equal to the amount of such dividends.
After December 15, 2003, the Company will pay dividends in cash only. The
Company does not expect to pay any dividends in cash before December 15, 2003.
Dividends payable on the Exchangeable Preferred Stock will be:
(1) computed on the basis of a 360-day year comprised of twelve 30-day
months; and
(2) accrue on a daily basis.
135
<PAGE>
For a discussion of certain federal income tax considerations relevant to
the payment of dividends on the Exchangeable Preferred Stock, see "Certain
Federal Income Tax Considerations--Dividends on Exchangeable Preferred Stock".
Dividends on the Exchangeable Preferred Stock will accrue whether or not:
(1) the Company has earnings or profits;
(2) there are funds legally available for the payment of such dividends;
or
(3) dividends are declared.
Dividends will accumulate to the extent they are not paid on the Dividend
Payment Date for the quarterly period to which they relate. Accumulated unpaid
dividends will accrue dividends at the rate of 12 3/4% per annum. The Company
must take all actions required or permitted under Delaware law to permit the
payment of dividends on the Exchangeable Preferred Stock.
For any dividend period, the Company will not declare or pay upon, or set
any sum apart for the payment of dividends upon any outstanding Exchangeable
Preferred Stock unless it has declared and paid upon, or declared and set
apart a sufficient sum for the payment of dividends upon, all outstanding
Exchangeable Preferred Stock for all preceding dividend periods.
Unless the Company has declared and paid upon, or declared and set apart a
sufficient sum for the payment of, full cumulative dividends on all
outstanding Exchangeable Preferred Stock due for all past dividend periods,
then:
(1) no dividend (other than a dividend payable solely in stock of any
class of stock ranking junior to the Exchangeable Preferred Stock as to the
payment of dividends and as to rights in liquidation, dissolution or
winding up of the affairs of the Company (any such stock, "Junior
Securities")) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any Junior Securities;
(2) no other distribution shall be declared or made upon, or any sum set
apart for the payment of any distribution upon, any Junior Securities;
(3) no Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for other Junior
Securities) by the Company or any of its Restricted Subsidiaries;
(4) no warrants, rights, calls or options to purchase any Junior
Securities shall be directly or indirectly issued by the Company or any of
its Restricted Subsidiaries; and
(5) no monies shall be paid into or set apart or made available for a
sinking or other like fund for the purchase, redemption or other
acquisition or retirement for value of any Junior Securities by the Company
or any of its Restricted Subsidiaries.
Holders of the Exchangeable Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the full
cumulative dividends as herein described.
In addition, the Senior Discount Notes Indenture contains restrictions on
the ability of the Company to pay dividends on the Exchangeable Preferred
Stock. Moreover, existing Indebtedness and anticipated future Indebtedness of
our subsidiaries and joint ventures restricts or will restrict our access to
the cash flow of those entities. Any future agreements relating to
Indebtedness to which the Company or any of its Subsidiaries becomes a party
may contain similar restrictions and provisions. See "Risk Factors--
Substantial Leverage; Restrictions Imposed by the Terms of Our Indebtedness"
and "Risk Factors--Holding Company Structure; Dependence on Dividends to Meet
Cash Requirements or Pay Dividends".
136
<PAGE>
Voting Rights
Holders of record of the Exchangeable Preferred Stock will have no voting
rights, except as required by law and as provided in the Certificate of
Designations. Under the Certificate of Designations, the number of members of
the Company's Board of Directors will immediately and automatically increase
by two, and the Holders of a majority of the outstanding Exchangeable
Preferred Stock, voting separately as a class together with holders of all
other Parity Securities having similar voting rights, may elect two members to
the Board of Directors of the Company, upon the occurrence of any of the
following events (each, a "Voting Rights Triggering Event"):
(1) the accumulation of accrued and unpaid dividends on the outstanding
Exchangeable Preferred Stock (or after December 15, 2003, such dividends
are not paid in cash) in an amount equal to six full quarterly dividends
(whether or not consecutive);
(2) failure by the Company or any of its Restricted Subsidiaries to
comply with any mandatory redemption obligation with respect to the
Exchangeable Preferred Stock, the failure to make an Asset Sale Offer or
Change of Control Offer in accordance with the provisions of the
Certificate of Designations and/or the failure to repurchase Exchangeable
Preferred Stock pursuant to such offers;
(3) failure by the Company to make a Change of Control Offer or to
repurchase any Exchangeable Preferred Stock pursuant to a Change of Control
Offer in reliance on the last paragraph under the caption "Repurchase at
the Option of Holders--Change of Control" or failure by the Company to make
an Asset Sale Offer or to repurchase any Exchangeable Preferred Stock
pursuant to an Asset Sale Offer in reliance on the last paragraph under the
caption "Repurchase at the Option of Holders--Asset Sales";
(4) failure by the Company or any of its Restricted Subsidiaries to
comply with any of the other covenants or agreements set forth in the
Certificate of Designations and the continuance of such failure for 30
consecutive days after notice to the Company by Holders of record of the
Exchangeable Preferred Stock representing 25% of the outstanding shares of
the Exchangeable Preferred Stock;
(5) defaults under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Significant Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Closing Date, which default (i) is caused
by a failure to pay the principal amount of such Indebtedness at final
maturity after giving effect to any applicable grace period (a "Payment
Default") or (ii) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $20.0 million or more; or
(6) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries.
The term of office of the directors elected as a result of a Voting Rights
Triggering Event will continue until all dividends in arrears on the
Exchangeable Preferred Stock are paid in full and all other Voting Rights
Triggering Events have been cured or waived, at which time the term of office
of any such directors shall terminate.
In addition, as provided above under "--Ranking," the Company may not
authorize, create (by way of reclassification or otherwise) or issue any
Senior Securities (other than Disqualified Stock), or any obligation or
security convertible into or evidencing the right to purchase Senior
Securities (other than Disqualified Stock), without the consent of the Holders
of at least two-thirds of the then outstanding Exchangeable Preferred Stock,
in each case, voting as a single class.
Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment to the certificate of incorporation if the
amendment would (a) increase or decrease the par value of the shares of that
class of preferred stock or (b) alter or change the powers, preferences or
special rights of the shares of that class of preferred stock in a way that
would affect the holders of that preferred stock adversely.
137
<PAGE>
Exchange
On any Dividend Payment Date, the Company may exchange all and not less than
all of the shares of then outstanding Exchangeable Preferred Stock for the
Company's 12 3/4% Exchange Debentures due 2010 (the "Exchange Debentures") if:
(1) on the date of the exchange, there are no accumulated and unpaid
dividends on the Exchangeable Preferred Stock (including the dividend
payable on that date) or other contractual impediments to the exchange;
(2) there are sufficient legally available funds;
(3) the exchange does not immediately cause:
(a) a Default (as defined in the Exchange Indenture); and
(b) a default or event of default under any material instrument governing
Indebtedness of the Company, including without limitation the Senior
Discount Notes, outstanding at the time;
(4) the Exchange Indenture has been qualified under the Trust Indenture
Act, if qualification is required at the time of exchange; and
(5) the Company has delivered a written opinion to the Exchange Trustee
(as defined herein) stating that all conditions to the exchange have been
satisfied.
The Senior Discount Notes Indenture currently restricts the exchange of the
Exchangeable Preferred Stock and may restrict the Company's ability to
exchange the Exchangeable Preferred Stock in the future. See "Description of
Certain Indebtedness--The Notes". In addition, existing Indebtedness and
anticipated future Indebtedness of our subsidiaries and joint ventures
restricts or will restrict our access to the cash flow from those entities.
Any future agreements relating to Indebtedness to which we or any of our
subsidiaries or joint ventures become a party may contain similar restrictions
and provisions. See "Risk Factors--Holding Company Structure; Dependence on
Dividends to Meet Cash Requirements or Pay Dividends".
Upon any exchange pursuant to the preceding paragraph, and subject to the
second succeeding sentence of this paragraph, holders of outstanding
Exchangeable Preferred Stock will be entitled to receive:
(1) $1.00 principal amount of Exchange Debentures for each $1.00 of the
aggregate Liquidation Preference; plus
(2) without duplication, any accrued and unpaid dividends.
The Exchange Debentures will be:
(1) issued in registered form, without coupons;
(2) issued in principal amounts of $1,000 and integral multiples thereof
to the extent possible; and
(3) issuable in principal amounts less than $1,000 so that each holder of
Exchangeable Preferred Stock will receive interests representing the entire
amount of Exchange Debentures to which such holder's share of Exchangeable
Preferred Stock entitle such holder, provided that the Company may pay cash
in lieu of issuing an Exchange Debenture having a principal amount less
than $1,000.
For a description of the Exchange Debentures, see "--Description of the
Exchange Debentures".
The Company or a Company representative will send notice of the intention to
exchange by first class mail, postage prepaid, to each Holder of record of
Exchangeable Preferred Stock at its registered address not more than 60 days
nor less than 30 days prior to the Exchange Date. In addition to any
information required by law or
138
<PAGE>
by the applicable rules of any exchange upon which Exchangeable Preferred
Stock may be listed or admitted to trading, the notice will state:
(1) the Exchange Date;
(2) the place or places where certificates for such stock are to be
surrendered for exchange, including any procedures applicable to exchanges
to be accomplished through book-entry transfers; and
(3) that dividends on the Exchangeable Preferred Stock to be exchanged
will cease to accrue on the Exchange Date.
If notice of any exchange has been properly given, and if on or before the
Exchange Date the Exchange Debentures have been duly executed and
authenticated and an amount in cash or additional Exchangeable Preferred Stock
(as applicable) equal to all accrued and unpaid dividends, if any, thereon to
the Exchange Date has been deposited with the Transfer Agent, then on and
after the close of business on the Exchange Date:
(1) the Exchangeable Preferred Stock to be exchanged will no longer be
considered outstanding and may subsequently be issued in the same manner as
the other authorized but unissued preferred stock, including as Parity
Securities, but not as the same class as the Exchangeable Preferred Stock;
and
(2) all rights of the Holders as stockholders of the Company will cease,
except their right to receive upon surrender of their certificates the
Exchange Debentures and all accrued and unpaid dividends, if any, thereon
to the Exchange Date.
Mandatory Redemption
On December 15, 2010 (the "Mandatory Redemption Date"), the Company will be
required to redeem (subject to it having sufficient legally available funds)
all outstanding Exchangeable Preferred Stock at a price in cash equal to the
Liquidation Preference, plus accrued and unpaid dividends, if any, to the date
of redemption. The Company will not be required to make sinking fund payments
with respect to the Exchangeable Preferred Stock. The Company must take all
actions required or permitted under Delaware law to permit such redemption.
The Senior Discount Notes Indenture currently restricts the redemption of
the Exchangeable Preferred Stock. See "Description of Certain Indebtedness--
The Notes". In addition, existing Indebtedness and anticipated future
Indebtedness of our subsidiaries and joint ventures restricts or will restrict
our access to the cash flow from those entities. Any future agreements
relating to Indebtedness to which we or any of our subsidiaries become a party
may contain similar restrictions and provisions. See "Risk Factors--Holding
Company Structure; Dependence on Dividends to Meet Cash Requirements or Pay
Dividends".
Optional Redemption
During the first 36 months after the Issue Date, the Company may on any one
or more occasions redeem up to 35% of the aggregate Liquidation Preference of
the Exchangeable Preferred Stock then outstanding at a redemption price of
112.750% of the Liquidation Preference thereof, plus accrued and unpaid
dividends and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings or Strategic
Equity Investments; provided that:
(1) at least $130.0 million aggregate Liquidation Preference of
Exchangeable Preferred Stock remains outstanding immediately after the
occurrence of such redemption (excluding Exchangeable Preferred Stock held
by the Company and its Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the closing
of the Public Equity Offering or Strategic Equity Investment.
Except pursuant to the preceding paragraph, the Exchangeable Preferred Stock
will not be redeemable at the Company's option prior to December 15, 2003.
139
<PAGE>
On or after December 15, 2003, the Company may redeem all or any part of the
Exchangeable Preferred Stock upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of the Liquidation
Preference) set forth below plus accrued and unpaid dividends and Liquidated
Damages thereon, if any, to the applicable redemption date, if redeemed during
the twelve-month period beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................................................. 106.375%
2004.............................................................. 104.781%
2005.............................................................. 103.188%
2006.............................................................. 101.594%
2007 and thereafter............................................... 100.000%
</TABLE>
The Senior Discount Notes Indenture currently restricts the redemption of
the Exchangeable Preferred Stock and additional indebtedness may restrict the
Company's ability to redeem the Exchangeable Preferred Stock in the future.
See "Description of Certain Indebtedness".
Selection and Notice
If less than all of the Exchangeable Preferred Stock is to be redeemed at
any time, the Transfer Agent will select Exchangeable Preferred Stock for
redemption as follows:
(1) if the Exchangeable Preferred Stock is listed, in compliance with the
requirements of the principal national securities exchange on which the
Exchangeable Preferred Stock is listed; or
(2) if the Exchangeable Preferred Stock is not so listed, on a pro rata
basis, by lot or by such method as the Transfer Agent shall deem fair and
appropriate.
No Exchangeable Preferred Stock with a Liquidation Preference of $1,000 or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Exchangeable Preferred Stock to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any Exchangeable Preferred Stock is to be redeemed in part only, the
notice of redemption that relates to that Exchangeable Preferred Stock shall
state the portion of the Liquidation Preference thereof to be redeemed. A new
certificate with an aggregate Liquidation Preference equal to the unredeemed
portion of the original certificate evidencing Exchangeable Preferred Stock
presented for redemption will be issued in the name of the Holder thereof upon
cancellation of the original certificate. Exchangeable Preferred Stock called
for redemption becomes due on the date fixed for redemption. On and after the
redemption date, dividends cease to accrue on Exchangeable Preferred Stock or
portions thereof called for redemption.
Liquidation Rights
Each Holder of the Exchangeable Preferred Stock will be entitled to payment,
out of the assets of the Company available for distribution, of an amount
equal to the Liquidation Preference per Exchangeable Preferred Stock held by
such Holder, plus accrued and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding up or reduction or decrease in capital
stock, before any distribution is made on any Junior Securities, including,
without limitation, common stock of the Company, upon any:
(1) voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company; or
(2) reduction or decrease in the Company's capital stock resulting in a
distribution of assets to the holders of any class or series of the
Company's capital stock (a "reduction or decrease in capital stock").
After payment in full of the Liquidation Preference and all accrued
dividends, if any, to which Holders of Exchangeable Preferred Stock are
entitled, such Holders may not further participate in any distribution of
assets
140
<PAGE>
of the Company. However, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
will be a voluntary or involuntary liquidation, dissolution or winding up of
the Company or reduction or decrease in capital stock, unless such sale,
conveyance, exchange or transfer is in connection with a liquidation,
dissolution or winding up of the business of the Company or reduction or
decrease in capital stock.
The Certificate of Designations will not contain any provision requiring
funds to be set aside to protect the Liquidation Preference of the
Exchangeable Preferred Stock, although such Liquidation Preference will be
substantially in excess of the par value of the Exchangeable Preferred Stock.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Exchangeable Preferred Stock
will have the right to require the Company to repurchase all or any part (but
not any fractional shares) of such Holder's Exchangeable Preferred Stock
pursuant to the offer described below (the "Change of Control Offer"). In the
Change of Control Offer, the Company will offer a payment in cash equal to
101% of the aggregate Liquidation Preference of Exchangeable Preferred Stock
repurchased plus accrued and unpaid dividends and Liquidated Damages thereon,
if any (subject to the right of Holders of record on the relevant record date
to receive dividends and Liquidated Damages, if any, due on the relevant
dividend payment date), to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Exchangeable
Preferred Stock on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Certificate of Designations and described in such notice.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Exchangeable Preferred Stock or portions
thereof properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Exchangeable Preferred Stock or portions
thereof so tendered; and
(3) deliver or cause to be delivered to the Transfer Agent the
Exchangeable Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate Liquidation Preference of Exchangeable
Preferred Stock or portions thereof being purchased by the Company.
The Company will promptly mail to each Holder of Exchangeable Preferred
Stock so tendered the Change of Control Payment for such Exchangeable
Preferred Stock, and the Transfer Agent will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new certificate
representing the Exchangeable Preferred Stock equal in Liquidation Preference
to any unpurchased portion of the Exchangeable Preferred Stock surrendered, if
any.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Certificate of Designations are applicable.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
applicable to any Change of Control Offer. To the extent that the provisions
of any such securities laws or securities regulations conflict with the
provisions of the covenant described above, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the covenant described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control,
141
<PAGE>
although it is possible that the Company would decide to do so in the future.
Subject to the limitations discussed below, the Company could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Certificate of Designations, but that could increase the amount of
Indebtedness outstanding at such time or otherwise affect the Company's
capital structure. Restrictions on the ability of the Company to incur
additional Indebtedness are contained in the covenants described under "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock". Such restrictions can only be waived with the consent of the Holders
of a majority in Liquidation Preference of the Exchangeable Preferred Stock
then outstanding. Except for the limitations contained in such covenants,
however, the Certificate of Designations will not contain any covenants or
provisions that may afford holders of the Exchangeable Preferred Stock
protection in the event of certain highly leveraged transactions.
The Senior Discount Notes Indenture currently prohibits the Company from
repurchasing any Exchangeable Preferred Stock. In addition, existing
Indebtedness and anticipated future Indebtedness of the Company's subsidiaries
and joint ventures restricts or will restrict the Company's access to the cash
flow from its subsidiaries and joint ventures. Any future agreements relating
to Indebtedness to which the Company or any of its subsidiaries or joint
ventures becomes a party may contain similar restrictions and provisions. In
the event that a Change of Control occurs at a time when the Company is
prohibited or prevented from repurchasing Exchangeable Preferred Stock, the
Company could seek the consent of the applicable lenders to allow such
repurchase or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from repurchasing the
Exchangeable Preferred Stock. In such case, the Company's failure to purchase
tendered Exchangeable Preferred Stock would constitute a Voting Rights
Triggering Event. Future Indebtedness of the Company and its Subsidiaries may
contain prohibitions on the repurchase of the Exchangeable Preferred Stock and
on the occurrence of certain events that would constitute a Change of Control
or may require such Indebtedness to be repurchased upon a Change of Control.
Finally, the Company's ability to pay cash to the Holders of Exchangeable
Preferred Stock following the occurrence of a Change of Control may be limited
by the Company's then existing financial resources, including its ability to
access the cash flow of its Subsidiaries. See "Risk Factors--Repurchase of the
Exchangeable Preferred Stock or the Exchange Debentures Upon a Change of
Control" and "Risk Factors--Holding Company Structure; Dependence on Dividends
to Meet Cash Requirements or Pay Dividends". There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Certificate of Designations applicable to a Change of Control
Offer made by the Company and purchases all Exchangeable Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer. The
provisions under the Certificate of Designations relative to the Company's
obligation to make an offer to repurchase the Exchangeable Preferred Stock as
a result of a Change of Control may be waived or modified with the written
consent of the Holders of a majority in Liquidation Preference of the
Exchangeable Preferred Stock then outstanding.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Exchangeable
Preferred Stock to require the Company to repurchase such Exchangeable
Preferred Stock as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of the Company and its Subsidiaries
taken as a whole to another Person or group may be uncertain.
Notwithstanding the foregoing, the Certificate of Designations will provide
that the Company may not repurchase any Exchangeable Preferred Stock pursuant
to this provision unless such repurchase complies with the restricted payments
covenant contained in the Senior Discount Notes Indenture; provided that if
the Company
142
<PAGE>
does not make a Change of Control Offer or does not repurchase any
Exchangeable Preferred Stock pursuant to a Change of Control Offer, then such
failure shall constitute a Voting Rights Triggering Event.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Transfer Agent) of the
assets or Equity Interests issued or sold or otherwise disposed of; and
(2) except in the case of a Tower Asset Exchange, at least 75% of the
consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents.
For purposes of this provision, each of the following shall be deemed to be
cash:
(1) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Exchangeable Preferred Stock or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability; and
(2) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are converted by
the Company or such Restricted Subsidiary into cash within 20 days of the
applicable Asset Sale (to the extent of the cash received).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net
Proceeds to:
(1) reduce any Indebtedness of the Company;
(2) reduce any Indebtedness of any of the Company's Restricted
Subsidiaries;
(3) the acquisition of all or substantially all the assets of a Permitted
Business;
(4) the acquisition of Voting Stock of a Permitted Business from a Person
that is not a Subsidiary of the Company; provided, that, after giving
effect thereto, the Company or its Restricted Subsidiary owns a majority of
such Voting Stock and designates such Permitted Business as a Restricted
Subsidiary; or
(5) the making of a capital expenditure or the acquisition of other long-
term assets that are used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Certificate of
Designations.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all holders of
Senior Discount Notes and may be required to make such offer to holders of
other Indebtedness of the Company then outstanding (a "Senior Asset Sale
Offer") to purchase the maximum principal amount of the Senior Discount Notes
and such other Indebtedness, if applicable, that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount or accreted value thereof, as the case may be, plus accrued
and unpaid interest to the date of purchase, in accordance with the procedures
set forth in the Senior Discount Notes Indenture and in the instruments
governing such other Indebtedness. To the extent that the aggregate amount of
Senior Discount Notes and such other Indebtedness tendered pursuant to a
Senior Asset Sale Offer is less than the remaining Excess Proceeds ("Remaining
Excess Proceeds") and the sum of (A) such amount of
143
<PAGE>
Remaining Excess Proceeds and (B) the Remaining Excess Proceeds from any
subsequent Senior Asset Sale Offers exceeds $3.0 million, the Company will be
required to make an offer to all Holders of Exchangeable Preferred Stock and
all holders of Parity Securities containing provisions similar to those set
forth in the Certificate of Designations with respect to offers to purchase
with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the
maximum Liquidation Preference of Exchangeable Preferred Stock and such Parity
Securities that may be purchased out of such Remaining Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the Liquidation Preference
thereof plus accrued and unpaid dividends and Liquidated Damages thereon, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive dividends and Liquidated Damages, if any, due
on the relevant Dividend Payment Date), in accordance with the procedures set
forth in the Certificate of Designations and such Parity Securities. To the
extent that any Remaining Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Certificate of Designations. If the aggregate
Liquidation Preference of Exchangeable Preferred Stock and such Parity
Securities tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Remaining Excess Proceeds, the Transfer Agent shall
select the Exchangeable Preferred Stock and such Parity Securities to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
The Asset Sale provisions described above will be applicable whether or not
any other provisions of the Certificate of Designations are applicable. The
Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
applicable to any Asset Sale Offer. To the extent that the provisions of any
such securities laws or securities regulations conflict with the provisions of
the covenant described above, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the covenant described above by virtue thereof.
The Senior Discount Notes Indenture currently prohibits the Company form
repurchasing any Exchangeable Preferred Stock. In addition, existing
Indebtedness and anticipated future Indebtedness of our subsidiaries and joint
ventures restricts or will restrict our access to the cash flow from those
entities. Any future agreements relating to Indebtedness to which we or any of
our subsidiaries or joint ventures become a party may contain similar
restrictions and provisions.
Notwithstanding the foregoing, the Certificate of Designations will provide
that the Company may not repurchase any Exchangeable Preferred Stock pursuant
to this provision unless such repurchase complies with the restricted payments
covenant contained in the Senior Discount Notes Indenture; provided that if
the Company does not make an Asset Sale Offer or does not repurchase any
Exchangeable Preferred Stock pursuant to an Asset Sale Offer, then such
failure shall constitute a Voting Rights Triggering Event.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's Junior Securities or any warrants, options or
other rights to acquire Junior Securities (other than any debt security
that is convertible into, or exchangeable for, Junior Securities) or any of
the Company's Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the
direct or indirect holders of the Company's Junior Securities or any
warrants, options or other rights to acquire Junior Securities (other than
any debt security that is convertible into, or exchangeable for, Junior
Securities) or any of the Company's Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company
or to the Company or a Restricted Subsidiary of the Company);
144
<PAGE>
(2) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation
involving the Company) any Junior Securities of the Company or any
warrants, options or other rights to acquire Junior Securities (other than
any debt security that is convertible into, or exchangeable for, Junior
Securities) or any Equity Interests of any direct or indirect parent of the
Company (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary of the Company and other than the Exchangeable
Preferred Stock); or
(3) make any Restricted Investment, (all such payments and other actions
set forth in clauses (1) through (3) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would have been permitted to incur at least $1.00 of
additional indebtedness pursuant to the Debt to Adjusted Consolidated Cash
Flow Ratio test set forth in the first paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; provided that the Company and its Restricted Subsidiaries
will not be required to comply with this clause (2) in order to make any
Restricted Investment; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (2) and (3) of the next succeeding paragraph), is less than the
sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the Issue Date to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit); plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the Issue Date as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock and except to the extent such net cash proceeds are
used to incur new Indebtedness outstanding pursuant to clause (10) of
the second paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock") or from
the issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock
or convertible debt securities that have been converted into
Disqualified Stock); plus
(c) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment; plus
(d) to the extent that any Unrestricted Subsidiary of the Company and
all of its Subsidiaries are designated as Restricted Subsidiaries after
the Issue Date, the lesser of (A) the fair market value of the
Company's Investments in such Subsidiaries as of the date of such
designation, or (B) the sum of (x) the fair market value of the
Company's Investments in such Subsidiaries as of the date on which such
Subsidiaries were originally designated as Unrestricted Subsidiaries
and (y) the amount of any Investments made in such Subsidiaries
subsequent to such designation (and treated as Restricted Payments) by
the Company or any Restricted Subsidiary; provided that:
(i) in the event the Unrestricted Subsidiaries designated as
Restricted Subsidiaries are CTSH and its Subsidiaries, the references
in clauses (A) and (B) of this clause (d) to fair market value of the
Company's Investments in such Subsidiaries shall mean the amount by
which the fair market
145
<PAGE>
value of all such Investments exceeds 34.3% of the fair market value
of CTSH and its Subsidiaries as a whole; and
(ii) in the event the Unrestricted Subsidiaries designated as
Restricted Subsidiaries are CCAIC and its Subsidiaries, the references
in clauses (A) and (B) of this clause (d) to fair market value of the
Company's Investments in such Subsidiaries shall mean the amount by
which the fair market value of all such Investments exceeds $250.0
million; plus
(e) 50% of any dividends received by the Company or a Restricted
Subsidiary after the Issue Date from an Unrestricted Subsidiary of the
Company, to the extent that such dividends were not otherwise included
in Consolidated Net Income of the Company for such period.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Certificate of Designations;
(2) the making of any Investment or the redemption, repurchase,
retirement, defeasance or other acquisition of any Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the sale after
the Issue Date (other than to a Subsidiary of the Company) of, any Equity
Interests of the Company (other than any Disqualified Stock); provided that
such net cash proceeds are not used to incur new Indebtedness pursuant to
clause (10) of the second paragraph of the covenant described below under
the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"); and provided further that, in each such case, the amount of any
such net cash proceeds that are so utilized shall be excluded from clause
(3) (b) of the preceding paragraph;
(3) the payment of any dividend by a Restricted Subsidiary of the Company
to the holders of its Equity Interests on a pro rata basis; or
(4) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the Issue
Date; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed (a)
$500,000 in any twelve-month period and (b) $5.0 million in the aggregate.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Voting Rights
Triggering Event; provided that in no event shall the businesses operated by
the Company's Restricted Subsidiaries as of November 20, 1997 be transferred
to or held by an Unrestricted Subsidiary. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the fair market value
of such Investments at the time of such designation. Such designation will
only be permitted if such Restricted Payment would be permitted at such time
and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if such designation would not cause a
Voting Rights Triggering Event.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or the
applicable Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. The fair market value of any property, assets or
Investments required by this covenant to be determined shall be determined by
the Board of Directors whose resolution with respect thereto shall be
delivered to the Transfer Agent.
146
<PAGE>
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company will not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and the Company's Restricted
Subsidiaries may incur Indebtedness if, in each case, the Company's Debt to
Adjusted Consolidated Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock, after giving pro
forma effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom as if the same had occurred at the beginning of the most
recently ended four full fiscal quarter period of the Company for which
internal financial statements are available, would have been no greater than
7.5 to 1.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness or to the issuance of
any of the following items of Disqualified Stock or preferred stock
(collectively, "Permitted Debt"):
(1) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness (including Indebtedness under Credit Facilities) in an
aggregate principal amount (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Restricted Subsidiaries thereunder) at any one time outstanding not
to exceed the greater of (x) $200.0 million less the aggregate amount of
all Net Proceeds of Asset Sales applied to repay Indebtedness under a
Credit Facility pursuant to the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales" and (y) 70% of the
Eligible Receivables that are outstanding as of such date of incurrence;
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the issuance by the Company of preferred stock represented by the
Exchangeable Preferred Stock and the incurrence by the Company of
Indebtedness represented by the Exchange Debentures;
(4) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (4), not to exceed $10.0 million at any one time outstanding;
(5) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund
Indebtedness of the Company or any of its Restricted Subsidiaries or
Disqualified Stock of the Company (other than intercompany Indebtedness)
that was permitted by the Certificate of Designations to be incurred under
the first paragraph hereof or clauses (2) or (3) or this clause (5) of this
paragraph;
(6) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, that (A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted Subsidiary and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be;
(7) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
147
<PAGE>
Indebtedness that is permitted by the terms of the Certificate of
Designations to be outstanding or currency exchange risk;
(8) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of the Certificate of
Designations;
(9) the incurrence by the Company or any of its Restricted Subsidiaries
of Acquired Debt in connection with the acquisition of assets or a new
Subsidiary and the incurrence by the Company's Restricted Subsidiaries of
Indebtedness as a result of the designation of an Unrestricted Subsidiary
as a Restricted Subsidiary; provided that, in the case of any such
incurrence of Acquired Debt, such Acquired Debt was incurred by the prior
owner of such assets or such Restricted Subsidiary prior to such
acquisition by the Company or one of its Restricted Subsidiaries and was
not incurred in connection with, or in contemplation of, such acquisition
by the Company or one of its Restricted Subsidiaries; and provided further
that, in the case of any incurrence pursuant to this clause (9), as a
result of such acquisition by the Company or one of its Restricted
Subsidiaries, the Company's Debt to Adjusted Consolidated Cash Flow Ratio
at the time of incurrence of such Acquired Debt, after giving pro forma
effect to such incurrence as if the same had occurred at the beginning of
the most recently ended four full fiscal quarter period of the Company for
which internal financial statements are available, would have been less
than the Company's Debt to Adjusted Consolidated Cash Flow Ratio for the
same period without giving pro forma effect to such incurrence;
(10) the incurrence by the Company of Indebtedness not to exceed, at any
one time outstanding, the sum of (i) 2.0 times the aggregate net cash
proceeds plus (ii) 1.0 times the fair market value of non-cash proceeds
(evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Transfer Agent), in each case, from
the issuance and sale, other than to a Subsidiary, of Equity Interests
(other than Disqualified Stock) of the Company since the Issue Date (less
the amount of such proceeds used to make Restricted Payments as provided in
clause (3)(b) of the first paragraph or clause (2) of the second paragraph
of the covenant described above under the caption "--Restricted Payments");
provided that such Indebtedness does not mature prior to the Stated
Maturity of the Exchangeable Preferred Stock and the Weighted Average Life
to Maturity of such Indebtedness is longer than that of the Exchangeable
Preferred Stock; and
(11) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness and/or the issuance by the Company of
Disqualified Stock in an aggregate principal amount, accreted value or
liquidation preference, as applicable, at any time outstanding, not to
exceed an amount equal to $100.0 million less the aggregate amount of all
Investments made pursuant to clause (12) of the definition of Permitted
Investments; provided that, notwithstanding the foregoing, the aggregate
principal amount, accreted value or liquidation preference, as applicable,
permitted to be incurred or issued pursuant to this clause (11) shall not
be reduced to less than $25.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (1) through (11) above or is entitled
to be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify (or later reclassify in whole or in
part) such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, accretion or amortization of original issue
discount and the payment of interest in the form of additional Indebtedness
will not be deemed to be an incurrence of Indebtedness for purposes of this
covenant.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to
148
<PAGE>
(1) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits;
(2) pay any indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(3) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(4) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness or Indebtedness under the Senior Credit
Facility, in each case as in effect on the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those
contained in the applicable series of Existing Indebtedness or in the
Senior Credit Facility, in each case as in effect on the Issue Date;
(2) encumbrances and restrictions applicable to any Unrestricted
Subsidiary, as the same are in effect as of the date on which such
Subsidiary becomes a Restricted Subsidiary, and as the same may be amended,
modified, restated, renewed, increased, supplemented, refunded, replaced or
refinanced; provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in the applicable
series of Indebtedness of such Subsidiary as in effect on the date on which
such Subsidiary becomes a Restricted Subsidiary;
(3) any Indebtedness (incurred in compliance with the covenant under the
heading "--Incurrence of Indebtedness and Issuance of Preferred Stock") or
any agreement pursuant to which such Indebtedness is issued if the
encumbrance or restriction applies only in the event of a payment default
or default with respect to a financial covenant contained in such
Indebtedness or agreement and such encumbrance or restriction is not
materially more disadvantageous to the holders of the Exchangeable
Preferred Stock than is customary in comparable financings (as determined
by the Company) and the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to pay
dividends or the Liquidation Preference on the Exchangeable Preferred
Stock;
(4) the Certificate of Designations;
(5) applicable law;
(6) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Certificate of Designations to be incurred;
(7) by reason of customary non-assignment provisions in leases or
licenses entered into in the ordinary course of business;
(8) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (4) in the prior paragraph on the property so acquired;
(9) the provisions of agreements governing Indebtedness incurred pursuant
to clause (4) of the second paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock";
(10) any agreement for the sale of a Restricted Subsidiary that restricts
that Restricted Subsidiary pending its sale;
149
<PAGE>
(11) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(12) Liens that limit the right of the debtor to transfer the assets
subject to such Liens;
(13) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements; and
(14) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless:
(1) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the
Exchangeable Preferred Stock and the Certificate of Designations;
(3) immediately after such transaction no Voting Rights Triggering Event
exists; and
(4) except in the case of a merger of the Company with or into a Wholly
Owned Restricted Subsidiary of the Company and except in the case of a
merger entered into solely for the purpose of reincorporating the Company
in another jurisdiction,
(a) in the case of a merger or consolidation in which the Company is
the surviving corporation, the Company's Debt to Adjusted Consolidated
Cash Flow Ratio, at the time of such transaction after giving pro forma
effect thereto as if such transaction had occurred at the beginning of
the most recently ended four full fiscal quarter period of the Company
for which internal financial statements are available, would have been
less than the Company's Debt to Adjusted Consolidated Cash Flow Ratio
for the same period without giving pro forma effect to such
transaction, or
(b) in the case of any other such transaction the Debt to Adjusted
Consolidated Cash Flow of the entity or Person formed by or surviving
any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, at the time of such transaction after
giving pro forma effect thereto as if such transaction had occurred at
the beginning of the most recently ended four full fiscal quarter
period of such entity or Person for which internal financial statements
are available, would have been less than the Company's Debt to Adjusted
Consolidated Cash Flow Ratio for the same period without giving pro
forma effect to such transaction; provided that for purposes of
determining the Debt to Adjusted Consolidated Cash Flow Ratio of any
such entity or Person for purposes of this clause (b) such entity or
Person shall be substituted for the Company in the definition of Debt
to Adjusted Consolidated Cash Flow Ratio and the defined terms included
therein under the caption "--Certain Definitions".
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets
150
<PAGE>
from, or enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Transfer Agent:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and
therefore will not be subject to the provisions of the prior paragraph:
(1) any employment arrangements with any executive officer of the Company
or a Restricted Subsidiary that is entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and
consistent with compensation arrangements of similarly situated executive
officers at comparable companies engaged in Permitted Businesses;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of directors fees in an aggregate annual amount not to exceed
$25,000 per Person;
(4) Restricted Payments that are permitted by the provisions of the
Certificate of Designations described above under the caption "--Restricted
Payments";
(5) the issuance or sale of Equity Interests (other than Disqualified
Stock) of the Company; and
(6) transactions pursuant to the provisions of the Governance Agreement,
the Rights Agreement, the Stockholders' Agreement, the CTSH Shareholders'
Agreement, the CTI Services Agreement, the CTI Operating Agreement and the
Crown Transition Agreements, as the same are in effect on the Issue Date.
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
The Company:
(1) will not, and will not permit any Restricted Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company); and
(2) will not permit any Restricted Subsidiary of the Company to issue any
of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than
to the Company or a Wholly Owned Restricted Subsidiary of the Company,
unless, in each such case: (a) as a result of such transfer, conveyance,
sale, lease or other disposition or issuance such Restricted Subsidiary no
longer constitutes a Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition or issuance are applied
in accordance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales".
Senior Subordinated Debt
So long as any Exchangeable Preferred Stock is outstanding, the Company
shall not incur any Indebtedness, other than the Exchange Debentures and New
Exchange Debentures, that is expressly made subordinated in right
151
<PAGE>
of payment to any Senior Debt unless such Indebtedness, by its terms and by
the terms of any agreement or instrument pursuant to which such Indebtedness
is outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the Exchange Debentures pursuant to provisions substantially
similar to those contained in the Exchange Indenture; provided that the
foregoing limitations shall not apply to distinctions between categories of
Senior Debt that exist by reason of any Liens or Guarantees arising or created
in respect of some but not all Senior Debt.
Business Activities
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not
be material to the Company and its Subsidiaries taken as a whole.
Reports
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Exchangeable Preferred
Stock is outstanding, the Company will furnish to the Holders of Exchangeable
Preferred Stock:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if
the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations of the
Company and its consolidated Subsidiaries (showing in reasonable detail, in
the footnotes to the financial statements and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" (in each
case to the extent not prohibited by the Commission's rules and
regulations), (a) the financial condition and results of operations of the
Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company and (b) the Tower Cash Flow for the most recently completed fiscal
quarter and the Adjusted Consolidated Cash Flow for the most recently
completed four-quarter period) and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants;
and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports,
in each case within the time periods specified in the Commission's rules
and regulations.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available
to securities analysts and prospective investors upon request.
Transfer and Exchange
A Holder may transfer or exchange Exchangeable Preferred Stock in accordance
with the Certificate of Designations. The Registrar and the Transfer Agent may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law. The Company is not required to transfer or exchange any
shares of Exchangeable Preferred Stock selected for redemption. Also, the
Company is not required to transfer or exchange any share of Exchangeable
Preferred Stock for a period of 15 days before a selection of Exchangeable
Preferred Stock to be redeemed.
The registered Holder of a share of Exchangeable Preferred Stock will be
treated as the owner of it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Certificate of
Designations or the Exchangeable Preferred Stock may be amended or
supplemented with the consent of the Holders of at least a
152
<PAGE>
majority in aggregate Liquidation Preference of the Exchangeable Preferred
Stock then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
Exchangeable Preferred Stock), and any existing default or compliance with any
provision of the Certificate of Designations or the Exchangeable Preferred
Stock may be waived with the consent of the Holders of a majority in aggregate
Liquidation Preference of the then outstanding Exchangeable Preferred Stock
(including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Exchangeable Preferred
Stock).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any shares of Exchangeable Preferred Stock held by a non-
consenting Holder):
(1) alter the voting rights with respect to the Exchangeable Preferred
Stock or reduce the number of shares of Exchangeable Preferred Stock whose
Holders must consent to an amendment, supplement or waiver;
(2) reduce the Liquidation Preference of or change the Mandatory
Redemption Date of any Exchangeable Preferred Stock or alter the provisions
with respect to the redemption (but not any required repurchase in
connection with an Asset Sale Offer or Change of Control Offer) of the
Exchangeable Preferred Stock;
(3) reduce the rate of or change the time for payment of dividends on any
Exchangeable Preferred Stock;
(4) waive a default in the payment of dividends on the Exchangeable
Preferred Stock;
(5) make any Exchangeable Preferred Stock payable in any form or money
other than that stated in the Certificate of Designations;
(6) waive a redemption payment (but not any payment upon a required
repurchase in connection with an Asset Sale Offer or Change of Control
Offer) with respect to any Exchangeable Preferred Stock; or
(7) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Exchangeable Preferred Stock, the Company may (to the extent permitted by
Delaware law) amend or supplement the Certificate of Designations:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Exchangeable Preferred Stock in
addition to or in place of certificated Exchangeable Preferred Stock;
(3) to provide for the assumption of the Company's obligations to Holders
of Exchangeable Preferred Stock in the case of a merger or consolidation;
or
(4) to make any change that would provide any additional rights or
benefits to the Holders of Exchangeable Preferred Stock or that does not
adversely affect the legal rights under the Certificate of Designations of
any such Holder.
Reissuance
Exchangeable Preferred Stock redeemed or otherwise acquired by the Company
will assume the status of authorized but unissued preferred stock and may
thereafter be reissued in the same manner as the other authorized but unissued
preferred stock, including as Parity Securities, but not as the same class as
the Exchangeable Preferred Stock.
153
<PAGE>
Description of the Exchange Debentures
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions". In this description, the word "Company"
refers only to Crown Castle International Corp. and not to any of its
subsidiaries.
The Exchange Debentures will, if and when issued, be issued pursuant to an
Indenture (the "Exchange Indenture") between the Company and United States
Trust Company of New York, as trustee (the "Trustee"). The terms of the
Exchange Debentures include those stated in the Exchange Indenture and those
made part of the Exchange Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Exchange Indenture. It does not restate the Exchange Indenture in its
entirety. We urge you to read the Exchange Indenture because it, and not this
description, defines your rights as holders of these Exchange Debentures.
Copies of the proposed form of Exchange Indenture are available as set forth
below under the subheading "Additional Information".
These Exchange Debentures:
. will be general unsecured obligations of the Company;
. will be subordinated in right of payment to all existing and future
Senior Debt of the Company; and
. will be senior in right of payment to all existing and future
subordinated Indebtedness of the Company other than future subordinated
Indebtedness that ranks on a parity with the Exchange Debentures.
As of September 30, 1998, we had total Senior Debt of approximately $232.8
million. As indicated above and as discussed in detail below under the
subheading "Subordination", payments on the Exchange Debentures will be
subordinated to the prior payment in full in cash or Cash Equivalents (other
than cash equivalents of the type referred to in clauses (3) and (4) of the
definition thereof) of all Senior Debt. The Exchange Indenture will permit us
to incur additional Senior Debt. In addition, our only significant asset is
the outstanding capital stock of our subsidiaries, and we rely on payments
from our subsidiaries to be able to meet our obligations. In the event of a
bankruptcy, liquidation or reorganization of any of our subsidiaries, such
subsidiaries would pay the holders of their debt and their trade creditors
before they would be able to distribute any of their assets to us.
As of the Issue Date, all of our subsidiaries (other than CTSH and its
subsidiaries and Crown Castle Investment Corp. and its subsidiaries) will be
"Restricted Subsidiaries". However, under the circumstances described below
under the subheading "Certain Covenants--Restricted Payments", we will be
permitted to designate certain of our other Subsidiaries as "Unrestricted
Subsidiaries". Unrestricted Subsidiaries will not be subject to most of the
restrictive covenants in the Exchange Indenture.
Principal, Maturity and Interest
The Company will issue Exchange Debentures in denominations of $1,000 and
integral multiples of $1,000. The Exchange Debentures will mature on December
15, 2010.
Interest on these Exchange Debentures will accrue at the rate of 12 3/4% per
annum and will be payable semi-annually in arrears on June 15 and December 15.
The Company will make each interest payment to the Holders of record of these
Exchange Debentures on the immediately preceding June 1 and December 1.
On or prior to December 15, 2003, the Company may, at its option, pay
interest:
(1) in cash; or
(2) in additional Exchange Debentures having an aggregate principal
amount equal to the amount of such interest.
154
<PAGE>
After December 15, 2003, the Company will pay interest in cash only. The
Company does not expect to pay any interest in cash before December 15, 2003.
Interest on these Exchange Debentures will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payments on the Exchange Debentures
If a Holder has given wire transfer instructions to the Company, the Company
will make all principal, premium and interest and Liquidated Damages, if any,
payments on those Exchange Debentures in accordance with those instructions.
All other payments on these Exchange Debentures will be made at the office or
agency of the Paying Agent and Registrar within the City and State of New York
unless the Company elects to make interest payments by check mailed to the
Holders at their address set forth in the register of Holders.
Paying Agent and Registrar for the Exchange Debentures
The Exchange Trustee will initially act as Paying Agent and Registrar. The
Company may change the Paying Agent or Registrar without prior notice to the
Holders of the Exchange Debentures, and the Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
Transfer and Exchange
A Holder may transfer or exchange Exchange Debentures in accordance with the
Exchange Indenture. The Registrar and the Exchange Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Exchange Indenture. The Company is not
required to transfer or exchange any Senior Subordinated Exchange Debenture
selected for redemption. Also, the Company is not required to transfer or
exchange any Senior Subordinated Exchange Debenture for a period of 15 days
before a selection of Exchange Debentures to be redeemed.
The registered Holder of a Senior Subordinated Exchange Debenture will be
treated as the owner of it for all purposes.
Subordination
The payment of principal, premium, interest, Liquidated Damages, if any, and
any other Obligations on, or relating to, the Exchange Debentures will be
subordinated to the prior payment in full in cash or Cash Equivalents (other
than cash equivalents of the type referred to in clauses (3) and (4) of the
definition thereof) of all Senior Debt of the Company.
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents (other than cash equivalents of the type referred to
in clauses (3) and (4) of the definition thereof) of all Obligations due in
respect of Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before the
Holders of Exchange Debentures will be entitled to receive any payment or
distribution of any kind or character with respect to any Obligations on, or
relating to, the Exchange Debentures (except that Holders of Exchange
Debentures may receive and retain Permitted Junior Securities and payments
made from the trust described under the caption "--Legal Defeasance and
Covenant Defeasance" so long as the deposit of amounts therein satisfied the
relevant conditions specified in the Exchange Indenture at the time of such
deposit), in the event of any distribution to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
155
<PAGE>
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of the Company's assets and liabilities.
The Company also may not make any payment or distribution of any kind or
character with respect to any Obligations on, or with respect to, the Exchange
Debentures or acquire any of the Exchange Debentures for cash or property or
otherwise (except in Permitted Junior Securities or from the trust described
under the caption "--Legal Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable period of grace; or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable
grace periods and the Exchange Trustee receives a notice of such default (a
"Payment Blockage Notice") from the holders of such Designated Senior Debt
or their Representative.
Payments on the Exchange Debentures may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; or
(2) in case of a nonpayment default, upon the earlier of (x) the date on
which all nonpayment defaults are cured or waived, (y) 179 days after the
date of delivery of the applicable Payment Blockage Notice or (z) the date
on which the Exchange Trustee receives notice from the holders of such
Designated Senior Debt or their Representative rescinding the Payment
Blockage Notice, unless the maturity of any Designated Senior Debt has been
accelerated.
No new Payment Blockage Notice may be delivered by the holders of any
Designated Senior Debt or their Representative unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Exchange Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 90 consecutive days.
The Company must promptly notify holders of Senior Debt if payment of the
Exchange Debentures are accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of the Company, Holders of
Exchange Debentures may recover less ratably than creditors of the Company who
are holders of Senior Debt. See "Risk Factors--Subordination of the
Exchangeable Preferred Stock".
Optional Redemption
During the first 36 months after the Issue Date, the Company may on any one
or more occasions redeem up to 35% of the aggregate principal amount of
Exchange Debentures then outstanding at a redemption price of 112.750% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings or Strategic Equity Investments; provided
that:
(1) at least $162.5 million aggregate principal amount of Exchange
Debentures remains outstanding immediately after the occurrence of such
redemption (excluding Exchange Debentures held by the Company and its
Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the closing
of the Public Equity Offering or Strategic Equity Investment.
156
<PAGE>
Except pursuant to the preceding paragraph, the Exchange Debentures will not
be redeemable at the Company's option prior to December 15, 2003.
On or after December 15, 2003, the Company may redeem all or any part of the
Exchange Debentures upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of the principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................................................. 106.375%
2004.............................................................. 104.781%
2005.............................................................. 103.188%
2006.............................................................. 101.594%
2007 and thereafter............................................... 100.000%
</TABLE>
The Senior Discount Notes Indenture currently restricts the redemption of
the Exchange Debentures and additional indebtedness may restrict the Company's
ability to redeem the Exchange Debentures in the future. See "Description of
Certain Indebtedness".
Selection and Notice
If less than all of the Exchange Debentures are to be redeemed at any time,
the Exchange Trustee will select Exchange Debentures for redemption as
follows:
(1) if the Exchange Debentures are listed, in compliance with the
requirements of the principal national securities exchange on which the
Exchange Debentures are listed; or
(2) If the Exchange Debentures are not so listed, on a pro rata basis, by
lot or by such method as the Exchange Trustee shall deem fair and
appropriate.
No Senior Subordinated Exchange Debenture of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder
of Exchange Debentures to be redeemed at its registered address. Notices of
redemption may not be conditional.
If any Exchange Debentures are to be redeemed in part only, the notice of
redemption that relates to that Exchange Debentures shall state the portion of
the principal amount thereof to be redeemed. A new certificate with an
aggregate principal amount equal to the unredeemed portion of the original
certificate evidencing Exchange Debentures presented for redemption will be
issued in the name of the Holder thereof upon cancellation of the original
certificate. Exchange Debentures called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on Exchange Debentures or portions thereof called for redemption.
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Debentures.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Exchange Debentures will have
the right to require the Company to repurchase all or any part (but not any
fractional shares) of such Holder's Exchange Debentures
157
<PAGE>
pursuant to the offer described below (the "Change of Control Offer"). In the
Change of Control Offer, the Company will offer a payment in cash equal to
101% of the aggregate principal amount of Exchangeable Preferred Stock
repurchased plus accrued and unpaid interest and Liquidated Damages thereon,
if any (subject to the right of Holders of record on the relevant record date
to receive dividends and Liquidated Damages, if any, due on the relevant
dividend payment date), to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Exchange
Debentures on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Exchange Indenture and described in such notice.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Exchange Debentures or portions thereof
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Exchange Debentures or portions thereof
so tendered; and
(3) deliver or cause to be delivered to the Exchange Trustee the Exchange
Debentures so accepted together with an Officers' Certificate stating the
aggregate principal amount of Exchange Debentures or portions thereof being
purchased by the Company.
The Company will promptly mail to each Holder of Exchange Debentures so
tendered the Change of Control Payment for such Exchange Debentures, and the
Exchange Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new certificate representing the
Exchange Debentures equal in principal amount to any unpurchased portion of
the Exchange Debentures surrendered, if any.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Exchange Indenture are applicable. The
Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
applicable to any Change of Control Offer. To the extent that the provisions
of any such securities laws or securities regulations conflict with the
provisions of the covenant described above, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the covenant described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Exchange Indenture, but that could increase the amount of Indebtedness
outstanding at such time or otherwise affect the Company's capital structure.
Restrictions on the ability of the Company to incur additional Indebtedness
are contained in the covenants described under "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock". Such restrictions
can only be waived with the consent of the Holders of a majority in principal
amount of the Exchange Debentures then outstanding. Except for the limitations
contained in such covenants, however, the Exchange Indenture will not contain
any covenants or provisions that may afford holders of the Exchange Debentures
protection in the event of certain highly leveraged transactions.
The Senior Discount Notes Indenture currently prohibits the Company from
repurchasing any Exchange Debentures. In addition, existing Indebtedness and
anticipated future Indebtedness of the Company's subsidiaries and joint
ventures restricts or will restrict the Company's access to the cash flow from
its subsidiaries and joint ventures. Any future agreements relating to
Indebtedness to which the Company or any of its subsidiaries or joint ventures
become a party may contain similar restrictions and provisions. In the event
that a Change of Control occurs at a time when the Company is prohibited or
prevented from repurchasing Exchange Debentures,
158
<PAGE>
the Company seek the consent of the applicable lenders to allow such
repurchase or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from repurchasing the Exchange
Debentures. In such case, the Company's failure to purchase tendered Exchange
Debentures would constitute an Event of Default under the Exchange Indenture
which would, in turn, constitute a default under the Senior Discount Notes
Indenture. Future Indebtedness of the Company and its Subsidiaries may contain
prohibitions on the repurchase of the Exchange Debentures and on the
occurrence of certain events that would constitute a Change of Control or may
require such Indebtedness to be repurchased upon a Change of Control. Finally,
the Company's ability to pay cash to the Holders of Exchange Debentures
following the occurrence of a Change of Control may be limited by the
Company's then existing financial resources, including its ability to access
the cash flow of its Subsidiaries. See "Risk Factors--Repurchase of the
Exchangeable Preferred Stock or the Exchange Debentures Upon a Change of
Control" and "Risk Factors--Holding Company Structure; Dependence on Dividends
to Meet Cash Requirements or Pay Dividends". There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Exchange Indenture applicable to a Change of Control Offer made
by the Company and purchases all Exchange Debentures validly tendered and not
withdrawn under such Change of Control Offer. The provisions under the
Exchange Indenture relative to the Company's obligation to make an offer to
repurchase the Exchange Debentures as a result of a Change of Control may be
waived or modified with the written consent of the Holders of a majority in
principal amount of the Exchange Debentures then outstanding.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Exchange
Debentures to require the Company to repurchase such Exchange Debentures as a
result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Company and its Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Exchange Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of; and
(2) except in the case of a Tower Asset Exchange, at least 75% of the
consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents.
For purposes of this provision, each of the following shall be deemed to be
cash:
(1) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Exchange Debentures or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to
a customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability; and
(2) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are converted by
the Company or such Restricted Subsidiary into cash within 20 days of the
applicable Asset Sale (to the extent of the cash received).
159
<PAGE>
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net
Proceeds to:
(1) reduce any Indebtedness of the Company that constitutes Senior Debt;
(2) reduce any Indebtedness of any of the Company's Restricted
Subsidiaries;
(3) the acquisition of all or substantially all the assets of a Permitted
Business;
(4) the acquisition of Voting Stock of a Permitted Business from a Person
that is not a Subsidiary of the Company; provided, that, after giving
effect thereto, the Company or its Restricted Subsidiary owns a majority of
such Voting Stock and designates such Permitted Business as a Restricted
Subsidiary; or
(5) the making of a capital expenditure or the acquisition of other long-
term assets that are used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Exchange Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all holders of
Senior Discount Notes and may be required to make such offer to holders of
other Senior Debt of the Company then outstanding (a "Senior Asset Sale
Offer") to purchase the maximum principal amount of the Senior Discount Notes
and such other Senior Debt, if applicable, that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount or accreted value thereof, as the case may be, plus accrued
and unpaid interest to the date of purchase, in accordance with the procedures
set forth in the Senior Discount Notes Indenture and in the instruments
governing such other Senior Debt. To the extent that the aggregate amount of
Senior Discount Notes and such other Senior Debt tendered pursuant to a Senior
Asset Sale Offer is less than the remaining Excess Proceeds ("Remaining Excess
Proceeds") and the sum of (A) such amount of Remaining Excess Proceeds and (B)
the Remaining Excess Proceeds from any subsequent Senior Asset Sale Offers
exceeds $3.0 million, the Company will be required to make an offer to all
Holders of Exchange Debentures and all holders of other senior subordinated
Indebtedness of the Company containing provisions similar to those set forth
in the Exchange Indenture with respect to offers to purchase with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Exchange Debentures and such other senior subordinated Indebtedness
of the Company that may be purchased out of the Remaining Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest and Liquidated Damages, if any, due
on the relevant interest payment date), in accordance with the procedures set
forth in the Exchange Indenture and such other senior subordinated
Indebtedness of the Company. To the extent that any Remaining Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by the Exchange
Indenture. If the aggregate principal amount of Exchange Debentures and such
other senior subordinated Indebtedness of the Company tendered into such Asset
Sale Offer surrendered by Holders thereof exceeds the amount of Remaining
Excess Proceeds, the Exchange Trustee shall select the Exchange Debentures and
such other senior subordinated Indebtedness to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
The Asset Sale provisions described above will be applicable whether or not
any other provisions of the Exchange Indenture are applicable. The Company
will comply, to the extent applicable, with the requirements of Section 14(e)
of the Exchange Act and any other securities laws or regulations applicable to
any Asset Sale Offer. To the extent that the provisions of any such securities
laws or securities regulations conflict with the provisions of the covenant
described above, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under
the covenant described above by virtue thereof.
160
<PAGE>
The Senior Discount Notes Indenture currently prohibits the Company form
repurchasing any Exchange Debentures. In addition, existing Indebtedness and
anticipated future Indebtedness of our subsidiaries and joint ventures
restricts or will restrict our access to the cash flow from those entities.
Any future agreements relating to Indebtedness to which we or any of our
subsidiaries or joint ventures become a party may contain similar restrictions
and provisions.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any
of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Company or to the Company or a Restricted
Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned
by the Company or any Restricted Subsidiary of the Company and other than
the Exchangeable Preferred Stock);
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Exchange Debentures, except a payment of interest or
the payment of principal at Stated Maturity; or
(4) make any Restricted Investment, (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default shall have occurred and be continuing or would occur as a
consequence thereof; and
(2) the Company would have been permitted to incur at least $1.00 of
additional indebtedness pursuant to the Debt to Adjusted Consolidated Cash
Flow Ratio test set forth in the first paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; provided that the Company and its Restricted Subsidiaries
will not be required to comply with this clause (2) in order to make any
Restricted Investment; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (2), (3) and (4) of the next succeeding paragraph), is less than
the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the Issue Date to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit); plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the Issue Date as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock and except to the extent such net cash proceeds are
used to incur new Indebtedness outstanding pursuant to clause (10) of
the second paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock") or from
the issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into
161
<PAGE>
such Equity Interests (other than Equity Interests (or Disqualified
Stock or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock); plus
(c) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment; plus
(d) to the extent that any Unrestricted Subsidiary of the Company and
all of its Subsidiaries are designated as Restricted Subsidiaries after
the Issue Date, the lesser of (A) the fair market value of the
Company's Investments in such Subsidiaries as of the date of such
designation, or (B) the sum of (x) the fair market value of the
Company's Investments in such Subsidiaries as of the date on which such
Subsidiaries were originally designated as Unrestricted Subsidiaries
and (y) the amount of any Investments made in such Subsidiaries
subsequent to such designation (and treated as Restricted Payments) by
the Company or any Restricted Subsidiary; provided that:
(i) in the event the Unrestricted Subsidiaries designated as
Restricted Subsidiaries are CTSH and its Subsidiaries, the references in
clauses (A) and (B) of this clause (d) to fair market value of the
Company's Investments in such Subsidiaries shall mean the amount by
which the fair market value of all such Investments exceeds 34.3% of the
fair market value of CTSH and its Subsidiaries as a whole; and
(ii) in the event the Unrestricted Subsidiaries designated as
Restricted Subsidiaries are CCAIC and its Subsidiaries, the references
in clauses (A) and (B) of this clause (d) to fair market value of the
Company's Investments in such Subsidiaries shall mean the amount by
which the fair market value of all such Investments exceeds $250.0
million; plus
(e) 50% of any dividends received by the Company or a Restricted
Subsidiary after the Issue Date from an Unrestricted Subsidiary of the
Company, to the extent that such dividends were not otherwise included
in Consolidated Net Income of the Company for such period.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Exchange Indenture;
(2) the making of any Investment or the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated
Indebtedness or Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the sale after the Issue Date (other than to a
Subsidiary of the Company) of, any Equity Interests of the Company (other
than any Disqualified Stock); provided that such net cash proceeds are not
used to incur new Indebtedness pursuant to clause (x) of the second
paragraph of the covenant described below under the caption "--Incurrence
of Indebtedness and Issuance of Preferred Stock"); and provided further
that, in each such case, the amount of any such net cash proceeds that are
so utilized shall be excluded from clause (3) (b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of the Company
to the holders of its common Equity Interests on a pro rata basis; or
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the Issue
Date; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed (a)
$500,000 in any twelve-month period and (b) $5.0 million in the aggregate.
162
<PAGE>
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default;
provided that in no event shall the businesses operated by the Company's
Restricted Subsidiaries as of November 20, 1997 be transferred to or held by
an Unrestricted Subsidiary. For purposes of making such determination, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated will be deemed
to be Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if such designation would not cause a Default.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or the
applicable Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. The fair market value of any property, assets or
Investments required by this covenant to be determined shall be determined by
the Board of Directors whose resolution with respect thereto shall be
delivered to the Exchange Trustee.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, incur any Indebtedness (including Acquired Debt)
and that the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and the Company's Restricted Subsidiaries
may incur Indebtedness if, in each case, the Company's Debt to Adjusted
Consolidated Cash Flow Ratio at the time of incurrence of such Indebtedness or
the issuance of such Disqualified Stock, after giving pro forma effect to such
incurrence or issuance as of such date and to the use of proceeds therefrom as
if the same had occurred at the beginning of the most recently ended four full
fiscal quarter period of the Company for which internal financial statements
are available, would have been no greater than 7.5 to 1.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness or to the issuance of
any of the following items of Disqualified Stock or preferred stock
(collectively, "Exchange Debentures Permitted Debt"):
(1) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness (including Indebtedness under Credit Facilities) in an
aggregate principal amount (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Restricted Subsidiaries thereunder) at any one time outstanding not
to exceed the greater of (x) $200.0 million less the aggregate amount of
all Net Proceeds of Asset Sales applied after the Issue Date to repay
Indebtedness under a Credit Facility pursuant to the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset
Sales" and (y) 70% of the Eligible Receivables that are outstanding as of
such date of incurrence;
(2) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by the Company of Indebtedness represented by the
Exchange Debentures;
(4) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (4), not to exceed $10.0 million at any one time outstanding;
163
<PAGE>
(5) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund
Indebtedness of the Company or any of its Restricted Subsidiaries or
Disqualified Stock of the Company (other than intercompany Indebtedness)
that was permitted by the Exchange Indenture to be incurred under the first
paragraph hereof or clauses (2) or (3) or this clause (5) of this
paragraph;
(6) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, that (i) if the Company is the obligor
on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
Exchange Debentures and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either
the Company or a Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(7) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Exchange Indenture to be outstanding
or currency exchange risk;
(8) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of the Exchange
Indenture;
(9) the incurrence by the Company or any of its Restricted Subsidiaries
of Acquired Debt in connection with the acquisition of assets or a new
Subsidiary and the incurrence by the Company's Restricted Subsidiaries of
Indebtedness as a result of the designation of an Unrestricted Subsidiary
as a Restricted Subsidiary; provided that, in the case of any such
incurrence of Acquired Debt, such Acquired Debt was incurred by the prior
owner of such assets or such Restricted Subsidiary prior to such
acquisition by the Company or one of its Restricted Subsidiaries and was
not incurred in connection with, or in contemplation of, such acquisition
by the Company or one of its Restricted Subsidiaries; and provided further
that, in the case of any incurrence pursuant to this clause (9), as a
result of such acquisition by the Company or one of its Restricted
Subsidiaries, the Company's Debt to Adjusted Consolidated Cash Flow Ratio
at the time of incurrence of such Acquired Debt, after giving pro forma
effect to such incurrence as if the same had occurred at the beginning of
the most recently ended four full fiscal quarter period of the Company for
which internal financial statements are available, would have been less
than the Company's Debt to Adjusted Consolidated Cash Flow Ratio for the
same period without giving pro forma effect to such incurrence;
(10) the incurrence by the Company of Indebtedness not to exceed, at any
one time outstanding, the sum of (i) 2.0 times the aggregate net cash
proceeds plus (ii) 1.0 times the fair market value of non-cash proceeds
(evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Exchange Trustee), in each case,
from the issuance and sale, other than to a Subsidiary, of Equity Interests
(other than Disqualified Stock) of the Company since the Issue Date (less
the amount of such proceeds used to make Restricted Payments as provided in
clause (3)(b) of the first paragraph or clause (2) of the second paragraph
of the covenant described above under the caption "--Restricted Payments");
provided that such Indebtedness does not mature prior to the Stated
Maturity of the Exchange Debentures and the Weighted Average Life to
Maturity of such Indebtedness is longer than that of the Exchange
Debentures; and
(11) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness and/or the issuance by the Company of
Disqualified Stock in an aggregate principal amount, accreted value or
liquidation preference, as applicable, at any time outstanding, not to
exceed an amount equal to $100.0 million less the aggregate amount of all
Investments made pursuant to clause (12) of the definition of Permitted
Investments; provided that, notwithstanding the foregoing, the aggregate
principal amount,
164
<PAGE>
accreted value or liquidation preference, as applicable, permitted to be
incurred or issued pursuant to this clause (11) shall not be reduced to
less than $25.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Exchange Debentures Permitted Debt described in clauses (1) through (11)
above or is entitled to be incurred pursuant to the first paragraph of this
covenant, the Company shall, in its sole discretion, classify (or later
reclassify in whole or in part) such item of Indebtedness in any manner that
complies with this covenant. Any Indebtedness incurred pursuant to clause (1)
of the second paragraph under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock" in the Certificate of Designations will be deemed
to have been incurred under clause (1) above on the Exchange Date. Accrual of
interest, accretion or amortization of original issue discount and the payment
of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to
(1) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits;
(2) pay any indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(3) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(4) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness or Indebtedness under the Senior Credit
Facility, in each case as in effect on the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those
contained in the applicable series of Existing Indebtedness or in the
Senior Credit Facility, in each case as in effect on the Issue Date;
(2) encumbrances and restrictions applicable to any Unrestricted
Subsidiary, as the same are in effect as of the date on which such
Subsidiary becomes a Restricted Subsidiary, and as the same may be amended,
modified, restated, renewed, increased, supplemented, refunded, replaced or
refinanced; provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in the applicable
series of Indebtedness of such Subsidiary as in effect on the date on which
such Subsidiary becomes a Restricted Subsidiary;
(3) any Indebtedness (incurred in compliance with the covenant under the
heading "--Incurrence of Indebtedness and Issuance of Preferred Stock") or
any agreement pursuant to which such Indebtedness is issued if the
encumbrance or restriction applies only in the event of a payment default
or default with respect to a financial covenant contained in such
Indebtedness or agreement and such encumbrance or restriction is not
materially more disadvantageous to the holders of the Exchange Debentures
than is customary in comparable financings (as determined by the Company)
and the Company determines that any such encumbrance or restriction will
not materially affect the Company's ability to pay dividends or the
Liquidation Preference on the Exchange Debentures;
(4) the Exchange Indenture and the Exchange Debentures;
(5) applicable law;
165
<PAGE>
(6) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Exchange
Indenture to be incurred;
(7) by reason of customary non-assignment provisions in leases or
licenses entered into in the ordinary course of business;
(8) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (4) in the prior paragraph on the property so acquired;
(9) the provisions of agreements governing Indebtedness incurred pursuant
to clause (4) of the second paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock";
(10) any agreement for the sale of a Restricted Subsidiary that restricts
that Restricted Subsidiary pending its sale;
(11) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(12) Liens that limit the right of the debtor to transfer the assets
subject to such Liens;
(13) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements; and
(14) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless:
(1) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the
Exchange Debentures and the Exchange Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Exchange Trustee;
(3) immediately after such transaction no Default exists; and
(4) except in the case of a merger of the Company with or into a Wholly
Owned Restricted Subsidiary of the Company and except in the case of a
merger entered into solely for the purpose of reincorporating the Company
in another jurisdiction, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, at the time of such transaction
after giving pro forma effect thereto as if such transaction had occurred
at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Debt to
Adjusted Consolidated Cash Flow Ratio test set forth in the first paragraph
of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock".
166
<PAGE>
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Exchange Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and
therefore will not be subject to the provisions of the prior paragraph:
(1) any employment arrangements with any executive officer of the Company
or a Restricted Subsidiary that is entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and
consistent with compensation arrangements of similarly situated executive
officers at comparable companies engaged in Permitted Businesses;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of directors fees in an aggregate annual amount not to exceed
$25,000 per Person;
(4) Restricted Payments that are permitted by the provisions of the
Exchange Indenture described above under the caption "--Restricted
Payments";
(5) the issuance or sale of Equity Interests (other than Disqualified
Stock) of the Company; and
(6) transactions pursuant to the provisions of the Governance Agreement,
the Rights Agreement, the Stockholders' Agreement, the CTSH Shareholders'
Agreement, the CTI Services Agreement, the CTI Operating Agreement and the
Crown Transition Agreements, as the same are in effect on the Issue Date.
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
The Company:
(1) will not, and will not permit any Restricted Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company); and
(2) will not permit any Restricted Subsidiary of the Company to issue any
of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than
to the Company or a Wholly Owned Restricted Subsidiary of the Company,
unless, in each such case: (a) as a result of such transfer, conveyance,
sale, lease or other disposition or issuance such Restricted Subsidiary no
longer constitutes a Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition or issuance are applied
in accordance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales".
167
<PAGE>
Senior Subordinated Debt
So long as any Exchange Debentures are outstanding, the Company will not
incur any Indebtedness that is expressly made subordinated in right of payment
to any Senior Debt unless such Indebtedness, by its terms and by the terms of
any agreement or instrument pursuant to which such Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the Exchange Debentures pursuant to provisions substantially
similar to those contained in the Exchange Indenture; provided that the
foregoing limitations shall not apply to distinctions between categories of
Senior Debt that exist by reason of any Liens or Guarantees arising or created
in respect of some but not all Senior Debt.
Business Activities
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not
be material to the Company and its Subsidiaries taken as a whole.
Reports
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Exchange Debentures are
outstanding, the Company will furnish to the Holders of Exchange Debentures:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if
the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations of the
Company and its consolidated Subsidiaries (showing in reasonable detail, in
the footnotes to the financial statements and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" (in each
case to the extent not prohibited by the Commission's rules and
regulations), (a) the financial condition and results of operations of the
Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company and (b) the Tower Cash Flow for the most recently completed fiscal
quarter and the Adjusted Consolidated Cash Flow for the most recently
completed four-quarter period) and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants;
and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports,
in each case within the time periods specified in the Commission's rules
and regulations.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available
to securities analysts and prospective investors upon request.
Transfer and Exchange
A Holder may transfer or exchange Exchange Debentures in accordance with the
Exchange Indenture. The Registrar and the Exchange Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law. The Company is not required to transfer or exchange any
Senior Subordinated Exchange Debenture selected for redemption. Also, the
Company is not required to transfer or exchange any Senior Subordinated
Exchange Debenture for a period of 15 days before a selection of Exchange
Debentures to be redeemed.
The registered Holder of a Senior Subordinated Exchange Debenture will be
treated as the owner of it for all purposes.
168
<PAGE>
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Exchange
Indenture or the Exchange Debentures may be amended or supplemented with the
consent of the Holders of a majority of the aggregate principal amount of the
Exchange Debentures then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Exchange Debentures) or, if no Exchange Debentures are outstanding, the
holders of a majority in Liquidation Preference of the Exchangeable Preferred
Stock then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
Exchangeable Preferred Stock), and any existing default or compliance with any
provision of the Exchange Indenture or the Exchange Debentures may be waived
with the consent of the Holders of a majority of the aggregate principal
amount of the then outstanding Exchange Debentures (including consents
obtained in connection with a tender offer or exchange offer for Exchange
Debentures) or, if no Exchange Debentures are outstanding, the holders of a
majority in Liquidation Preference of the Exchangeable Preferred Stock then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Exchangeable
Preferred Stock).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Debentures held by a non-consenting Holder):
(1) reduce the principal amount of Exchange Debentures whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Senior
Subordinated Exchange Debenture or alter the provisions with respect to the
redemption (but not any required repurchase in connection with an Asset
Sale Offer or Change of Control Offer) of the Exchange Debentures;
(3) reduce the rate of or change the time for payment of interest on any
Senior Subordinated Exchange Debenture;
(4) waive a Default in the payment of principal of or premium, if any, or
interest on the Exchange Debentures (except a rescission of acceleration of
the Exchange Debentures by the Holders of a majority in aggregate principal
amount of the Exchange Debentures and a waiver of the payment default that
resulted from such acceleration);
(5) make any Senior Subordinated Exchange Debenture payable in money
other than that stated in the Exchange Debentures;
(6) make any change in the provisions of the Exchange Indenture relating
to waivers of past Defaults or the rights of Holders of Exchange Debentures
to receive payments of principal of or premium, if any, or interest on the
Exchange Debentures;
(7) waive a redemption payment (but not any payment upon a required
repurchase in connection with an Asset Sale Offer or Change of Control
Offer) with respect to any Senior Subordinated Exchange Debenture;
(8) except as provided under the caption "--Legal Defeasance and Covenant
Defeasance" or in accordance with the terms of any Subsidiary Guarantee,
release a Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee or make any change in a Subsidiary Guarantee that would adversely
affect the Holders of the Exchange Debentures; or
(9) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Exchange
Debentures, the Company and the Exchange Trustee may amend or supplement the
Exchange Indenture or the Exchange Debentures:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Exchange Debentures in addition to or
in place of certificated Exchange Debentures;
169
<PAGE>
(3) to provide for the assumption of the Company's obligations to Holders
of Exchange Debentures in the case of a merger or consolidation;
(4) to make any change that would provide any additional rights or
benefits to the Holders of Exchange Debentures or that does not adversely
affect the legal rights under the Exchange Indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Exchange Indenture under the Trust
Indenture Act.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Exchange Debentures;
(2) default in payment when due of the principal of or premium, if any,
on the Exchange Debentures;
(3) failure by the Company or any of its Subsidiaries for 30 days after
notice to comply with the provisions described under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" or failure by the
Company to consummate a Change of Control Offer or Asset Sale Offer in
accordance with the provisions of the Exchange Indenture applicable
thereto;
(4) failure by the Company or any of its Subsidiaries for 60 days after
notice to comply with any of its other agreements in the Exchange Indenture
or the Exchange Debentures;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Significant Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, which default (a) is caused by
a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $20.0 million or more;
(6) failure by the Company or any of its Significant Subsidiaries to pay
final judgments aggregating in excess of $20.0 million, which judgments are
not paid, discharged or stayed for a period of 60 consecutive days; or
(7) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Exchange Trustee or
the Holders of at least 25% of the aggregate principal amount of the then
outstanding Exchange Debentures may declare all the Exchange Debentures to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company, all outstanding Exchange Debentures will become due
and payable without further action or notice. Holders of the Exchange
Debentures may not enforce the Exchange Indenture or the Exchange Debentures
except as provided in the Exchange Indenture. Subject to certain limitations,
Holders of a majority of the aggregate principal amount of the then
outstanding Exchange Debentures may direct the Exchange Trustee in its
exercise of any trust or power.
The Holders of a majority of the aggregate principal amount of the Exchange
Debentures then outstanding by notice to the Exchange Trustee may on behalf of
the Holders of all of the Exchange Debentures waive any existing Default or
Event of Default and its consequences under the Exchange Indenture except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Exchange Debentures.
170
<PAGE>
The Exchange Indenture provides that if a Default occurs and is continuing
and is known to the Exchange Trustee, the Exchange Trustee must mail to each
holder of the Exchange Debentures notice of the Default within 90 days after
it occurs. Except in the case of a Default in the payment of principal of or
interest on any Senior Subordinated Exchange Debenture, the Exchange Trustee
may withhold notice if and so long as a committee of its trust officers
determines that withholding notice is not opposed to the interest of the
holders of the Exchange Debentures. In addition, the Company is required to
deliver to the Exchange Trustee, within 90 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. The Company is also required to
deliver to the Exchange Trustee, forthwith after the occurrence thereof,
written notice of any event that would constitute a Default, the status
thereof and what action the Company is taking or proposes to take in respect
thereof.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Exchange Debentures, the Exchange Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder
of Exchange Debentures by accepting a Senior Subordinated Exchange Debenture
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Exchange Debentures. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Debentures
("Legal Defeasance") except for:
(1) the rights of Holders of outstanding Exchange Debentures to receive
payments in respect of the principal of, premium, if any, and interest and
Liquidated Damages on such Exchange Debentures when such payments are due
from the trust referred to below;
(2) the Company's obligations with respect to the Exchange Debentures
concerning issuing temporary Exchange Debentures, registration of Exchange
Debentures, mutilated, destroyed, lost or stolen Exchange Debentures and
the maintenance of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Exchange
Trustee and the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Exchange Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Exchange Indenture ("Covenant Defeasance") and thereafter
any omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Exchange Debentures. In the event
Covenant Defeasance occurs, certain events (not including non-payment and
bankruptcy, receivership, rehabilitation and insolvency events with respect to
the Company) described under "--Events of Default and Remedies" will no longer
constitute an Event of Default with respect to the Exchange Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Exchange Trustee, in
trust, for the benefit of the Holders of the Exchange Debentures, cash in
United States dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest and Liquidated Damages on the
outstanding Exchange Debentures on the stated maturity or on the applicable
redemption
171
<PAGE>
date, as the case may be, and the Company must specify whether the Exchange
Debentures are being defeased to maturity or to a particular redemption
date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Exchange Trustee an opinion of counsel in the United States reasonably
acceptable to the Exchange Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the Issue Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders of
the outstanding Exchange Debentures will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Exchange Trustee an opinion of counsel in the United States
reasonably acceptable to the Exchange Trustee confirming that the Holders
of the outstanding Exchange Debentures will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events with
respect to the Company are concerned, at any time in the period ending on
the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Exchange Indenture) to which the
Company or any of its Restricted Subsidiaries is a party or by which the
Company or any of its Restricted Subsidiaries is bound;
(6) the Company must have delivered to the Exchange Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Exchange Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Exchange Debentures over the other
creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and
(8) the Company must deliver to the Exchange Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Concerning the Exchange Trustee
The Exchange Indenture contains certain limitations on the rights of the
Exchange Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Exchange Trustee
will be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority of the aggregate principal amount of the then
outstanding Exchange Debentures will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the Exchange Trustee, subject to certain exceptions. The Exchange Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Exchange Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Exchange Trustee will be under no obligation
to exercise any of its rights or powers under the Exchange Indenture at the
request of any Holder of Exchange Debentures, unless such Holder shall have
offered to the Exchange Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
172
<PAGE>
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Certificate of
Designations, the Exchange Indenture and the Registration Rights Agreement
without charge by writing to Crown Castle International Corp., 510 Bering
Drive, Suite 500, Houston, Texas 77057, Attention: Chief Financial Officer.
Certain Definitions
Set forth below are certain defined terms used in the Certificate of
Designations and the Exchange Indenture. Reference is made to the Certificate
of Designations and the Exchange Indenture for a full disclosure of all such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness or Disqualified Stock of any other Person existing at
the time such other Person is merged with or into or became a Subsidiary of
such specified Person, including, without limitation, Indebtedness incurred
in connection with, or in contemplation of, such other Person merging with
or into or becoming a Subsidiary of such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Adjusted Consolidated Cash Flow" has the meaning given to such term in the
definition of "Debt to Adjusted Consolidated Cash Flow Ratio".
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback)
provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken
as a whole will be governed by the provisions of the Certificate of
Designations or the Exchange Indenture, as applicable, described above
under the respective captions "--Repurchase at the Option of Holders--
Change of Control" and/or the provisions described above under the
respective captions "--Repurchase at the Option of Holders--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset
Sale covenant; and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Subsidiaries
(other than directors' qualifying shares or shares required by applicable
law to be held by a Person other than the Company or a Restricted
Subsidiary), in the case of either clause (1) or (2), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be
deemed to be Asset Sales:
(1) a transfer of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary;
(2) an issuance of Equity Interests by a Subsidiary to the Company or
to another Restricted Subsidiary;
(3) a Restricted Payment that is permitted by the covenant described
above under the respective captions "--Certain Covenants--Restricted
Payments";
(4) grants of leases or licenses in the ordinary course of business;
and
(5) disposals of Cash Equivalents.
173
<PAGE>
"Berkshire Group" means Berkshire Fund III, A Limited Partnership, Berkshire
Fund IV, Limited Partnership, Berkshire Investors LLC and Berkshire Partners
LLC.
"Broker-Dealer" means any broker or dealer registered under the Exchange
Act.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits, in
each case with any lender party to the Senior Credit Facility or with any
domestic commercial bank having capital and surplus in excess of $500.0
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group and in each case
maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1)-(5) of this
definition.
"CCAIC" means CCA Investment Corp., which is an indirect wholly owned
Subsidiary of the Company and was formed to hold the Company's Equity
Interests in Crown Atlantic Holding Company LLC.
"Centennial Group" means Centennial Fund IV, L.P., Centennial Fund V, L.P.
and Centennial Entrepreneurs Fund V, L.P.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries, taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act) other than a Principal or
a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
174
<PAGE>
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly
or indirectly, of more than 50% of the Voting Stock of the Company
(measured by voting power rather than number of shares); provided that
transfers of Equity Interests in the Company between or among the
beneficial owners of the Company's Equity Interests and/or Equity Interests
in CTSH, in each case as of November 20, 1997, will not be deemed to cause
a Change of Control under this clause (3) so long as no single Person
together with its Affiliates acquires a beneficial interest in more of the
Voting Stock of the Company than is at the time collectively beneficially
owned by the Principals and their Related Parties;
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(5) the Company consolidates with, or merges with or into, any Person, or
any Person consolidates with, or merges with or into, the Company, in any
such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where (x) the Voting Stock
of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a majority of the
outstanding shares of such Voting Stock of such surviving or transferee
Person (immediately after giving effect to such issuance) or (y) the
Principals and their Related Parties own a majority of such outstanding
shares after such transaction.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income; plus
(2) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of goodwill and
other intangibles and other non- cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income; minus
(4) non-cash items increasing such Consolidated Net Income for such
period (excluding any items that were accrued in the ordinary course of
business), in each case on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person as of any date
of determination, the sum, without duplication, of:
(1) the total amount of Indebtedness of such Person and its Restricted
Subsidiaries; plus
(2) the total amount of Indebtedness of any other Person, to the extent
that such Indebtedness has been Guaranteed by the referent Person or one or
more of its Restricted Subsidiaries; plus
175
<PAGE>
(3) the aggregate liquidation value of all Disqualified Stock of such
Person and all preferred stock of Restricted Subsidiaries of such Person,
in each case, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(1) the Net Income (but not loss) of any Person other than the Company
that is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary thereof;
(2) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(3) the cumulative effect of a change in accounting principles shall be
excluded; and
(4) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded whether or not distributed to the Company or one of its Restricted
Subsidiaries.
"Consolidated Tangible Assets" means, with respect to the Company, the total
consolidated assets of the Company and its Restricted Subsidiaries, less the
total intangible assets of the Company and its Restricted Subsidiaries, as
shown on the most recent internal consolidated balance sheet of the Company
and such Restricted Subsidiaries calculated on a consolidated basis in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the Issue Date;
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election; or
(3) is a designee of a Principal or was nominated by a Principal.
"Credit Facilities" means one or more debt facilities (including, without
limitation, the Senior Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables
to such lenders or to special purpose entities formed to borrow from such
lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"Crown Transition Agreements" means collectively (i) the Crown Memorandum of
Understanding among the Company, Robert A. Crown and Barbara A. Crown, dated
as of July 2, 1998, (ii) the Crown Services Agreement between the Company and
Robert A. Crown, dated as of July 2, 1998 and (iii) the Registration Rights
Crown Side Letter Agreement, among the Company, Robert A. Crown and Barbara A.
Crown, dated as of August 18, 1998.
"CTI" means Castle Transmission International Limited.
"CTI Operating Agreement" means the memorandum of understanding among the
Company, CTSH, CTI and TdF, dated as of August 21, 1998, relating to the
development of certain business opportunities outside of the United States and
the provision of certain business support and technical services in connection
therewith.
"CTI Services Agreement" means the amended and restated services agreement
between CTI and TdF, dated as of August 21, 1998, relating to the provisions
of certain services to CTI.
"CTSH" means Castle Transmission Services (Holdings) Ltd and its successors.
176
<PAGE>
"CTSH Shareholders' Agreement" means the agreement entered into by the
Company, CTSH and TdF, dated as of August 21, 1998, to govern the relationship
between the Company and TdF as shareholders of CTSH.
"Debt to Adjusted Consolidated Cash Flow Ratio"means, as of any date of
determination, the ratio of:
(1) the Consolidated Indebtedness of the Company as of such date to
(2) the sum of (a) the Consolidated Cash Flow of the Company for the four
most recent full fiscal quarters ending immediately prior to such date for
which internal financial statements are available, less the Company's Tower
Cash Flow for such four-quarter period, plus (b) the product of four times
the Company's Tower Cash Flow for the most recent quarterly period (such
sum being referred to as "Adjusted Consolidated Cash Flow"),
in each case determined on a pro forma basis after giving effect to all
acquisitions or dispositions of assets made by the Company and its
Subsidiaries from the beginning of such four-quarter period through and
including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. For purposes of making the computation
referred to above, (i) acquisitions that have been made by the Company or any
of its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the reference period
or subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (ii) of the proviso set forth in definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to Calculation Date, shall be excluded.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Designated Senior Debt" with respect to the Exchange Debentures means:
(1) any Indebtedness under or in respect of the Senior Credit Facility;
(2) any Indebtedness outstanding under the Senior Discount Notes
Indenture; and
(3) any other Senior Debt permitted under the Exchange Indenture the
principal amount of which is $25.0 million or more and that has been
designated by the Company in the instrument or agreement relating to the
same as "Designated Senior Debt".
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable, in each case, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
Holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Exchangeable Preferred Stock or Exchange
Debentures mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments".
"Eligible Indebtedness" means any Indebtedness other than (i) Indebtedness
in the form of, or represented by, bonds or other securities or any guarantee
thereof and (ii) Indebtedness that is, or may be, quoted, listed or purchased
and sold on any stock exchange, automated trading system or over-the-counter
or other securities market (including, without prejudice to the generality of
the foregoing, the market for securities eligible for resale pursuant to Rule
144A under the Securities Act).
"Eligible Receivables" means the accounts receivable (net of any reserves
and allowances for doubtful accounts in accordance with GAAP) of the Company
and its Restricted Subsidiaries that are not more than 60
177
<PAGE>
days past their due date and that were entered into in the ordinary course of
business on normal payment terms as shown on the most recent internal
consolidated balance sheet of the Company and such Restricted Subsidiaries,
all calculated on a consolidated basis in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Date" means the date on which the Company exchanges all but not
less than all of the Exchangeable Preferred Stock for Exchange Debentures.
"Exchange Offer" means exchange and issuance by the Company of New Preferred
Stock or New Exchange Debentures, as the case may be, which shall be
registered pursuant to a Registration Statement, in an amount equal to (i) the
aggregate Liquidation Preference of all shares of Exchangeable Preferred Stock
that are tendered by the Holders thereof or (ii) the aggregate principal
amount of all Exchange Debentures that are tendered by the Holders thereof, as
the case may be, in connection with such exchange and issuance.
"Exchange Offer Registration Statement" means the Registration Statement
relating to the Exchange Offer, including the related Prospectus.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the Issue Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Governance Agreement" means the agreement among the Company, TdF and its
affiliates, dated as of August 21, 1998, to provide for certain rights and
obligations of the Company, TdF and its affiliates with respect to the
management of the Company.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property; or
(6) representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person whether
or not such Indebtedness is assumed by such Person (the amount
178
<PAGE>
of such Indebtedness as of any date being deemed to be the lesser of the value
of such property or assets as of such date or the principal amount of such
Indebtedness of such other Person so secured) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other
Person. The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company or a Restricted Subsidiary of the Company issues any of its Equity
Interests such that, in each case, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Subsidiary not sold or disposed of in an amount determined as provided in
the final paragraph of the covenant described above under the respective
captions "--Certain Covenants--Restricted Payments".
"Issue Date" means the closing date for the sale and original issuance of
the Exchangeable Preferred Stock.
"Joint Venture Operating Agreement" means the Crown Atlantic Holding Company
LLC Operating Agreement to be entered into by the Company and BAM,
substantially in the form attached to the Certificate of Designations.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Nassau Group" means Nassau Capital Partners II, L.P. and NAS Partners I,
L.L.C.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or
any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision
for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non- cash consideration received in any Asset Sale), net of:
(1) the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof;
(2) taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements);
(3) amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under a Credit Facility) secured by a Lien on the
asset or assets that were the subject of such Asset Sale;
179
<PAGE>
(4) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries as a result of such Asset Sale;
(5) the deduction of appropriate amounts provided by the seller as a
reserve in accordance with GAAP against any liabilities associated with the
assets disposed of in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale and
(6) without duplication, any reserves that the Company's Board of
Directors determines in good faith should be made in respect of the sale
price of such asset or assets for post closing adjustments; provided that
in the case of any reversal of any reserve referred to in clause (5) or (6)
above, the amount so reserved shall be deemed to be Net Proceeds from an
Asset Sale as of the date of such reversal.
"New Exchange Debentures" means the Company's 12 3/4% Exchange Debentures
due 2010 issued pursuant to the Exchange Indenture (i) in the Exchange Offer
or (ii) in connection with a resale of Exchange Debentures in reliance on a
Shelf Registration Statement.
"New Preferred Stock" means the Company's 12 3/4% Exchangeable Preferred
Stock due 2010 issued pursuant to the Certificate of Designations (i) in the
Exchange Offer or (ii) in connection with a resale of Exchangeable Preferred
Stock in reliance on a Shelf Registration Statement.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries (except that this clause (3) will not apply to any
Indebtedness incurred by CTSH and its Subsidiaries prior to August 21,
1998).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business conducted by the Company, its
Restricted Subsidiaries or CTSH and its Subsidiaries on the Issue Date and any
other business related, ancillary or complementary to any such business.
"Permitted Investments" means:
(1) Liens securing Senior Debt;
(2) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(3) any Investment in Cash Equivalents;
(4) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company;
(5) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the respective captions
"--Repurchase at the Option of Holders--Asset Sales";
180
<PAGE>
(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;
(7) receivables created in the ordinary course of business;
(8) loans or advances to employees made in the ordinary course of
business not to exceed $1.0 million at any one time outstanding;
(9) securities and other assets received in settlement of trade debts or
other claims arising in the ordinary course of business;
(10) purchases of additional Equity Interests in CTSH for cash pursuant
to the Governance Agreement as the same is in effect on the Issue Date for
aggregate cash consideration not to exceed $20.0 million since the Issue
Date;
(11) the Investment of up to an aggregate of $100.0 million of the net
proceeds from the sale of the Exchangeable Preferred Stock (i) to be used
to consummate the formation of the Crown Atlantic Holding Company LLC joint
venture with BAM or (ii) if the Company does not consummate the formation
of the Crown Atlantic Holding Company LLC joint venture with BAM, in one or
more other Subsidiaries of the Company (which may be Unrestricted
Subsidiaries of the Company), each of which derives or expects to derive a
majority of its revenues from one or more Permitted Businesses (each such
Investment being measured as of the date made and without giving effect to
subsequent changes in value).
(12) Additional Investments with the net proceeds from the sale of the
Exchangeable Preferred Stock in an aggregate amount equal to (x) the gross
proceeds from the sale of the Exchangeable Preferred Stock, minus (y) the
aggregate amount of Investments made or permitted to be made pursuant to
clause (11) of this paragraph, minus (z) the aggregate amount of
Indebtedness incurred and/or Disqualified Stock issued pursuant to clause
(11) of the second paragraph under the caption "Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock" (each such
Investment being measured as of the date made and without giving effect to
subsequent changes in value).
(13) other Investments in Permitted Businesses not to exceed an amount
equal to $10.0 million plus 10% of the Company's Consolidated Tangible
Assets at any one time outstanding (each such Investment being measured as
of the date made and without giving effect to subsequent changes in value).
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the Exchange Debentures are subordinated to Senior Debt
pursuant to the Exchange Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries or Disqualified Stock of the Company
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries (other than intercompany Indebtedness)
or Disqualified Stock of the Company; provided that:
(1) the principal amount, initial accreted value or liquidation
preference, as applicable, of such Permitted Refinancing Indebtedness does
not exceed the principal amount, accreted value or liquidation preference,
as applicable, of, plus accrued interest or accumulated dividends on, the
Indebtedness or Disqualified Stock so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of expenses and prepayment
premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Exchange
Debentures, such Permitted Refinancing Indebtedness is subordinated in
right of payment to, the Exchange Debentures on terms at least as favorable
to the Holders
181
<PAGE>
of Exchange Debentures as those contained in the documentation governing
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded or such
Disqualified Stock is issued by the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business).
"Principals" means Berkshire Group, Centennial Group, Nassau Group, TdF and
any Related Party of the foregoing.
"Prospectus" means the prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by
reference into such Prospectus.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Registration Rights Agreement" means the registration rights agreement to
be entered into by the Company on or before the Issue relating to the
registration of the Exchangeable Preferred Stock and the Exchange Debentures
with the Commission.
"Registration Statement" means any registration statement of the Company
relating to an offering of New Preferred Stock or New Exchange Debentures, as
the case may be, that is filed pursuant to the provisions of the Registration
Rights Agreement, and includes the Prospectus included therein, all amendments
and supplements thereto (including post-effective amendments) and all exhibits
and material incorporated by reference therein.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary of such
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, members, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist
of such Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rights Agreement" means the agreement between the Company and ChaseMellon
Shareholders Services, L.L.C., as rights agent, dated as of August 21, 1998,
relating to the dividend declared by the Company consisting of the right to
purchase 1/1000th of a share of the Company's Series A Participating
Cumulative Preferred Stock, par value $.01 per share.
"Senior Credit Facility" means that certain Amended and Restated Loan
Agreement, dated as of July 10, 1998, by and among Key Corporate Capital Inc.
and PNC Bank, National Association, as arrangers and agents for the financial
institutions listed therein, and Crown Communication Inc. and Crown Castle
International Corp. de Puerto Rico, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced
or refinanced from time to time.
182
<PAGE>
"Senior Debt" means:
(1) all Indebtedness outstanding under the Senior Credit Facility and all
Hedging Obligations (including guarantees thereof) with respect thereto of
the Company, whether outstanding on the Issue Date or thereafter incurred;
(2) all Indebtedness outstanding under the Senior Discount Notes or any
Guarantees thereof, as the case may be;
(3) any other Indebtedness permitted to be incurred by the Company or any
of its Restricted Subsidiaries under the terms of the Certificate of
Designations or the Exchange Indenture, as applicable, unless the
instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
Exchange Debentures; and
(4) all Obligations with respect to the preceding clauses (1), (2) and
(3) (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable
law).
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing
by the Company or the Restricted Subsidiaries;
(2) any Indebtedness of the Company or any Restricted Subsidiary to any
of its Subsidiaries;
(3) any trade payables;
(4) any Indebtedness that is incurred in violation of the Certificate of
Designations or the Exchange Indenture, as applicable (but only to the
extent so incurred); or
(5) any Capitalized Lease Obligations.
"Senior Discount Notes Indenture" means that certain Indenture, dated as of
November 20, 1997, governing the Company's 105/8% Senior Discount Notes due
2007.
"Exchangeable Preferred Stock" means (i) the 12 3/4% Exchangeable Preferred
Stock due 2010 of the Company issued on the Issue Date, (ii) any and all
additional fully-paid and non-assessable shares of 12 3/4% Exchangeable
Preferred Stock due 2010 of the Company issued after the Issue Date as payment
of dividends in accordance with the provisions under the caption "Description
of Exchangeable Preferred Stock--Dividends" and (iii) any and all shares of
New Preferred Stock.
"Exchange Debentures" means (i) the 12 3/4% Exchange Debentures due 2010 of
the Company issued on the Exchange Date, (ii) any and all additional 12 3/4%
Exchange Debentures due 2010 of the Company issued after the Exchange Date as
payment of interest in accordance with the provisions under the caption
"Description of Senior Subordinated Debentures--Principal, Maturity and
Interest" and (iii) any and all shares of New Exchange Debentures.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means, with respect to any Person, any Restricted
Subsidiary of such Person that would be a "significant subsidiary" of such
Person as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof, except that all references to "10 percent" in Rule 1-02(w)(1), (2) and
(3) shall mean "5 percent" and that all Unrestricted Subsidiaries of the
Company shall be excluded from all calculations under Rule 1-02(w).
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original
183
<PAGE>
documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Stockholders' Agreement" means the agreement among the Company and certain
stockholders of the Company, dated as of August 21, 1998, to provide for
certain rights and obligations of the Company and such stockholders with
respect to the governance of the Company and such stockholders' shares of
Common Stock and/or Class A Common Stock of the Company.
"Strategic Equity Investment" means a cash contribution to the common equity
capital of the Company or a purchase from the Company of common Equity
Interests (other than Disqualified Stock), in either case by or from a
Strategic Equity Investor and for aggregate cash consideration of at least
$50.0 million.
"Strategic Equity Investor" means a Person engaged in a Permitted Business
whose Total Equity Market Capitalization exceeds $1.0 billion.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TdF" means TeleDiffusion de France International S.A.
"Total Equity Market Capitalization" of any Person means, as of any day of
determination, the sum of:
(1) the product of (A) the aggregate number of outstanding primary shares
of common stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into,
shares of common stock of such person) multiplied by (B) the average
closing price of such common stock listed on a national securities exchange
or the Nasdaq National Market System over the 20 consecutive business days
immediately preceding such day; plus
(2) the liquidation value of any outstanding shares of preferred stock of
such Person on such day.
"Tower Asset Exchange" means any transaction in which the Company or one of
its Restricted Subsidiaries exchanges assets for Tower Assets and/or cash or
Cash Equivalents where the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Transfer Agent and/or the Exchange Trustee, as appropriate) of the Tower
Assets and cash or Cash Equivalents received by the Company and its Restricted
Subsidiaries in such exchange is at least equal to the fair market value of
the assets disposed of in such exchange.
"Tower Assets" means wireless transmission towers and related assets that
are located on the site of a transmission tower.
"Tower Cash Flow" means, for any period, the Consolidated Cash Flow of the
Company and its Restricted Subsidiaries for such period that is directly
attributable to site rental revenue or license fees paid to lease or sublease
space on communication sites owned or leased by the Company, all determined on
a consolidated basis and in accordance with GAAP. Tower Cash Flow will not
include revenue or expenses attributable to non-site rental services provided
by the Company or any of its Restricted Subsidiaries to lessees of
communication sites or revenues derived from the sale of assets.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
184
<PAGE>
(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the
Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the
Transfer Agent and the Exchange Trustee by filing with the Transfer Agent and
the Exchange Trustee a certified copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the respective captions""--Certain Covenants--Restricted
Payments". If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of the Certificate of
Designations and the Exchange Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenants described above under the
respective captions "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described above under the
respective captions "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference
period, and (ii) no Default would occur or be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
or series or class of preferred stock at any date, the number of years
obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal or liquidation preference, including payment
at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness or the
aggregate liquidation preference of the then outstanding preferred stock,
as the case may be.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
185
<PAGE>
BOOK-ENTRY, DELIVERY AND FORM
The New Preferred Stock will be represented by one or more Certificates in
registered, global form without interest coupons (collectively, the "Global
Certificates"). The Global Certificates will be deposited upon issuance with
the Transfer Agent as custodian for DTC, in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Certificates may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Certificates may not be
exchanged for Exchangeable Preferred Stock in certificated form except in the
limited circumstances described below. See "--Depositary Procedures--Exchange
of Book-Entry Exchangeable Preferred Stocks for Certificated Securities."
Except in the limited circumstances described below, owners of beneficial
interests in the Global Certificates will not be entitled to receive physical
delivery of Certificated Securities (as defined below). Transfers of
beneficial interest in the Global Certificates will be subject to the
applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Initially, the Exchange Agent will act as Paying Agent and Registrar. The
Exchangeable Preferred Stock may be presented for registration of transfer and
exchange at the offices of the Registrar.
Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures
are solely within the control of the respective settlement systems and are
subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
Pursuant to procedures established by DTC:
(1) upon deposit of the Global Certificates, DTC will credit the accounts
of Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Certificates; and
(2) ownership of such interests in the Global Certificates will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Certificates).
Investors in the Global Certificates may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel Bank) which are
Participants in such system. Investors in the Regulation S Global Certificates
must initially hold their interests therein through Euroclear or Cedel Bank,
if they are participants in such systems, or indirectly through organizations
which are participants in such systems. After the expiration of the Restricted
Period (but not earlier), investors may also hold interests in the Regulation
S Global Certificates through organizations other than Euroclear and Cedel
Bank that are Participants in the DTC system. Euroclear and Cedel Bank will
hold interests
186
<PAGE>
in the Regulation S Global Certificates on behalf of their Participants
through customers' securities accounts in their respective names on the books
of their respective depositaries, which are Morgan Guaranty Trust Company of
New York, Brussels office, as operator of Euroclear, and Citibank, N.A. as
operator of Cedel. The depositaries, in turn, will hold such interests in the
Regulation S Global Certificates in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in a Global
Certificate, including those held through Euroclear or Cedel Bank, may be
subject to the procedures and requirements of DTC. Those interests held by
Euroclear or Cedel Bank may be also be subject to the procedures and
requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in a Global Certificate to such persons may be
limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having a beneficial interest in a Global Certificate to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests. For
certain other restrictions on the transferability of the Preferred Stock or
the Exchange Debentures, as applicable, see "--Exchange of Book-Entry
Securities for Certificated Securities", "--Exchange of Certificated
Securities for Book-Entry Securities" and "--Exchanges between Regulation S
Certificates and Rule 144A Certificates."
Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Certificate to pledge such interests
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Certificates
will not have Exchangeable Preferred Stock or Exchange Debentures, as
applicable, registered in their names, will not receive physical delivery of
Exchangeable Preferred Stock or Exchange Debentures, as applicable, in
certificated form and will not be considered the registered owners or
"Holders" thereof under the Certificate of Designations or the Exchange
Indenture, as applicable, for any purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Certificate registered in the name
of DTC or its nominee will be payable to DTC in its capacity as the registered
Holder under the Certificate of Designations or the Exchange Indenture, as
applicable. Under the terms of the Certificate of Designations and the
Exchange Indenture, the Company and the Transfer Agent or Exchange Trustee, as
applicable, will treat the persons in whose names the Exchangeable Preferred
Stock or Exchange Debentures, as applicable, including the Global
Certificates, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company, the Transfer Agent or the Exchange Trustee
nor any of their respective agents has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Certificates, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Certificates; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC's current practice, upon receipt of any payment in respect of securities
such as the Exchangeable Preferred Stock (including dividends) or the Exchange
Debentures (including principal and interest), as applicable, is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in the principal amount of
beneficial interest in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date.
187
<PAGE>
Payments by the Participants and the Indirect Participants to the beneficial
owners of Exchangeable Preferred Stock or Exchange Debentures, as applicable,
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Transfer Agent, the Exchange Trustee or
the Company. None of the Company, the Transfer Agent or the Exchange Trustee
will be liable for any delay by DTC or any of its Participants in identifying
the beneficial owners of the Exchangeable Preferred Stock or Exchange
Debentures, as applicable, and the Company, the Transfer Agent and the
Exchange Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel Bank participants,
interests in the Global Certificates are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity
in such interests will, therefore, settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its Participants.
See "--Same Day Settlement and Payment".
DTC will take any action permitted to be taken by a holder of Exchangeable
Preferred Stock or Exchange Debentures, as applicable, only at the direction
of one or more Participants to whose account DTC has credited the interests in
the Global Certificates and only in respect of such portion of the aggregate
principal amount of the Exchangeable Preferred Stock or Exchange Debentures,
as applicable, as to which such Participant or Participants has or have given
such direction. However, if there is an Event of Default under the Exchange
Debentures, DTC reserves the right to exchange the Global Certificates for
legended Securities in certificated form, and to distribute such Certificates
to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Certificates among Participants in DTC, Euroclear
and Cedel Bank, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, the Transfer Agent or the Exchange Trustee nor any of
their respective agents will have any responsibility for the performance by
DTC, Euroclear or Cedel Bank or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Certificates for Certificated Securities
A Global Certificate is exchangeable for definitive Certificates in
registered certificated form ("Certificated Securities") if:
(1) DTC:
(a) notifies the Company that it is unwilling or unable to continue
as depositary for the Global Certificate and the Company fails to
appoint a successor depositary; or
(b) has ceased to be a clearing agency registered under the Exchange
Act and the Company fails to appoint a successor depositary;
(2) the Company, at its option, notifies the Exchange Trustee in writing
that it elects to cause the issuance of the Exchangeable Preferred Stock or
Exchange Debentures, as applicable, in certificate form; or
(3) there shall have occurred and be continuing (a) a Voting Rights
Triggering Event with respect to the Exchangeable Preferred Stock or (b) a
Default or Event of Default with respect to the Exchange Debentures.
In addition, beneficial interests in a Global Certificate may be exchanged
for Certificated Certificates upon request but only upon prior written notice
given to the Exchange Trustee by or on behalf of DTC in accordance with the
Exchange Indenture. In all cases, certificated securities delivered in
exchange for any Global Certificate or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend referred to in
"Notice to Investors," unless the Company determines otherwise in compliance
with applicable law.
188
<PAGE>
Exchange of Certificated Securities for Book-Entry Securities
Certificates issued in certificated form may not be exchanged for beneficial
interests in any Global Certificate unless the transferor first delivers to
the Transfer Agent or the Exchange Trustee, as applicable, a written
certificate (in the form provided in the Certificate of Designations or the
Exchange Indenture) to the effect that such transfer will comply with the
appropriate transfer restrictions applicable to such Certificate.
Same Day Settlement and Payment
The Certificate of Designation or the Exchange Indenture, as applicable,
require that payments in respect of the Certificates represented by the Global
Certificates (including Liquidation Preference, dividends, principal, premium,
interest and Liquidated Damages) be made by wire transfer of immediately
available funds to the accounts specified by the Global Certificate Holder.
With respect to Certificated Securities, the Company will make all such
payments by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by
mailing a check to each such Holder's registered address. The Certificates
represented by the Global Certificates are expected to be eligible to trade in
the PORTAL market and to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such
Certificates will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in any
certificated Certificates will also be settled in immediately available funds.
Registration Rights and Liquidated Damages
Holders of the New Preferred Stock are not entitled to any registration
rights with respect to the New Preferred Stock. The Company and the Initial
Purchasers entered into the Registration Rights Agreement for the benefit of
the holders of Transfer Restricted Securities on the Closing Date. Pursuant to
the Registration Rights Agreement, the Company agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to the New Preferred Stock. The
registration statement of which this Prospectus is a part constitutes the
Exchange Offer Registration Statement. The Registration Rights Agreement
provides that if (i) the Company is not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or Commission policy or
(ii) any Holder of Transfer Restricted Securities notifies the Company prior
to the 20th day following consummation of the Exchange Offer that (A) it is
prohibited by law or Commission policy from participating in the Exchange
Offer or (B) that it may not resell the New Preferred Stock acquired by it in
the Exchange Offer to the public without delivering a Prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer
and owns Preferred Stock acquired directly from the Company or an affiliate of
the Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Preferred Stock by the Holders thereof,
subject to such Holders satisfying certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Company has agreed that it will use all commercially reasonable efforts to
cause any such Shelf Registration Statement to be declared effective as
promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Old Preferred Stock until (i) the
date on which such Old Preferred Stock has been exchanged by a person other
than a broker-dealer for a New Preferred Stock in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of an Old
Preferred Stock for a New Preferred Stock, the date on which such New
Preferred Stock is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the Prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Old
Preferred Stock has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Old Preferred Stock is distributed to the public pursuant
to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 60
days after the Closing Date, (ii) the Company will use all
189
<PAGE>
commercially reasonable efforts to have the Exchange Offer Registration
Statement declared effective by the Commission on or prior to 150 days after
the Closing Date, (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Company will commence the Exchange
Offer and use its best efforts to issue on or prior to 30 business days after
the date on which the Exchange Offer Registration Statement was declared
effective by the Commission, New Preferred Stock in exchange for all Old
Preferred Stock tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 45 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Company will pay Liquidated Damages to each Holder of
Exchangeable Preferred Stock, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default in an
amount equal to $.05 per week per $1,000 of the liquidation preference of the
Exchangeable Preferred Stock held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 of the
liquidation preference of the Exchangeable Preferred Stock with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages for all Registration Defaults of $.50
per week per $1,000 of the liquidation preference of the Exchangeable Preferred
Stock. All accrued Liquidated Damages will be paid by the Company on each
interest payment date to the Holders of record on the immediately preceding
record date by wire transfer of immediately available funds, in the case of the
Holder of Global Preferred Stock, and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
190
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Certificate of Incorporation, the Certificate of Designations, the By-laws, the
Governance Agreement, the CTSH Shareholders Agreement and the Stockholders'
Agreement, and to the applicable provisions of the Delaware General Corporation
Law (the "DGCL").
General
The authorized capital stock of the Company consists of 600,000,000 shares of
Common Stock, par value $.01 per share (the "Common Stock"), 90,000,000 shares
of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"),
and 10,000,000 shares of Preferred Stock, par value $.01 per share. There are
82,921,352 shares of Common Stock outstanding and 11,340,000 shares of Class A
Common Stock outstanding.
Common Stock
Voting Rights
Each share of Common Stock is entitled to one vote. The Common Stock votes
together as a single class on all matters presented for a vote of the
stockholders, except as provided under the DGCL. All the outstanding shares of
Common Stock are held by directors, executive officers, other employees and
affiliates of the Company or its subsidiaries.
Dividends
Each share of Common Stock is entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available therefor,
subject to approval of certain holders of the Senior Convertible Preferred
Stock.
Liquidation Rights
In the event of the dissolution of the Company, after satisfaction of amounts
payable to creditors and distribution to the holders of outstanding Senior
Convertible Preferred Stock, if any, of amounts to which they may be
preferentially entitled, holders of Common Stock are entitled to share ratably
in the assets available for distribution to the stockholders.
Other Provisions
There are no preemptive rights to subscribe for any additional securities
which the Company may issue, and there are no redemption provisions or sinking
fund provisions applicable to the Common Stock. All outstanding shares of
Common Stock are legally issued, fully paid and nonassessable.
Class A Common Stock
Voting Rights
Each share of Class A Common Stock is entitled to one vote for each such
share on all matters presented to the stockholders, except with respect to the
election of directors. The holders of the shares of Class A Common Stock vote,
except as provided under the DGCL, together with the holders of the Common
Stock and any other class or series of stock of the Company accorded such
general voting rights, as a single class.
So long as TdF is Qualified, holders of shares of Class A Common Stock voting
as a separate class have the right to elect two directors to the Board of
Directors of the Company; provided, however, that if TdF is not Qualified, so
long as the ownership interest of the TdF Group is at least 5%, holders of
Class A Common Stock voting as a separate class have the right to elect one
director.
191
<PAGE>
The holders of Class A Common Stock, subject to certain limitations described
in "The Roll-Up--Governance Agreement--Governance Limitations", have a Veto
over certain significant actions, described in "Governance--Veto Rights", taken
by the Company.
Convertibility
Each share of Class A Common Stock is convertible, at the option of its
record holder, into one share of Common Stock at any time.
In the event of any transfer of any share of Class A Common Stock to any
Person other than an Affiliate (as defined in Rule 12b-2 of the Exchange Act),
such share of Class A Common Stock automatically converts, without any further
action, into one share of Common Stock; provided, however, and subject to
certain conditions described in the Certificate of Incorporation, that a holder
of shares of Class A Common Stock may pledge such holder's shares to a
financial institution pursuant to a bona fide pledge of such shares of Class A
Common Stock as collateral security for any indebtedness or other obligation of
any Person due to the pledgee or its nominee.
Further, each share of Class A Common Stock automatically converts into one
share of Common Stock on the first date on which the ownership interest of TdF
Group is less than 5%.
Other Provisions
Pursuant to the Governance Agreement, so long as it remains Qualified, TdF
has anti-dilutive rights in connection with maintaining a certain percentage of
voting power in the Company and, accordingly, the Company may not, subject to
certain exceptions relating primarily to compensation of directors and
employees, issue, sell or transfer additional securities (except for the IPO)
unless TdF is offered the right to purchase, at the same price, an amount such
that it would maintain such percentage of voting power in the Company. All
outstanding shares of Class A Common Stock are legally issued, fully paid and
nonassessable.
Preferred Stock
Pursuant to the Certificate of Incorporation, the Company may issue up to
10,000,000 shares of Preferred Stock in one or more series. The Board of
Directors has the authority, without any vote or action by the stockholders
(other than any rights of TdF under the Governance Agreement), to create one or
more series of Preferred Stock up to the limited of the Company's authorized
but unissued shares of Preferred Stock and to fix the designations,
preferences, rights, qualifications, limitations and restrictions thereof,
including the voting rights, dividend rights, dividend rate, conversion rights,
terms of redemption (including sinking fund provisions), redemption price or
prices, liquidation preferences and the number of shares constituting any
series. See "Risk Factors--Anti-Takeover Provisions".
Senior Preferred Warrants
In connection with the offering of the Senior Convertible Preferred Stock in
August 1997 and October 1997, the Company issued warrants to purchase an
aggregate of 1,314,990 shares of Common Stock at a price of $7.50 per share.
Certificate of Incorporation and By-laws
Stockholders' rights and related matters are governed by the DGCL, the
Certificate of Incorporation and the By-laws. Certain provisions of the
Certificate of Incorporation and By-laws, which are summarized below, may have
the effect, either alone or in combination with each other, of discouraging or
making more difficult a tender offer or takeover attempt that is opposed by the
Company's Board of Directors but that a stockholder might consider to be in its
best interest. Such provisions may also adversely affect prevailing market
prices for the Common Stock. The Company believes that such provisions are
necessary to enable the Company to develop its
192
<PAGE>
business in a manner that will foster its long-term growth without disruption
caused by the threat of a takeover not deemed by the Board of Directors to be
in the best interests of the Company and its stockholders.
Classified Board of Directors and Related Provisions
The Certificate of Incorporation provides that the directors of the Company,
other than those directors who may be elected by holders of any series of
Preferred Stock or holders of the Class A Common Stock, initially are to be
divided into three classes of directors, initially consisting of three, three
and four directors. One class of directors, initially consisting of three
directors, will be elected for a term expiring at the annual meeting of
shareholders to be held in 1999, another class initially consisting of three
directors will be elected for a term expiring at the annual meeting of
stockholders to be held in 2000, and another class initially consisting of four
directors shall be initially elected for a term expiring at the annual meeting
of stockholders in 2001. The classified board provisions will prevent a party
who acquires control of a majority of the outstanding Voting Stock of the
Company from obtaining control of the Board of Directors until the second
annual stockholders meeting following the date such party obtains the
controlling interest. The provisions of the Certificate of Incorporation
relating to the classified nature of the Company's Board of Directors may not
be amended without the affirmative vote of the holders of at least 80% of the
voting power of the Company's outstanding Voting Stock. "Voting Stock" is
defined in the Certificate of Incorporation as the outstanding shares of
capital stock of the Company entitled to vote in a general vote of stockholders
of the Corporation as a single class with shares of Common Stock of the
Company, which shares of capital stock include the shares of Class A Common
Stock.
No Stockholder Action by Written Consent; Special Meeting
The Certificate of Incorporation prohibits stockholders (other than holders
of Class A Common Stock with respect to matters upon which such holders are
entitled to vote as a separate class) from taking action by written consent in
lieu of an annual or special meeting and, thus, stockholders may only take
action at an annual or special meeting called in accordance with the By-laws.
The By-laws provide that special meetings of stockholders may only be called by
the Secretary of the Company at the direction of the Board of Directors
pursuant to a resolution adopted by the Board.
These provisions could have the effect of delaying consideration of a
stockholder proposal until the next annual meeting. The provisions would also
prevent the holders of a majority of the voting power of the capital stock of
the Company entitled to vote from unilaterally using the written consent
procedure to take stockholder action.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
The By-laws establish advance notice procedures with regard to stockholder
proposals and the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors. These procedures provide
that the notice of stockholder proposals and stockholder nominations for the
election of directors at an annual meeting must be in writing and received by
the Secretary no less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that
with respect to the annual meeting to be held in 1999, the anniversary date
shall be deemed to be April 1, 1999; provided further that in the event that
the date of the annual meeting is advanced by more than 30 days, or delayed by
more than 90 days, from such anniversary date, notice by the stockholder to be
timely must be delivered not earlier than the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the day on which public
disclosure of the date of the annual meeting was made. The notice of
nominations for the election of directors must set forth certain information
with respect to the stockholder giving the notice and with respect to each
nominee.
By requiring advance notice of nominations by stockholders, the foregoing
procedures will afford the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed
193
<PAGE>
necessary or desirable by the Board of Directors, to inform stockholders about
such qualifications. By requiring advance notice of other proposed business,
such procedures will provide the Board of Directors with an opportunity to
inform stockholders, prior to such meetings, of any business proposed to be
conducted at such meetings, together with any recommendations as to the Board
of Directors' position regarding action to be taken with respect to such
business, so that stockholders can better decide whether to attend such a
meeting or to grant a proxy regarding the disposition of any such business.
Dilution
The Certificate of Incorporation provides that the Board of Directors is
authorized to create and issue, whether or not in connection with the issuance
and sale of any of its stock or other securities or property, rights entitling
the holders to purchase from the Company shares of stock or other securities of
the Company or any of other corporation, recognizing that, under certain
circumstances, the creation and issuance of such rights could have the effect
of discouraging third parties from seeking, or impairing their right to seek,
to acquire a significant portion of the outstanding securities of the Company,
to engage in any transaction which might result in a change of control of the
corporation or to enter into any agreement, arrangement or understanding with
another party to accomplish the foregoing or for the purpose of acquiring,
holding, voting or disposing of any securities of the Company.
Indemnification
The Certificate of Incorporation and By-laws provide that the Company shall
indemnify each director or officer of the Company to the fullest extent
permitted by law.
Amendments
The Certificate of Incorporation and By-laws provide that the Company may at
any time and from time to time, amend, alter, change or repeal any provision
contained in the Certificate of Incorporation or a Preferred Stock designation;
provided, however, the affirmative vote of the holders of at least 80% of the
voting power of the then outstanding Voting Stock, voting together as a single
class, is required to amend, repeal or adopt any provision inconsistent with
certain provisions of the Certificate of Incorporation, including the
provisions referred to above relating to the classification of the Board of
Directors, prohibiting stockholder action by written consent, and prohibiting
the calling of special meetings by stockholders.
The By-laws may be amended by either the holders of 80% of the voting power
of the Voting Stock or by the majority of the Board; provided that the Board
may alter, amend or repeal or adopt new By-laws in conflict with certain
provisions thereof by a two-thirds vote of the entire Board.
Rights Plan
Rights
The Board of Directors of the Company has declared a dividend of one right
(the "Rights") for each outstanding share of Common Stock and each outstanding
share of Class A Common Stock. The Rights will be issued to the holders of
record of Common Stock and Class A Common Stock outstanding on the date of the
consummation of the IPO (the "Issuance Date"), and with respect to Common Stock
and Class A Common Stock issued thereafter until the Distribution Date (as
defined below), and, in certain circumstances, with respect to Common Stock and
Class A Common Stock issued after the Distribution Date. Each Right, when it
becomes exercisable as described below, will entitle the registered holder to
purchase from the Company one one-thousandth (1/1000th) of a share of Series A
Participating Cumulative Preferred Stock (the "Preferred Shares") at a price of
$110.00 per (1/1000th) of a share, subject to adjustment in certain
circumstances (the "Purchase Price"). The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and the Rights Agent named therein. The Rights will not be exercisable
until the Distribution Date and will expire on the tenth annual anniversary of
the Rights Agreement (the "Expiration
194
<PAGE>
Date"), unless earlier redeemed by the Company. Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends with
respect to the Rights or the Preferred Shares relating thereto.
Distribution Date
Under the Rights Agreement, the Distribution Date is the earlier of (i) such
time as the Company learns that a person or group (including any affiliate or
associate of such person or group) has acquired, or has obtained the right to
acquire, beneficial ownership of more than 15% of the outstanding voting
securities of the Company (such person or group being an "Acquiring Person"),
subject to the exceptions relating to the TDF Group and the Berkshire Group
described in the paragraph below, unless provisions preventing accidental
triggering of the distribution of the Rights apply, and (ii) the close of
business on such date, if any, as may be designated by the Board of Directors
following the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer for more than 15% or more of the
outstanding shares of Voting Securities.
Each member of the TdF Group will not otherwise be considered an Acquiring
Person if (a) during the first five years following the adoption of the Rights
Agreement, the aggregate ownership interest of the TdF Group does not exceed
25% (or 30% if the Board so elects) of the outstanding Voting Securities or (b)
thereafter, the aggregate ownership interest of the TdF Group does not exceed
the lesser of (i) 25% or 30%, as applicable, of the Voting Securities then
outstanding and (ii) the greater of (x) the aggregate interest of the TdF Group
as of the fifth anniversary of the Rights Agreement and (y) 15% of the then
outstanding Voting Securities. Each member of the Berkshire Group will not
otherwise be deemed an Acquiring Person if the aggregate ownership interest of
the Berkshire Group does not exceed the greater of (a) the aggregate ownership
interest of the Berkshire Group upon the execution of the Rights Agreement,
reduced by an amount equal to any disposition of Voting Securities following
the date the Rights Agreement is executed and (b) 15% of the outstanding Voting
Securities.
Triggering Event and Effect of Triggering Event
At such time as there is an Acquiring Person, the Rights will entitle each
holder (other than such Acquiring Person) of a Right to purchase, at the
Purchase Price, that number of one-thousandths (1/1000ths) of a Preferred Share
equivalent to the number of shares of Common Stock that at the time of such
event would have a market value of twice the Purchase Price.
In the event the Company is acquired in a merger or other business
combination by an Acquiring Person or an affiliate or associate of an Acquiring
Person that is a publicly traded corporation or 50% or more of the Company's
assets or assets representing 50% or more of the Company's revenues or cash
flow are sold, leased, exchanged or otherwise transferred (in one or more
transactions) to an Acquiring Person or an affiliate or associate of an
Acquiring Person that is a publicly traded corporation, each Right will entitle
its holder (other than Rights beneficially owned by such Acquiring Person or
its affiliates or associates) to purchase, for the Purchase Price, that number
of common shares of such corporation which at the time of the transaction would
have a market value or, in certain circumstances, book value of twice the
Purchase Price. In the event the Company is acquired in a merger or other
business combination by an Acquiring Person or an affiliate or associate of an
Acquiring Person that is not a publicly traded entity or 50% or more of the
Company's assets or assets representing 50% or more of the Company's revenues
or cash flow are sold, leased, exchanged or otherwise transferred (in one or
more transactions) to an Acquiring Person or affiliate or associate of an
Acquiring Person that is not a publicly traded entity, each right will entitle
its holder (subject to the next paragraph) to purchase, for the Purchase Price,
at such holder's option, (i) that number of shares of the surviving corporation
in the transaction with such entity (which surviving corporation could be the
Company) which at the time of the transaction would have a book value of twice
the Purchase Price, (ii) that number of shares of the ultimate parent of or
entity controlling such surviving corporation which at the time of the
transaction would have a book value of twice the Purchase Price or (iii) if
such entity has an affiliate which has publicly traded
195
<PAGE>
common shares, that number of common shares of such affiliate which at the time
of the transaction would have market value of twice the Purchase Price.
Any Rights that are at any time beneficially owned by an Acquiring Person (or
any affiliate or associate of an Acquiring Person) will be null and void and
nontransferable and any holder of any such right (including any purported
transferee or subsequent holder) will be unable to exercise or transfer any
such Right.
Redemption
At any time prior to the earlier of (i) such time as a person or group
becomes an Acquiring Person and (ii) the Expiration Date, the Board of
Directors may redeem the Rights in whole, but not in part, at a price (in cash
or Common Stock or other securities of the Company deemed by the Board of
Directors to be at least equivalent in value) of $.01 per Right (which amount
shall be subject to adjustment as provided in the Rights Agreement) (the
"Redemption Price"). Immediately upon the action of the Board of Directors
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right of the holders of Rights will be to receive the Redemption Price.
In addition, at any time after there is an Acquiring Person, the Board of
Directors may elect to exchange each Right for consideration per Right
consisting of one-half of the securities that would be issuable at such time
upon exercise of one Right pursuant to the terms of the Rights Agreement.
Amendment
At any time prior to the Distribution Date, the Company may, without the
approval of any holder of any Rights, supplement or amend any provision of the
Rights Agreement (including, without limitation, the date on which the
Expiration Date or Distribution Date shall occur, the definition of Acquiring
Person, the time during which the Rights may be redeemed or the terms of the
Preferred Shares), except that no supplement or amendment shall be made which
reduces the Redemption Price (other than pursuant to certain adjustments
therein).
Certain Effects of the Rights Plan
The Rights plan is designed to protect stockholders of the Company in the
event of unsolicited offers to acquire the Company and other coercive takeover
tactics which, in the opinion of the Board of Directors, could impair its
ability to represent stockholder interests. The provisions of the Rights Plan
may render an unsolicited takeover of the Company more difficult or less likely
to occur or might prevent such a takeover, even though such takeover may offer
the Company's stockholders the opportunity to sell their stock at a price above
the prevailing market rate and may be favored by a majority of the stockholders
of the Company.
Section 203 of the Delaware General Corporation Law
Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder", which is defined as a person who,
together with any affiliates and/or associates of such person, beneficially
owns, directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. This provision prohibits certain business combinations
(defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value of 10% or more of the
consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period
of three years after the date the interested stockholder acquired its stock,
unless: (i) the business combination is approved by the corporation's Board of
Directors prior to the date the interested stockholder acquired shares; (ii)
the interested stockholder acquired at least 85% of the voting stock of the
corporation in the transaction in which it became an interested stockholder; or
(iii) the business combination is approved by a majority of the Board of
Directors and by the affirmative vote of two-thirds of the outstanding voting
stock owned by disinterested stockholders at an annual or special meeting. A
Delaware corporation, pursuant to a provision in its certificate of
incorporation or
196
<PAGE>
by-laws, may elect not to be governed by Section 203 of the DGCL. The
Certificate of Incorporation does not exclude the Company from the restrictions
imposed by Section 203 of the DGCL and, as a result, the Company will be
subject to its provisions upon consummation of the IPO.
Under certain circumstances, Section 203 of the DGCL makes it more difficult
for a person who could be an "interested stockholder" to effect various
business combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. The Certificate of Incorporation of the Company does not exclude
the Company from the restrictions imposed under Section 203 of the DGCL. It is
anticipated that the provisions of Section 203 of the DGCL may encourage
companies interested in acquiring the Company to negotiate in advance with the
Board of Directors, since the stockholder approval requirement would be avoided
if a majority of the directors then in office approves, prior to the date on
which a stockholder becomes an interested stockholder, either the business
combination or the transaction which results in the stockholder becoming an
interested stockholder.
Limitations of Directors' Liability
The Certificate of Incorporation provides that no director of the Company
will be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director except for liability: (1)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (2) for acts of omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the DGCL, or (4) for any transaction from which the director derived an
improper personal benefit. The effect of these provisions will be to eliminate
the rights of the Company and its stockholders (through stockholders'
derivatives suits on behalf of the Company) to recover monetary damages against
a director for breach of fiduciary duty as a director (including breaches
resulting from grossly negligent behavior), except in the situations described
above. These provisions will not limit the liability of directors under federal
securities laws and will not affect the availability of equitable remedies such
as an injunction or rescission based upon a director's breach of his duty of
care.
Transfer Agent
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
197
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior Credit Facility
Pursuant to the Amended and Restated Loan Agreement dated as of July 10,
1998, two wholly owned subsidiaries of CCIC, CCI and Crown Castle
International Corp. de Puerto Rico ("CCIC(PR)") (collectively, the
"Borrowers"), have entered into the Senior Credit Facility with a group of
banks and other financial institutions led by Key Corporate Capital Inc.
("KeyCorp") and PNC Bank, National Association, as arrangers and agents. The
following summary of certain provisions of the Senior Credit Facility does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the provisions of the Senior Credit Facility.
The Senior Credit Facility provides for revolving credit loans in an
aggregate principal amount not to exceed $100.0 million, for working capital
needs, acquisitions and general corporate purposes. The Senior Credit Facility
includes a $5.0 million sublimit available for the issuance of letters of
credit. As of November 1, 1998, the Company had no significant unused
borrowing availability under the Senior Credit Facility.
The loan commitment under the Senior Credit Facility reduces by $5.0 million
commencing March 31, 2001 and by $5.0 million each calendar quarter thereafter
until December 31, 2004, when the Senior Credit Facility matures. In addition,
the Senior Credit Facility provides for mandatory reduction of the loan
commitment and mandatory prepayment with the (i) net proceeds of certain asset
sales, (ii) net proceeds of certain required capital contributions to CCI by
CCIC relating to the proceeds from the sale of equity, convertible or debt
securities, subject to certain exceptions, (iii) net proceeds of any unused
insurance proceeds and (iv) a percentage of the excess cash flow of the
Borrowers, commencing with the calendar year ending December 31, 2000.
The Borrowers' obligations under the Senior Credit Facility are guaranteed
by each direct and indirect majority owned subsidiary of CCI and are also
secured by (i) a pledge by the Borrowers of all of the outstanding capital
stock of each of their respective direct subsidiaries and (ii) a perfected
first priority security interest in substantially all of the personal property
of the Borrowers and their subsidiaries. In addition, the Senior Credit
Facility is guaranteed on a limited recourse basis by CCIC, limited in
recourse to the collateral pledged by CCIC (the capital stock of CCI). The
capital stock of CTSH will not be pledged to secure the Senior Credit
Facility.
The loans under the Senior Credit Facility will bear interest, at the
Borrowers' option, at either (A) a "base rate" equal to KeyCorp's prime
lending rate plus an applicable spread ranging from 0% to 1.5% (determined
based on a leverage ratio) or (B) a "LIBOR rate" plus an applicable spread
ranging from 1.0% to 3.25% (determined based on a leverage ratio). Following
the occurrence and during the continuance of an event of default under the
Senior Credit Facility, the loans will bear interest at the "base rate" plus
3.5%.
The Senior Credit Facility contains a number of covenants that, among other
things, restrict the ability of the Borrowers and their respective
subsidiaries to dispose of assets, incur additional indebtedness, incur
guaranty obligations, repay subordinated indebtedness except in accordance
with the subordination provisions, pay dividends or make capital
distributions, create liens on assets, enter into leases, make investments,
make acquisitions, engage in mergers or consolidations, make capital
expenditures, engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, the Senior Credit
Facility will require compliance with certain financial covenants, including
requiring the Borrowers and their respective subsidiaries to maintain a
maximum ratio of indebtedness to operating cash flow, a minimum ratio of
operating cash flow to fixed charges, a minimum ratio of operating cash flow
to projected debt service and a minimum ratio of operating cash flow to
interest expense. CCIC does not expect that such covenants will materially
impact the ability of the Borrowers and their respective subsidiaries to
operate their respective businesses.
Pursuant to the terms of the Senior Credit Facility, CCI is entitled to pay
dividends or make distributions to CCIC in order to permit CCIC to pay its
out-of-pocket costs for corporate development and overhead and to pay cash
interest on certain indebtedness of CCIC (including the Notes); provided that
the amount of such dividends or distributions does not exceed (i) $6.0 million
in any year ending on or prior to October 31, 2002 or (ii) $33.0
198
<PAGE>
million in any year thereafter. The Senior Credit Facility also allows CCI to
pay dividends or distribute cash to CCIC to the extent required to pay taxes
allocable to the Borrowers and their respective subsidiaries. All of the
above-mentioned dividends or distributions, however, including dividends or
distributions that are intended to pay interest on the Notes, may not be made
by CCI so long as any default or event of default exists under the Senior
Credit Facility.
The Senior Credit Facility contains customary events of default, including
the failure to pay principal when due or any interest or other amount that
becomes due within two days after the due date thereof, any representation or
warranty being made by the Borrowers that is incorrect in any material respect
on or as of the date made, a default in the performance of any negative
covenants or a default in the performance of certain other covenants or
agreements for a period of thirty days, default in certain other indebtedness,
certain insolvency events and certain change of control events. In addition, a
default under the Notes Indenture will result in a default under the Senior
Credit Facility.
CTI Credit Facility
Pursuant to the Loan Amendment Agreement dated May 21, 1997 (the "CTI Credit
Facility"), among CTI, as borrower, CTSH, as guarantor, Credit Suisse First
Boston, as arranger and agent ("CSFB"), and J.P. Morgan Securities Ltd., as
co-arranger ("JPM"), CTI's (Pounds)162.5 million term and revolving loan
facilities (the "Old Facilities") were amended to a (Pounds)64.0 million
revolving loan facility. The following summary of certain provisions of the
CTI Credit Facility does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the CTI Credit
Facility.
The CTI Credit Facility provides for revolving credit loans in an aggregate
principal amount not to exceed (Pounds)64.0 million to finance capital
expenditures in respect of digital terrestrial television with up to
(Pounds)46.5 million of such amount available for working capital needs and
for general corporate purposes. As of September 30, 1998, CTI had unused
borrowing availability under the CTI Credit Facility of approximately
(Pounds)30.0 million ($51.0 million).
The loan commitment under the CTI Credit Facility will be automatically
reduced to zero in three equal semi-annual installments commencing on May 31,
2001 and ending on May 31, 2002, when the CTI Credit Facility matures. In
addition, the CTI Credit Facility provides for mandatory cancellation of all
or part of the loan commitment and mandatory prepayment (i) with an amount
equal to the net proceeds of certain asset sales and (ii) upon the
consummation of an initial public offering or the listing on any stock
exchange of the shares of CTI, CTSH or CCIC.
CTI's and CTSH's obligations under the CTI Credit Facility are secured by
fixed and floating charges over all of their respective assets. The loans
under the CTI Credit Facility will bear interest at a "LIBOR rate" plus 0.85%
and a spread related to the lenders' cost of making the CTI Credit Facility
available to CTI.
The CTI Credit Facility contains a number of covenants that, among other
things, restrict the ability of CTI to dispose of assets, incur additional
indebtedness, incur guaranty obligations, repay subordinated indebtedness
except in accordance with the subordination provisions, pay dividends or make
capital distributions, create liens on assets, make investments, make
acquisitions, engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, the CTI Credit
Facility will require compliance with certain financial covenants, including
requiring CTI to maintain a maximum ratio of indebtedness to EBITDA, a minimum
ratio of EBITDA to interest expense, and a minimum tangible net worth. CCIC
does not expect that such covenants will materially impact the ability of CTI
to operate its business.
The CTI Credit Facility contains customary events of default, including the
failure to pay principal or any interest or any other amount that becomes due
within three business days after the due date thereof, any representation or
warranty being made by CTI that is untrue or misleading on the date made, a
default in the performance of any of its covenants under the CTI Credit
Facility (unless, if such default is capable of remedy,
199
<PAGE>
such default is cured within 14 days of CTI becoming aware of such default),
default in certain other indebtedness, certain insolvency events and certain
change of control events.
On July 17, 1998, the lenders (acting through Credit Suisse First Boston, as
agent) under the CTI Credit Facility waived a provision in the CTI Credit
Facility that would have required the repayment of the CTI Credit Facility
concurrently with the listing of the Company's Common Stock.
The Notes
On November 20, 1997, the Company privately placed $251.0 million principal
amount at maturity ($150,010,150 initial accreted value) of its 10 5/8% Senior
Discount Notes due 2007 (the "Notes"). The following is a summary of certain
terms of the Notes and is qualified in its entirety by reference to the Notes
Indenture (the "Notes Indenture") relating to the Notes. A copy of the Notes
Indenture has been filed with the Registration Statement of which this
Prospectus forms a part.
The Notes are unsecured senior obligations of the Company, and will rank
pari passu in right of payment with all existing and future senior
indebtedness of the Company and will be senior to future subordinated
indebtedness of the Company. The Notes mature on November 15, 2007. The Notes
will accrete in value until November 15, 2002. Thereafter, cash interest will
accrue on the Notes at the rate of 10.625% per annum and will be payable semi-
annually, commencing on May 15, 2003.
Except as stated below, the notes are not redeemable prior to November 15,
2002. Thereafter, the Notes are redeemable at the option of the Company, in
whole or in part, at any time or from time to time, at a premium which is at a
fixed percentage that declines to par on or after November 15, 2005, in each
case together with accrued and unpaid interest, if any, to the date of
redemption. In the event the Company consummates a public equity offering or
certain strategic equity investments prior to November 15, 2000, the Company
may, at its option, use all or a portion of the proceeds from such offering to
redeem up to 35% of the original aggregate principal amount at maturity of the
Notes at a redemption price equal to 110.625% of the accreted value of the
Notes to be redeemed, plus accrued and unpaid interest, if any, thereon to the
redemption date, provided at least 65% of the original aggregate principal
amount at maturity of the Notes remains outstanding after each such
redemption.
Upon the occurrence of a Change of Control (as defined in the Notes
Indenture), each holder of Notes has the right to require the Company to
purchase all or a portion of such holder's Notes at a price equal to 101% of
the aggregate principal amount thereof, together with accrued and unpaid
interest to the date of purchase.
The Notes Indenture contains certain covenants, including covenants that
limit (i) indebtedness, (ii) restricted payments, (iii) distributions from
restricted subsidiaries, (iv) transactions with affiliates, (v) sales of
assets and subsidiary stock (including sale and leaseback transactions), (vi)
dividend and other payment restrictions affecting restricted subsidiaries, and
(vii) mergers or consolidations.
The CTI Bonds
On May 21, 1997, a subsidiary of CTSH issued (Pounds)125.0 million aggregate
principal amount of its 9% Guaranteed Bonds due 2007 (the "CTI Bonds"). The
CTI Bonds are listed on the Luxembourg Stock Exchange. The following is a
summary of certain terms of the Bonds and is qualified in its entirety by
reference to the trust deed dated May 21, 1997 (the "Trust Deed") relating to
the Bonds. A copy of the Trust Deed has been filed with the Registration
Statement of which this Prospectus forms a part.
The Bonds constitute direct, general and unconditional guaranteed
obligations of the subsidiary of CTSH and rank pari passu with all other
present and future unsecured and unsubordinated obligations of such
subsidiary. The CTI Bonds are guaranteed jointly and severally by CTI and
CTSH. The CTI Bonds will mature on March 30, 2007. Interest on the Bonds is
payable annually in arrears on March 30 in each year, the first payment having
been made on March 30, 1998.
200
<PAGE>
The CTI Bonds may be redeemed at the option of the Company in whole or in
part, at any time or from time to time, at the greater of their principal and
such price as will provide a gross redemption yield 0.5% per annum above the
gross redemption yield of the benchmark gilt plus, in either case, accrued and
unpaid interest.
Upon the occurrence of a Put Event (as defined in the Trust Deed), each
holder of CTI Bonds has the right to require such subsidiary to purchase all
or a portion of such holder's CTI Bonds at a price equal to 101% of the
aggregate principal amount thereof, together with accrued and unpaid interest
to the date of purchase.
The Trust Deed contains certain covenants, including covenants that limit
(i) indebtedness, (ii) restricted payments, (iii) distributions from
restricted subsidiaries, (iv) transactions with affiliates, (v) sales of
assets and subsidiary stock, (vi) dividend and other payment restrictions
affecting restricted subsidiaries, and (vii) mergers or consolidations.
Proposed JV Credit Facility
Key Corporate Capital Inc. ("KeyCorp") has committed, subject to formation
of the joint venture and certain other conditions, to provide the Proposed JV
with a revolving credit facility not to exceed $250.0 million. The following
summary of certain provisions of the proposed loan facility (the "Proposed JV
Credit Facility") does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the Proposed JV
Credit Facility.
The Proposed JV Credit Facility provides for revolving credit loans in an
aggregate principal amount not to exceed $250.0 million, $180.0 million of
which is expected to be drawn in connection with the formation of the Proposed
JV, and the balance of which will be used for acquisition and construction of
tower facilities, capital expenditures, working capital needs and general
corporate purposes. The borrowing base until September 30, 2001, is based on a
multiple of test operating cash flow. On September 30, 2001 (the "Conversion
Date"), the borrowing base test will be eliminated and the amount of the
facility will be decreased to the borrowing base as of that date. The Proposed
JV Credit Facility includes a $25.0 million sublimit available for the
issuance of letters of credit.
The amount of the facility after the Conversion Date will be reduced on a
quarterly basis until March 31, 2006, when the Proposed JV Credit Facility
matures. The annual percentage reduction in this loan commitment is 3.0% in
2001 (two quarters), 7.5% in 2002, 22.5% in 2003, 26.0% in 2004, 32.0% in 2005
and 9.0% in 2006 (one quarter). In addition, the Proposed JV Credit Facility
provides for mandatory reduction of the loan commitment and mandatory
prepayment with the (1) net proceeds of certain asset sales, (2) 50% of
capital contributions to Holdco subject to certain significant exceptions
including capital expenditures pursuant to the Build-to-Suit Agreement, (3)
net proceeds of any unused insurance proceeds and (4) a percentage of the
excess cash flow of the Proposed JV, commencing with the calendar year ending
December 31, 2001.
The Proposed JV's obligations under the Proposed JV Credit Facility are
secured by (1) a pledge of the membership interest in the Proposed JV and (2)
a perfected first priority security interest in the Proposed JV's interest in
tenant leases including the Global Lease. The Proposed JV Credit Facility
contractually permits the Proposed JV to pay maintenance, operating, ground
lease and other expenses and costs relating to the tower facilities out of the
tower rentals whether or not an event of default has occurred.
The loans under the Proposed JV Credit Facility will bear interest, at the
Proposed JV's option, at either (A) a "base rate" equal to KeyCorp's prime
lending rate plus an applicable spread ranging from 0% to 1.25% (determined
based on a leverage ratio) or (B) a "LIBOR rate" plus an applicable spread
ranging from 1.0% to 2.875% (determined based on a leverage ratio). The
Proposed JV must hedge approximately 50% of its variable interest rate
obligations for a period of two years. Following the occurrence of and during
the continuance of an event of default under the Proposed JV Credit Facility,
the loans will bear interest at the "base rate" plus 4.875%.
201
<PAGE>
The Proposed JV Credit Facility will contain a number of covenants that,
among other things, restrict the ability of the Proposed JV to dispose of
assets, incur additional indebtedness, incur guaranty obligations, repay
subordinated indebtedness except in accordance with the subordination
provisions, pay dividends or make capital distributions, create liens on
assets, enter into leases, make investments, make acquisitions, engage in
mergers or consolidations, make capital expenditures, engage in certain
transactions with subsidiaries and affiliates and otherwise restrict company
activities. In addition, the Proposed JV Credit Facility will require
compliance with certain financial covenants, including requiring the Proposed
JV to maintain a minimum ratio of operating cash flow to indebtedness, a
minimum ratio of operating cash flow to fixed charges, a minimum ratio of
operating cash flow to projected debt service and a minimum ratio of operating
cash flow to interest expense. The Proposed JV does not expect that such
covenants will materially impact its ability to operate its business.
The Proposed JV Credit Facility contains customary events of default,
including the failure to pay principal when due or any interest or other
amount that becomes due within two days after the due date thereof, any
representation or warranty being made by the Proposed JV that is incorrect in
any material respect on or as of the date made, a default in the performance
of any negative covenants or a default in the performance of certain other
covenants or agreements (including the Formation Agreement) for a period of
days, default in certain other indebtedness, certain insolvency events and
certain change of control events. During the first two years of the Proposed
JV Credit Facility, capital contributions can cure an operating cash flow
default and certain other covenant and agreement defaults.
202
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain U.S. federal income tax
consequences of the Exchange Offer to holders of Old Preferred Stock, but does
not purport to be a complete analysis of all potential tax effects. The
summary set forth below is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), regulations of the Treasury Department, administrative
rulings and pronouncements of the Internal Revenue Service and judicial
decisions, all of which are subject to change, possibly with retroactive
effect. This summary does not purport to address all the U.S. federal income
tax consequences that may be applicable to particular holders, including
dealers in securities, financial institutions, insurance companies and tax-
exempt organizations. In addition, this summary does not consider the effect
of any foreign, state, local, gift, estate or other tax laws that may be
applicable to a particular holder. This summary applies only to a holder that
acquired Old Preferred Stock at original issue for cash and holds Old
Preferred Stock as a "capital asset" within the meaning of Section 1221 of the
Code. Holders of Old Preferred Stock considering the Exchange Offer should
consult their own tax advisors concerning the U.S. federal income tax
consequences in light of their particular situations as well as any
consequences arising under the laws of any other taxing jurisdiction.
An exchange of Old Preferred Stock for New Preferred Stock pursuant to the
Exchange Offer will not be treated as an exchange or other taxable event for
U.S. federal income tax purposes. Accordingly, holders of Old Preferred Stock
who exchange their Old Preferred Stock for New Preferred Stock will not
recognize income, gain or loss for U.S. federal income tax purposes and any
such holder will have the same adjusted tax basis and holding period in the
New Preferred Stock as it had in the Old Preferred Stock immediately before
the exchange.
THE FOREGOING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
DOES NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR HOLDER'S
SITUATION OR STATUS. ACCORDINGLY, EACH HOLDER OF OLD PREFERRED STOCK SHOULD
CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE
EXCHANGE OFFER TO IT, INCLUDING THOSE UNDER STATE, FOREIGN AND OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Preferred Stock for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Preferred Stock. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Preferred Stock
received in exchange for Old Preferred Stock where such Old Preferred Stock
were acquired as a result of market-making activities or other trading
activities. The Company has agreed that for a period of 180 days after the
Expiration Date, it will make available a prospectus meeting the requirements
of the Preferred Stock Act to any broker-dealer for use in connection with any
such resale. In addition, until , all dealers effecting transactions in the
New Preferred Stock may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Preferred
Stock by broker-dealers. New Preferred Stock received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Preferred Stock or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New
Preferred Stock. Any broker-dealer that resells New Preferred Stock that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Preferred
Stock may be deemed to be an "underwriter" within the meaning of the Preferred
Stock Act and any profit on any such resale of New Preferred Stock and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Preferred Stock Act. The Letter of
Transmittal states that
203
<PAGE>
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Preferred Stock Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Cravath, Swaine
& Moore, New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements and schedule of the Company at
December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997, the combined financial statements of Crown for each
of the two years in the period ended December 31, 1996 and the seven months
ended July 31, 1997, the financial statements of the Home Service Transmission
business of the BBC at March 31, 1996 and for the year ended March 31, 1996
and the period from April 1, 1996 to February 27, 1997 and the consolidated
financial statements of CTI at March 31, 1997 and December 31, 1997 and for
the period from February 28, 1997 to March 31, 1997 and the period from April
1, 1997 to December 31, 1997, and the financial statements of TEA Group
Incorporated at December 31, 1996 and for the year then ended, have been
included herein in reliance upon the report of KPMG LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of TEA Group Incorporated at December 31, 1995 and
for the year then ended, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at its offices at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such reports and other information concerning
the Company are also available for inspection at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006. In addition, the
Commission maintains an Internet site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission.
Anyone who receives this Prospectus may obtain a copy of any of the
agreements summarized herein without charge by writing to Crown Castle
International Corp., 510 Bering Drive, Suite 500, Houston, TX 77057,
Attention: Secretary.
204
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
CROWN CASTLE INTERNATIONAL CORP.
Unaudited Financial Statements:
<S> <C>
Consolidated Balance Sheet as of September 30, 1998 (unaudited)............ F-3
Consolidated Statement of Operations and Comprehensive Loss for the three
and nine month periods ended September 30, 1997 and 1998 (unaudited)...... F-4
Consolidated Statement of Cash Flows for the nine month periods ended
September 30, 1997 and 1998 (unaudited)................................... F-5
Condensed Notes to Consolidated Financial Statements for the nine month
period ended September 30, 1998 (unaudited)............................... F-6
Audited Financial Statements:
Report of KPMG LLP, Independent Certified Public Accountants.............. F-12
Consolidated Balance Sheet as of December 31, 1996 and 1997............... F-13
Consolidated Statement of Operations for each of the three years in the
period ended December 31, 1997........................................... F-14
Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1997........................................... F-15
Consolidated Statement of Stockholders' Equity (Deficit) for each of the
three years in the period ended December 31, 1997........................ F-16
Notes to Consolidated Financial Statements for each of the three years in
the period ended December 31, 1997....................................... F-17
CROWN COMMUNICATIONS
Report of KPMG LLP, Independent Certified Public Accountants.............. F-35
Combined Statement of Income for each of the two years in the period ended
December 31, 1996 and for the seven month period ended July 31, 1997..... F-36
Combined Statement of Cash Flows for each of the two years in the period
ended December 31, 1996 and for the seven month period ended July 31,
1997..................................................................... F-37
Notes to Combined Financial Statements for each of the two years in the
period ended December 31, 1996 and for the seven month period ended July
31, 1997................................................................. F-38
TEA GROUP INCORPORATED
Report of Ernst & Young LLP, Independent Auditors......................... F-41
Report of KPMG LLP, Independent Certified Public Accountants.............. F-42
Balance Sheet as of December 31, 1995 and 1996............................ F-43
Statement of Income for each of the two years in the period ended December
31, 1996, and for each of the three month periods ended March 31, 1996
and 1997 (unaudited)..................................................... F-44
Statement of Shareholders' Equity for each of the two years in the period
ended December 31, 1996.................................................. F-45
Statement of Cash Flows for each of the two years in the period ended
December 31, 1996, and for each of the three month periods ended March
31, 1996 and 1997 (unaudited)............................................ F-46
Notes to Financial Statements for each of the two years in the period
ended December 31, 1996.................................................. F-47
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND THE BBC HOME SERVICE
TRANSMISSION BUSINESS
Report of KPMG, Chartered Accountants..................................... F-50
Profit and Loss Accounts of the BBC Home Service Transmission business for
the Year ended March 31, 1996 and the Period from April 1, 1996 to
February 27, 1997 and the Consolidated Profit and Loss Accounts of Castle
Transmission Services (Holdings) Ltd for the Period from February 28,
1997 to March 31, 1997 and for the Period from April 1, 1997 to December
31, 1997................................................................. F-51
Balance Sheet of the BBC Home Service Transmission business at March 31,
1996 and Consolidated Balance Sheets of Castle Transmission Services
(Holdings) Ltd at March 31, 1997 and at
December 31, 1997........................................................ F-52
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Cash Flow Statements of the BBC Home Service Transmission business for the
Year ended March 31, 1996 and the Period from April 1, 1996 to February
27, 1997 and the Consolidated Cash Flow Statements of Castle Transmission
Services (Holdings) Ltd for the Period from February 28, 1997 to March
31, 1997 and for the Period from April 1, 1997 to December 31, 1997...... F-53
Reconciliation of Movements in Corporate Funding of the BBC Home Service
Transmission business for the Year ended March 31, 1996 and the Period
from April 1, 1996 to February 27, 1997 and Consolidated Reconciliation
of Movements in Shareholders' Funds of Castle Transmission Services
(Holdings) Ltd for the Period from February 28, 1997 to March 31, 1997
and for the Period from April 1, 1997 to December 31, 1997............... F-54
Notes to the Consolidated Financial Statements............................ F-55
BELL ATLANTIC MOBILE TOWER OPERATIONS
Report of KPMG LLP, Independent Certified Public Accountants.............. F-78
Statement of Net Assets as of September 30, 1998.......................... F-79
Statement of Revenues and Direct Expenses for the year ended December 31,
1997 and the nine months ended September 30, 1998........................ F-80
Notes to Financial Statements for the year ended December 31, 1997 and the
nine months ended September 30, 1998..................................... F-81
</TABLE>
F-2
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
ASSETS ------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 55,078 $ 201,349
Receivables:
Trade, net of allowance for doubtful accounts of
$177 and $232 at December 31, 1997 and
September 30, 1998, respectively............... 9,264 33,834
Other........................................... 811 665
Inventories...................................... 1,322 5,209
Prepaid expenses and other current assets........ 681 2,883
-------- ----------
Total current assets............................ 67,156 243,940
Property and equipment, net of accumulated
depreciation of $4,852 and $13,180 at December 31,
1997 and September 30, 1998, respectively......... 81,968 544,486
Investments in affiliates.......................... 59,082 2,221
Goodwill and other intangible assets, net of
accumulated amortization of $3,997 and $12,633 at
December 31, 1997 and September 30, 1998,
respectively...................................... 152,541 563,706
Deferred financing costs and other assets, net of
accumulated amortization of $743 and $1,441 at
December 31, 1997 and September 30, 1998,
respectively...................................... 10,644 15,586
-------- ----------
$371,391 $1,369,939
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 7,760 $ 30,271
Accrued compensation and related benefits........ 1,792 2,122
Accrued interest................................. -- 9,998
Deferred rental revenues and other accrued
liabilities..................................... 2,398 34,958
-------- ----------
Total current liabilities....................... 11,950 77,349
Long-term debt..................................... 156,293 494,324
Other liabilities.................................. 607 4,620
-------- ----------
Total liabilities............................... 168,850 576,293
-------- ----------
Commitments and contingencies
Minority interests................................. -- 38,529
Redeemable preferred stock, $.01 par value;
10,000,000 shares authorized (none issued at
September 30, 1998):
Senior Convertible Preferred Stock; 657,495
shares issued at December 31, 1997 (stated at
redemption value; aggregate liquidation value of
$68,916)........................................ 67,948 --
Series A Convertible Preferred Stock; 1,383,333
shares issued at December 31, 1997 (stated at
redemption and aggregate liquidation value)..... 8,300 --
Series B Convertible Preferred Stock; 864,568
shares issued at December 31, 1997 (stated at
redemption and aggregate liquidation value)..... 10,375 --
Series C Convertible Preferred Stock; 3,529,832
shares issued at December 31, 1997 (stated at
redemption and aggregate liquidation value)..... 74,126 --
-------- ----------
Total redeemable preferred stock................ 160,749 --
-------- ----------
Stockholders' equity:
Common stock, $.01 par value; 690,000,000 shares
authorized:
Class A Common Stock; shares issued: December
31, 1997--1,041,565 and September 30, 1998--
none........................................... 2 --
Class B Common Stock; shares issued: December
31, 1997--9,367,165 and September 30, 1998--
none........................................... 19 --
Common Stock; shares issued: December 31, 1997--
none and September 30, 1998--82,548,545........ -- 825
Class A Common Stock; shares issued: December
31, 1997--none and September 30, 1998--
11,340,000..................................... -- 113
Additional paid-in capital....................... 58,248 800,973
Cumulative foreign currency translation
adjustment...................................... 562 5,069
Accumulated deficit.............................. (17,039) (51,863)
-------- ----------
Total stockholders' equity...................... 41,792 755,117
-------- ----------
$371,391 $1,369,939
======== ==========
</TABLE>
See condensed notes to consolidated financial statements.
F-3
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September Ended September
30, 30,
----------------- -----------------
1997 1998 1997 1998
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net revenues:
Site rental and broadcast
transmission......................... $ 3,402 $ 18,008 $ 6,743 $ 28,456
Network services and other............ 8,079 10,886 11,503 23,805
------- -------- ------- --------
11,481 28,894 18,246 52,261
------- -------- ------- --------
Operating expenses:
Costs of operations (exclusive of
depreciation and amortization):
Site rental and broadcast
transmission....................... 817 5,980 1,422 8,398
Network services and other.......... 5,016 7,079 7,187 14,234
General and administrative............ 2,350 6,254 3,841 15,022
Corporate development................. 872 816 4,654 2,838
Non-cash compensation charges......... -- 11,361 -- 11,361
Depreciation and amortization......... 2,365 9,410 3,295 17,105
------- -------- ------- --------
11,420 40,900 20,399 68,958
------- -------- ------- --------
Operating income (loss)................. 61 (12,006) (2,153) (16,697)
Other income (expense):
Equity in earnings (losses) of
unconsolidated affiliate............. (968) 1,530 (1,189) 2,055
Interest and other income (expense)... 98 923 1,606 2,293
Interest expense and amortization of
deferred financing costs............. (3,172) (7,554) (4,368) (17,581)
------- -------- ------- --------
Loss before income taxes and minority
interests.............................. (3,981) (17,107) (6,104) (29,930)
Provision for income taxes.............. (20) (9) (46) (218)
Minority interests...................... -- (328) -- (328)
------- -------- ------- --------
Net loss................................ (4,001) (17,444) (6,150) (30,476)
Dividends on Senior Convertible
Preferred Stock........................ (461) (216) (461) (4,348)
------- -------- ------- --------
Net loss after deduction of dividends on
Senior Convertible Preferred Stock..... $(4,462) $(17,660) $(6,611) $(34,824)
======= ======== ======= ========
Net loss................................ $(4,001) $(17,444) $(6,150) $(30,476)
Other comprehensive income:
Foreign currency translation
adjustments.......................... (1,624) 2,750 (546) 4,507
------- -------- ------- --------
Comprehensive loss...................... $(5,625) $(14,694) $(6,696) $(25,969)
======= ======== ======= ========
Loss per common share--basic and
diluted................................ $ (0.62) $ (0.33) $ (1.42) $ (1.38)
======= ======== ======= ========
Common shares outstanding--basic and
diluted (in thousands)................. 7,254 53,879 4,672 25,262
======= ======== ======= ========
</TABLE>
See condensed notes to consolidated financial statements.
F-4
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------
1997 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $ (6,150) $(30,476)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization.................... 3,295 17,105
Amortization of deferred financing costs and
discount on long-term debt...................... 112 13,069
Non-cash compensation charges.................... -- 11,361
Minority interests............................... -- 328
Equity in losses (earnings) of unconsolidated
affiliate....................................... 1,189 (2,055)
Changes in assets and liabilities, excluding the
effects of acquisitions:
Increase (decrease) in deferred rental revenues
and other liabilities.......................... (191) 3,550
Decrease (increase) in receivables.............. 2,709 (5,464)
Increase in inventories, prepaid expenses and
other assets................................... (670) (3,311)
Decrease in accounts payable.................... (3,129) (644)
Increase (decrease) in accrued interest......... 774 (111)
-------- --------
Net cash provided by (used for) operating
activities.................................... (2,061) 3,352
-------- --------
Cash flows from investing activities:
Capital expenditures.............................. (5,295) (77,728)
Acquisitions of businesses, net of cash acquired.. (32,460) 997
Investments in affiliates......................... (59,487) --
-------- --------
Net cash used for investing activities......... (97,242) (76,731)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of capital stock........... 103,236 149,097
Net borrowings under revolving credit agreements.. 7,471 72,712
Incurrence of financing costs..................... (732) (1,699)
Purchase of capital stock......................... (2,132) (884)
Principal payments on long-term debt.............. (2,788) --
-------- --------
Net cash provided by financing activities...... 105,055 219,226
-------- --------
Effect of exchange rate changes on cash............ -- 424
-------- --------
Net increase in cash and cash equivalents.......... 5,752 146,271
Cash and cash equivalents at beginning of period... 7,343 55,078
-------- --------
Cash and cash equivalents at end of period......... $ 13,095 $201,349
======== ========
Supplementary schedule of non-cash investing and
financing activities:
Conversion of stockholder's Convertible Secured
Subordinated Notes to Series A Convertible
Preferred Stock.................................. $ 3,657 $ --
Amounts recorded in connection with acquisitions:
Fair value of net assets acquired, including
goodwill and other intangible assets............ 195,733 417,703
Issuance of long-term debt....................... 78,102 --
Assumption of long-term debt..................... 27,982 --
Issuance of common stock......................... 56,777 418,700
Amounts due to seller............................ 412 --
Supplemental disclosure of cash flow information:
Interest paid..................................... $ 3,309 $ 4,984
Income taxes paid................................. 23 286
</TABLE>
See condensed notes to consolidated financial statements.
F-5
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The information contained in the following notes to the consolidated
financial statements is condensed from that which would appear in the annual
consolidated financial statements; accordingly, the consolidated financial
statements included herein should be reviewed in conjunction with the
consolidated financial statements for the fiscal year ended December 31, 1997,
and related notes thereto, of Crown Castle International Corp. included
elsewhere herein. All references to the "Company" include Crown Castle
International Corp. and its subsidiary companies unless otherwise indicated or
the context indicates otherwise.
The consolidated financial statements included herein are unaudited;
however, they include all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to present
fairly the consolidated financial position of the Company at September 30,
1998, the consolidated results of operations for the three and nine months
ended September 30, 1997 and 1998 and consolidated cash flows for the nine
months ended September 30, 1997 and 1998. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"). SFAS 128 establishes new standards for computing and presenting
earnings per share ("EPS") amounts for companies with publicly held common
stock or potential common stock. The new standards require the presentation of
both basic and diluted EPS amounts for companies with complex capital
structures. Basic EPS is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period, and excludes the effect of potentially dilutive securities (such
as options, warrants and convertible securities) which are convertible into
common stock. Dilutive EPS reflects the potential dilution from such
convertible securities. SFAS 128 is effective for periods ending after
December 15, 1997. The Company has adopted the requirements of SFAS 128 in its
financial statements for the year ended December 31, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income in a company's
financial statements. Comprehensive income includes all changes in a company's
equity accounts (including net income or loss) except investments by, or
distributions to, the company's owners. Items which are components of
comprehensive income (other than net income or loss) include foreign currency
translation adjustments, minimum pension liability adjustments and unrealized
gains and losses on certain investments in debt and equity securities. The
components of comprehensive income must be reported in a financial statement
that is displayed with the same prominence as other financial statements. SFAS
130 is effective for fiscal years beginning after December 15, 1997. The
Company has adopted the requirements of SFAS 130 in its financial statements
for the three months ended March 31, 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 establishes standards for the way that public companies
report, in their annual financial statements, certain information about their
operating segments, their products and services, the geographic areas in which
they operate and their major customers. SFAS 131 also requires that certain
information about operating segments be reported in interim financial
statements. SFAS 131 is effective for periods beginning after December 15,
1997. The Company will adopt the requirements of SFAS 131 in its financial
statements for the year ending December 31, 1998.
F-6
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires
that costs of start-up activities be charged to expense as incurred and
broadly defines such costs. The Company has deferred certain costs incurred in
connection with potential business initiatives and new geographic markets, and
SOP 98-5 will require that such deferred costs be charged to results of
operations upon its adoption. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998. The Company will adopt the requirements of SOP 98-5
as of January 1, 1999. The cumulative effect of the change in accounting
principle for the adoption of SOP 98-5 will result in a charge to results of
operations in the Company's financial statements for the three months ended
March 31, 1999; it is currently estimated that such charge will amount to
approximately $2,300,000.
2. Acquisitions
On May 12, 1997, the Company acquired all of the common stock of TEA Group
Incorporated and TeleStructures, Inc. (collectively, "TEA"). On August 15,
1997, the Company acquired (i) substantially all of the assets, net of
outstanding liabilities, of Crown Communications ("CCM") and (ii) all of the
outstanding common stock of Crown Network Systems, Inc. ("CNS") and Crown
Mobile Systems, Inc. ("CMS") (collectively, "Crown"). These business
acquisitions were accounted for using the purchase method. Results of
operations and cash flows of the acquired businesses are included in the
consolidated financial statements for the periods subsequent to the respective
dates of acquisition.
On April 24, 1998, the Company entered into a share exchange agreement with
certain shareholders of Castle Transmission Services (Holdings) Ltd ("CTI")
pursuant to which certain of CTI's shareholders agreed to exchange their
shares of CTI for shares of the Company. On August 18, 1998, the exchange was
consummated and the Company's ownership of CTI increased from approximately
34.3% to 80%. The Company issued 20,867,700 shares of its Common Stock and
11,340,000 shares of its Class A Common Stock, with such shares valued at an
aggregate of $418,700,000 (based on the price per share to the public in the
Company's initial public offering as discussed in Note 4). The Company
recognized goodwill of $343,898,000 in connection with this transaction, which
was accounted for as an acquisition using the purchase method. CTI's results
of operations and cash flows are included in the consolidated financial
statements for the period subsequent to the date the exchange was consummated.
The following unaudited pro forma summary presents consolidated results of
operations for the Company as if (i) the TEA and Crown acquisitions had been
consummated as of January 1, 1997 and (ii) the share exchange with CTI's
shareholders had been consummated as of January 1 for both 1997 and 1998.
Appropriate adjustments have been reflected for depreciation and amortization,
interest expense, amortization of deferred financing costs, income taxes and
certain nonrecurring income and expenses recorded by the Company in connection
with the investment in CTI in 1997. The pro forma information does not
necessarily reflect the actual results that would have been achieved, not is
it necessarily indicative of future consolidated results for the Company.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1997 1998
------------ ------------
(In thousands of dollars,
except per share amounts)
<S> <C> <C>
Net revenues.................................... $ 135,745 $ 149,224
Net loss........................................ (24,641) (39,218)
Loss per common share--basic and diluted........ (0.43) (0.60)
</TABLE>
F-7
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(In thousands of dollars)
<S> <C> <C>
Senior Credit Facility.......................... $ 4,700 $ 69,000
10 5/8% Senior Discount Notes due 2007, net of
discount....................................... 151,593 163,803
CTI Credit Facility............................. -- 56,294
9% Guaranteed Bonds due 2007.................... -- 205,227
-------- --------
$156,293 $494,324
======== ========
</TABLE>
Reporting Requirements Under the Indenture Governing the 10 5/8% Senior
Discount Notes due 2007
(the "Indenture")
The following information (as such capitalized terms are defined in the
Indenture) is presented solely as a requirement of the Indenture; such
information is not intended as an alternative measure of financial position,
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles). Furthermore, the Company's
measure of the following information may not be comparable to similarly titled
measures of other companies.
Upon consummation of the share exchange with CTI's shareholders (see Note
2), which increased the Company's ownership interest in CTI to 80%, the
Company designated CTI as an Unrestricted Subsidiary. In addition, the net
proceeds from the Company's initial public offering of common stock (see Note
4) were placed into a newly formed subsidiary that was also designated as an
Unrestricted Subsidiary. Prior to these transactions, the Company did not have
any Unrestricted Subsidiaries. Summarized financial information for (i) the
Company and its Restricted Subsidiaries and (ii) the Company's Unrestricted
Subsidiaries is as follows:
<TABLE>
<CAPTION>
September 30, 1998
--------------------------------------
Company and
Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Total
------------ ------------ ------------
(In thousands of dollars)
<S> <C> <C> <C>
Cash and cash equivalents........... $ 34,116 $ 167,233 $ 201,349
Other current assets................ 16,051 26,540 42,591
Property and equipment, net......... 142,211 402,275 544,486
Goodwill and other intangible
assets, net........................ 146,115 417,591 563,706
Other assets, net................... 15,600 2,207 17,807
-------- ---------- ----------
$354,093 $1,015,846 $1,369,939
======== ========== ==========
Current liabilities................. $ 11,183 $ 66,166 $ 77,349
Long-term debt...................... 232,803 261,521 494,324
Other liabilities................... 684 3,936 4,620
Minority interests.................. -- 38,529 38,529
Stockholders' equity................ 109,423 645,694 755,117
-------- ---------- ----------
$354,093 $1,015,846 $1,369,939
======== ========== ==========
</TABLE>
F-8
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998 Nine Months Ended September 30, 1998
-------------------------------------- --------------------------------------
Company and Company and
Restricted Unrestricted Consolidated Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Total Subsidiaries Subsidiaries Total
------------ ------------ ------------ ------------ ------------ ------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $ 14,626 $14,268 $ 28,894 $ 37,993 $14,268 $ 52,261
Costs of operations
(exclusive of
depreciation and
amortization).......... 6,804 6,255 13,059 16,377 6,255 22,632
General and
administrative......... 5,502 752 6,254 14,270 752 15,022
Corporate development... 816 -- 816 2,838 -- 2,838
Non-cash compensation
charges................ 9,384 1,977 11,361 9,384 1,977 11,361
Depreciation and
amortization........... 4,347 5,063 9,410 12,042 5,063 17,105
-------- ------- -------- -------- ------- --------
Operating income
(loss)................. (12,227) 221 (12,006) (16,918) 221 (16,697)
Equity in earnings of
unconsolidated
affiliate.............. 1,530 -- 1,530 2,055 -- 2,055
Interest and other
income (expense)....... 16 907 923 1,386 907 2,293
Interest expense and
amortization of
deferred financing
costs.................. (5,877) (1,677) (7,554) (15,904) (1,677) (17,581)
Provision for income
taxes.................. (9) -- (9) (218) -- (218)
Minority interests...... -- (328) (328) -- (328) (328)
-------- ------- -------- -------- ------- --------
Net loss................ $(16,567) $ (877) $(17,444) $(29,599) $ (877) $(30,476)
======== ======= ======== ======== ======= ========
</TABLE>
Tower Cash Flow and Adjusted Consolidated Cash Flow for the Company and its
Restricted Subsidiaries is as follows:
<TABLE>
<CAPTION>
(In
thousands
of
dollars)
---------
<S> <C>
Tower Cash Flow, for the three months ended September 30, 1998... $ 3,560
========
Consolidated Cash Flow, for the twelve months ended September 30,
1998............................................................ $ 7,571
Less: Tower Cash Flow, for the twelve months ended September 30,
1998............................................................ (14,564)
Plus: four times Tower Cash Flow, for the three months ended
September 30, 1998.............................................. 14,240
--------
Adjusted Consolidated Cash Flow, for the twelve months ended
September 30, 1998.............................................. $ 7,247
========
</TABLE>
4. Stockholders' Equity
On August 18, 1998, the Company consummated its initial public offering of
common stock at a price to the public of $13 per share (the "IPO"). The
Company sold 12,320,000 shares of its common stock and received proceeds of
$151,043,000 (after underwriting discounts of $9,117,000 but before other
expenses of the IPO, which are expected to total approximately $3,800,000).
The net proceeds from the IPO are currently invested in short-term
investments.
In anticipation of the IPO, the Company (i) amended and restated the 1995
Stock Option Plan to, among other things, authorize the issuance of up to
18,000,000 shares of common stock pursuant to awards made thereunder and (ii)
approved an amendment to its certificate of incorporation to increase the
number of authorized
F-9
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
shares of common and preferred stock to 690,000,000 shares and 10,000,000
shares, respectively, and to effect a five-for-one stock split for the shares
of common stock then outstanding. The effect of the stock split has been
presented retroactively in the Company's consolidated financial statements for
all periods presented.
During the period from April 24, 1998 through July 15, 1998, the Company
granted options to employees and executives for the purchase of 3,236,980
shares of its common stock at an exercise price of $7.50 per share. Of such
options, options for 1,810,730 shares vested upon consummation of the IPO and
the remaining options for 1,426,250 shares will vest at 20% per year over five
years, beginning one year from the date of grant. In addition, the Company has
assigned its right to repurchase shares of its common stock from a stockholder
(at a price of $6.26 per share) to two individuals (including a newly-elected
director) with respect to 100,000 of such shares. Since the granting of these
options and the assignment of these rights to repurchase shares occurred
subsequent to the date of the share exchange agreement with CTI's shareholders
and at prices substantially below the price to the public in the IPO, the
Company has recorded a non-cash compensation charge related to these options
and shares based upon the difference between the respective exercise and
purchase prices and the price to the public in the IPO. Such compensation
charge will total approximately $18.4 million, of which approximately $10.6
million was recognized upon consummation of the IPO (for such options and
shares which vested upon consummation of the IPO), and the remaining $7.8
million is being recognized over five years (approximately $1.6 million per
year) through the second quarter of 2003. An additional $1.6 million in non-
cash compensation charges will be recognized through the third quarter of 2001
for stock options issued to certain members of CTI's management prior to the
consummation of the share exchange.
In July 1998, all of the holders of the Company's Senior Convertible
Preferred Stock converted such shares into an aggregate of 9,629,200 shares of
the Company's common stock. Upon consummation of the IPO, all of the holders
of the Company's then-existing shares of Class A Common Stock, Class B Common
Stock, Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock converted such shares into an
aggregate of 39,842,290 shares of the Company's common stock.
5. Per Share Information
Per share information is based on the weighted-average number of common
shares outstanding during each period for the basic computation and, if
dilutive, the weighted-average number of potential common shares resulting
from the assumed conversion of outstanding stock options, warrants and
convertible preferred stock for the diluted computation.
A reconciliation of the numerators and denominators of the basic and diluted
per share computations is as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September Ended September
30, 30,
----------------- -----------------
1997 1998 1997 1998
------- -------- ------- --------
(In thousands of dollars, except
per share amounts)
<S> <C> <C> <C> <C>
Net loss.............................. $(4,001) $(17,444) $(6,150) $(30,476)
Dividends on Senior Convertible
Preferred Stock...................... (461) (216) (461) (4,348)
------- -------- ------- --------
Net loss applicable to common stock
for basic and diluted computations... $(4,462) $(17,660) $(6,611) $(34,824)
======= ======== ======= ========
Weighted-average number of common
shares outstanding during the period
for basic and diluted computations
(in thousands)....................... 7,254 53,879 4,672 25,262
======= ======== ======= ========
Loss per common share--basic and
diluted.............................. $ (0.62) $ (0.33) $ (1.42) $ (1.38)
======= ======== ======= ========
</TABLE>
F-10
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The calculations of common shares outstanding for the diluted computations
exclude the following potential common shares as of September 30, 1998: (i)
options to purchase 16,254,142 shares of common stock at exercise prices
ranging from $.40 to $13.00 per share; (ii) warrants to purchase 1,314,990
shares of common stock at an exercise price of $7.50 per share; and (iii)
shares of CTI stock which are convertible into 17,443,500 shares of common
stock. The inclusion of such potential common shares in the diluted per share
computations would be antidilutive since the Company incurred net losses for
all periods presented.
6. Contingencies
The Company is involved in various claims, lawsuits and proceedings arising
in the ordinary course of business. While there are uncertainties inherent in
the ultimate outcome of such matters and it is impossible to presently
determine the ultimate costs that may be incurred, management believes the
resolution of such uncertainties and the incurrence of such costs should not
have a material adverse effect on the Company's consolidated financial
position or results of operations.
F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Crown Castle International Corp.:
We have audited the accompanying consolidated balance sheets of Crown Castle
International Corp. and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, cash flows and stockholders'
equity (deficit) for each of the three years in the period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Crown
Castle International Corp. and subsidiaries as of December 31, 1996 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 20, 1998 (July 24, 1998 as to Note 14)
F-12
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------
1996 1997
ASSETS ------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 7,343 $ 55,078
Receivables:
Trade, net of allowance for doubtful accounts of $32 and
$177 at December 31, 1996 and 1997, respectively....... 840 9,264
Other................................................... 1,081 811
Inventories.............................................. -- 1,322
Prepaid expenses and other current assets................ 149 681
------- --------
Total current assets................................... 9,413 67,156
Property and equipment, net................................ 26,753 81,968
Investments in affiliates.................................. 2,101 59,082
Goodwill and other intangible assets, net of accumulated
amortization of $47 and $3,997 at December 31, 1996 and
1997, respectively........................................ 820 152,541
Deferred financing costs and other assets, net of
accumulated amortization of $153 and $743 at December 31,
1996 and 1997, respectively .............................. 2,139 10,644
------- --------
$41,226 $371,391
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................... $ 1,048 $ 7,760
Accrued interest......................................... 49 --
Accrued compensation and related benefits................ -- 1,792
Other accrued liabilities................................ 508 2,398
Long-term debt, current maturities....................... 140 --
------- --------
Total current liabilities.............................. 1,745 11,950
Accrued interest........................................... 729 --
Long-term debt, less current maturities.................... 21,912 156,293
Site rental deposits and other liabilities................. 1,500 607
------- --------
Total liabilities...................................... 25,886 168,850
------- --------
Commitments and contingencies (Note 11)
Redeemable preferred stock, $.01 par value; 6,435,228
shares authorized:
Senior Convertible Preferred Stock; shares issued:
December 31, 1996--none and December 31, 1997--657,495
(stated at redemption value; aggregate liquidation value
of $0 and $68,916, respectively)........................ -- 67,948
Series A Convertible Preferred Stock; shares issued:
December 31, 1996--862,455 and December 31, 1997--
1,383,333 (stated at redemption and aggregate
liquidation value)...................................... 5,175 8,300
Series B Convertible Preferred Stock; 864,568 shares
issued (stated at redemption and aggregate liquidation
value).................................................. 10,375 10,375
Series C Convertible Preferred Stock; shares issued:
December 31, 1996--none and December 31, 1997--3,529,832
(stated at redemption and aggregate liquidation value).. -- 74,126
------- --------
Total redeemable preferred stock....................... 15,550 160,749
------- --------
Stockholders' equity (deficit):
Common stock, $.01 par value; 11,511,109 shares
authorized:
Class A Common Stock; shares issued: December 31, 1996--
1,350,000 and December 31, 1997--1,041,565 ............ 3 2
Class B Common Stock; shares issued: December 31, 1996--
1,488,330 and December 31, 1997 -- 9,367,165 .......... 3 19
Additional paid-in capital............................... 762 58,248
Cumulative foreign currency translation adjustment....... -- 562
Accumulated deficit...................................... (978) (17,039)
------- --------
Total stockholders' equity (deficit) .................. (210) 41,792
------- --------
$41,226 $371,391
======= ========
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Net revenues:
Site rental.................................. $ 4,052 $ 5,615 $ 11,010
Network services and other................... 6 592 20,395
------- ------- --------
4,058 6,207 31,405
------- ------- --------
Operating expenses:
Costs of operations (exclusive of deprecia-
tion and amortization):
Site rental................................. 1,226 1,292 2,213
Network services and other.................. -- 8 13,137
General and administrative................... 729 1,678 6,824
Corporate development........................ 204 1,324 5,731
Depreciation and amortization................ 836 1,242 6,952
------- ------- --------
2,995 5,544 34,857
------- ------- --------
Operating income (loss)........................ 1,063 663 (3,452)
Other income (expense):
Equity in losses of unconsolidated affili-
ate......................................... -- -- (1,138)
Interest and other income.................... 53 193 1,951
Interest expense and amortization of deferred
financing costs............................. (1,137) (1,803) (9,254)
------- ------- --------
Loss before income taxes....................... (21) (947) (11,893)
Provision for income taxes..................... -- (10) (49)
------- ------- --------
Net loss....................................... (21) (957) (11,942)
Dividends on Senior Convertible Preferred
Stock......................................... -- -- (2,199)
------- ------- --------
Net loss after deduction of dividends on Senior
Convertible Preferred Stock................... $ (21) $ (957) $(14,141)
======= ======= ========
Loss per common share--basic and diluted....... $ (0.01) $ (0.27) $ (2.27)
======= ======= ========
Common shares outstanding--basic and diluted
(in thousands)................................ 3,316 3,503 6,238
============== ========
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $ (21) $ (957) $(11,942)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization.................... 836 1,242 6,952
Amortization of deferred financing costs and
discount on long-term debt...................... 36 55 2,159
Equity in losses of unconsolidated affiliate..... -- -- 1,138
Changes in assets and liabilities, excluding the
effects of acquisitions:
Increase in accounts payable.................... 406 323 1,824
Decrease (increase) in receivables.............. (226) (1,695) 1,353
Increase in inventories, prepaid expenses and
other assets................................... (63) (23) (1,472)
Increase (decrease) in accrued interest......... 472 306 (396)
Increase (decrease) in other liabilities........ 232 219 (240)
------- ------- --------
Net cash provided by (used for) operating
activities.................................... 1,672 (530) (624)
------- ------- --------
Cash flows from investing activities:
Investments in affiliates......................... -- (2,101) (59,487)
Acquisitions of businesses, net of cash acquired.. (16,512) (10,925) (33,962)
Capital expenditures.............................. (161) (890) (18,035)
------- ------- --------
Net cash used for investing activities......... (16,673) (13,916) (111,484)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.......... 6,168 -- 150,010
Proceeds from issuance of capital stock........... 5,072 10,503 139,867
Principal payments on long-term debt.............. -- (130) (113,881)
Incurrence of financing costs..................... (343) (180) (7,798)
Net borrowings (payments) under revolving credit
agreements....................................... 4,700 11,000 (6,223)
Purchase of capital stock......................... -- -- (2,132)
------- ------- --------
Net cash provided by financing activities...... 15,597 21,193 159,843
------- ------- --------
Net increase in cash and cash equivalents.......... 596 6,747 47,735
Cash and cash equivalents at beginning of year..... -- 596 7,343
------- ------- --------
Cash and cash equivalents at end of year........... $ 596 $ 7,343 $ 55,078
======= ======= ========
Supplementary schedule of non-cash investing and
financing activities:
Conversion of stockholder's Convertible Secured
Subordinated Notes to Series A Convertible
Preferred Stock.................................. $ 743 $ -- $ 3,657
Amounts recorded in connection with acquisitions
(see Note 2):
Fair value of net assets acquired, including
goodwill and other intangible assets............ 17,801 10,958 197,235
Issuance of long-term debt....................... 762 -- 78,102
Assumption of long-term debt..................... 295 -- 27,982
Issuance of Class B Common Stock................. -- -- 57,189
Amounts due to seller............................ 232 33 --
Supplemental disclosure of cash flow information:
Interest paid..................................... $ 628 $ 1,442 $ 7,533
Income taxes paid................................. -- -- 26
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
Cumulative
Class A Class B Foreign
Common Stock Common Stock Additional Currency
--------------------- --------------------- Paid-In Translation Accumulated
Shares ($.01 Par) Shares ($.01 Par) Capital Adjustment Deficit Total
--------- ---------- --------- ---------- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995................... -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuances of capital
stock................. 1,350,000 3 1,433,330 3 634 -- -- 640
Net loss............... -- -- -- -- -- -- (21) (21)
--------- ---- --------- ---- ------- ---- -------- -------
Balance, December 31,
1995................... 1,350,000 3 1,433,330 3 634 -- (21) 619
Issuances of capital
stock................. -- -- 55,000 -- 128 -- -- 128
Net loss............... -- -- -- -- -- -- (957) (957)
--------- ---- --------- ---- ------- ---- -------- -------
Balance, December 31,
1996................... 1,350,000 3 1,488,330 3 762 -- (978) (210)
Issuances of capital
stock................. -- -- 8,228,835 17 57,696 -- -- 57,713
Purchase of capital
stock................. (308,435) (1) (350,000) (1) (210) -- (1,920) (2,132)
Foreign currency
translation
adjustments........... -- -- -- -- -- 562 -- 562
Dividends on Senior
Convertible Preferred
Stock................. -- -- -- -- -- -- (2,199) (2,199)
Net loss............... -- -- -- -- -- -- (11,942) (11,942)
--------- ---- --------- ---- ------- ---- -------- -------
Balance, December 31,
1997................... 1,041,565 $ 2 9,367,165 $ 19 $58,248 $562 $(17,039) $41,792
========= ==== ========= ==== ======= ==== ======== =======
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Crown Castle
International Corp. and its wholly owned subsidiaries, collectively referred
to herein as the "Company." All significant intercompany balances and
transactions have been eliminated in consolidation. Certain reclassifications
have been made to the prior year's financial statements to be consistent with
the presentation in the current year.
The Company (a Delaware corporation) was organized on April 20, 1995. On
April 27, 1995, the stockholders of Castle Tower Corporation ("CTC")
contributed all of the outstanding shares of CTC's stock to the Company in
exchange for shares of the Company's stock. CTC (a Delaware corporation) was
organized on December 21, 1994 and began operations on January 1, 1995. The
Company and CTC have treated this exchange of securities as a reorganization
of entities under common control. As such, the transaction has been accounted
for as if it were a pooling of interests on January 1, 1995.
The Company owns, operates and manages wireless transmission towers and
rooftop sites, and also provides an array of related infrastructure and
network support services to the wireless communications and radio and
television broadcasting industries. The Company's primary business focus is
the leasing of antenna space on multiple tenant towers and rooftops to a
variety of wireless communications carriers under long-term lease contracts.
The Company's transmission towers and rooftop sites are located throughout the
United States and in Puerto Rico.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Summary of Significant Accounting Policies
Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation.
Depreciation is computed utilizing the straight-line method at rates based
upon the estimated useful lives of the various classes of assets. Additions,
renewals and improvements are capitalized, while maintenance and repairs are
expensed. Upon the sale or retirement of an asset, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is
recognized.
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("SFAS 121"). SFAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of
F-17
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
an asset may not be recoverable. SFAS 121 was effective for fiscal years
beginning after December 15, 1995. The adoption of SFAS 121 by the Company in
1996 did not have a material impact on its consolidated financial statements.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets represents the excess of the purchase
price for an acquired business over the allocated value of the related net
assets (see Note 2). Goodwill is amortized on a straight-line basis over a
twenty year life. Other intangible assets (principally the value of existing
site rental contracts at Crown Communications) are amortized on a straight-
line basis over a ten year life. The carrying value of goodwill and other
intangible assets will be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the acquired assets may
not be recoverable. If the sum of the estimated future cash flows
(undiscounted) expected to result from the use and eventual disposition of an
asset is less than the carrying amount of the asset, an impairment loss is
recognized. Measurement of an impairment loss is based on the fair value of
the asset.
Deferred Financing Costs
Costs incurred to obtain financing are deferred and amortized over the
estimated term of the related borrowing. At December 31, 1997, other accrued
liabilities includes $1,160,000 of such costs related to the issuance of the
Company's 10 5/8% Senior Discount Notes.
Revenue Recognition
Site rental revenues are recognized on a monthly basis under lease or
management agreements with terms ranging from 12 months to 25 years.
Network services revenues from site development, construction and antennae
installation activities are recognized under a method which approximates the
completed contract method. This method is used because these services are
typically completed in three months or less and financial position and results
of operations do not vary significantly from those which would result from use
of the percentage-of-completion method. These services are considered complete
when the terms and conditions of the contract or agreement have been
substantially completed. Costs and revenues associated with installations not
complete at the end of a period are deferred and recognized when the
installation becomes operational. Any losses on contracts are recognized at
such time as they become known.
Network services revenues from site selection and acquisition activities are
recognized under service contracts with customers which provide for billings
on a time and materials, cost plus profit, or fixed price basis. Such
contracts typically have terms from six months to two years. Revenues are
recognized as services are performed with respect to the time and materials
contracts. Revenues are recognized using the percentage-of-completion method
for cost plus profit and fixed price contracts, measured by the percentage of
contract costs incurred to date compared to estimated total contract costs.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined.
Corporate Development Expenses
Corporate development expenses represent costs incurred in connection with
acquisitions and development of new business initiatives.
Income Taxes
The Company accounts for income taxes using an asset and liability approach,
which requires the recognition of deferred income tax assets and liabilities
for the expected future tax consequences of events that
F-18
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
have been recognized in the Company's financial statements or tax returns.
Deferred income tax assets and liabilities are determined based on the
temporary differences between the financial statement and tax bases of assets
and liabilities using enacted tax rates.
Per Share Information
Per share information is based on the weighted-average number of common
shares outstanding during each period for the basic computation and, if
dilutive, the weighted-average number of potential common shares resulting
from the assumed conversion of outstanding stock options, warrants and
convertible preferred stock for the diluted computation.
A reconciliation of the numerators and denominators of the basic and diluted
per share computations is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1995 1996 1997
-------- -------- ---------
(In thousands of dollars,
except per share amounts)
<S> <C> <C> <C>
Net loss.......................................... $ (21) $ (957) $ (11,942)
Dividends on Senior Convertible Preferred Stock... -- -- (2,199)
------- ------- ---------
Net loss applicable to common stock for basic and
diluted computations............................. $ (21) $ (957) $ (14,141)
======= ======= =========
Weighted-average number of common shares
outstanding during the period for basic and
diluted computations (in thousands).............. 3,316 3,503 6,238
======= ======= =========
Loss per common share--basic and diluted.......... $ (0.01) $ (0.27) $ (2.27)
======= ======= =========
</TABLE>
The calculations of common shares outstanding for the diluted computations
exclude the following potential common shares as of December 31, 1997: (i)
options to purchase 3,694,375 shares of common stock at exercise prices
ranging from $.40 to $7.50 per share; (ii) warrants to purchase 1,314,990
shares of common stock at an exercise price of $7.50 per share; (iii) shares
of Senior Convertible Preferred Stock which are convertible into 9,050,060
shares of common stock; and (iv) shares of Series Preferred Stock (see Note 7)
which are convertible into 28,888,665 shares of common stock. The inclusion of
such potential common shares in the diluted per share computations would be
antidilutive since the Company incurred net losses for each of the three years
in the period ended December 31, 1997.
Financial Instruments
The carrying amount of cash and cash equivalents approximates fair value for
these instruments. The estimated fair value of the 10 5/8% Senior Discount
Notes is based on quoted market prices, and the estimated fair value of the
Convertible Secured Subordinated Notes is based on the most recent price at
which shares of the Company's stock were sold (see Note 5). The estimated fair
value of the other long-term debt is determined based on the current rates
offered for similar borrowings. The estimated fair value of the interest rate
swap agreement is based on the amount that the Company would receive or pay to
terminate the agreement at the balance sheet date. The estimated fair values
of the Company's financial instruments, along with the carrying amounts of the
related assets (liabilities), are as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1997
------------------ --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- --------- ---------
(In thousands of dollars)
<S> <C> <C> <C> <C>
Cash and cash equivalents.......... $ 7,343 $ 7,343 $ 55,078 $ 55,078
Long-term debt..................... (22,052) (25,736) (156,293) (161,575)
Interest rate swap agreement....... -- -- -- (97)
</TABLE>
F-19
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's interest rate swap agreement is used to manage interest rate
risk. The net settlement amount resulting from this agreement is recognized as
an adjustment to interest expense. The Company does not hold or issue
derivative financial instruments for trading purposes.
Stock Options
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123
establishes alternative methods of accounting and disclosure for employee
stock-based compensation arrangements. The Company has elected to continue the
use of the "intrinsic value based method" of accounting for its employee stock
option plan (see Note 8). This method does not result in the recognition of
compensation expense when employee stock options are granted if the exercise
price of the options equals or exceeds the fair market value of the stock at
the date of grant. See Note 8 for the disclosures required by SFAS 123.
Recent Accounting Pronouncements
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, Earnings per Share ("SFAS 128"). SFAS 128 establishes new
standards for computing and presenting earnings per share ("EPS") amounts for
companies with publicly held common stock or potential common stock. The new
standards require the presentation of both basic and diluted EPS amounts for
companies with complex capital structures. Basic EPS is computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the period, and excludes the effect of
potentially dilutive securities (such as options, warrants and convertible
securities) which are convertible into common stock. Dilutive EPS reflects the
potential dilution from such convertible securities. SFAS 128 is effective for
periods ending after December 15, 1997. The Company has adopted the
requirements of SFAS 128 in its financial statements for the year ended
December 31, 1997.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure ("SFAS
129"). SFAS 129 establishes standards for disclosing information about a
company's outstanding debt and equity securities and eliminates exemptions
from such reporting requirements for nonpublic companies. SFAS 129 is
effective for periods ending after December 15, 1997. The Company has adopted
the requirements of SFAS 129 in its financial statements for the year ended
December 31, 1996.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income in a company's
financial statements. Comprehensive income includes all changes in a company's
equity accounts (including net income or loss) except investments by, or
distributions to, the company's owners. Items which are components of
comprehensive income (other than net income or loss) include foreign currency
translation adjustments, minimum pension liability adjustments and unrealized
gains and losses on certain investments in debt and equity securities. The
components of comprehensive income must be reported in a financial statement
that is displayed with the same prominence as other financial statements. SFAS
130 is effective for fiscal years beginning after December 15, 1997. The
Company will adopt the requirements of SFAS 130 in 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 establishes standards for the way that public companies
report, in their annual financial statements, certain information about their
operating segments, their products and services, the geographic areas in which
they operate and their major customers.
F-20
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
SFAS 131 also requires that certain information about operating segments be
reported in interim financial statements. SFAS 131 is effective for periods
beginning after December 15, 1997. The Company will adopt the requirements of
SFAS 131 in its financial statements for the year ending December 31, 1998.
2. Acquisitions
During the three years in the period ended December 31, 1997, the Company
consummated a number of business acquisitions which were accounted for using
the purchase method. Results of operations and cash flows of the acquired
businesses are included in the consolidated financial statements for the
periods subsequent to the respective dates of acquisition.
Pittencrieff Communications, Inc. ("PCI")
From January 9, 1995 through November 1, 1995, the Company acquired 127
telecommunications towers and related assets, net of certain outstanding
liabilities, from PCI. The total purchase price of $16,179,000 consisted of
$15,122,000 in cash, a note payable to PCI for $762,000 and the assumption of
a note payable to a third party for $295,000.
The Company entered into a license agreement with PCI under which PCI leases
space on certain of the towers for its telecommunications equipment. This
license agreement was assumed by Nextel Communications, Inc. ("Nextel") upon
its acquisition of PCI in 1997. The license agreement commenced on January 1,
1995 and expires on December 31, 2008, at which time Nextel has the option to
renew the license agreement for an additional three year term.
The Company also entered into a management agreement with PCI under which
PCI managed the towers for the Company. The term of this management agreement
was for one year commencing on January 1, 1995. The Company paid a management
fee to PCI equal to 15% of the revenues generated by the towers. Such
management fees amounted to $553,000 for the year ended December 31, 1995. The
Company began managing the towers on January 1, 1996.
Spectrum Engineering Company ("Spectrum")
On October 30, 1995, the Company acquired substantially all of the property
and equipment of Spectrum for $1,185,000 in cash. Spectrum provides management
services for building rooftop antenna sites. The Company recognized goodwill
of $870,000 in connection with this acquisition.
Motorola, Inc. ("Motorola")
On June 28, 1996, the Company acquired fifteen telecommunications towers and
related assets, and assets related to specialized mobile radio and microwave
services, from Motorola in Puerto Rico. The purchase price consisted of
$9,919,000 in cash. Motorola provided certain management services related to
these assets for a period of ninety days after the closing date. Management
fees for such services amounted to $57,000 for the year ended December 31,
1996.
Other Acquisitions
During 1995 and 1996, the Company acquired a number of other
telecommunications towers and related equipment from various sellers. The
aggregate total purchase price for these acquisitions of $1,476,000 consisted
of $1,211,000 in cash and a $265,000 payable to a seller.
TEA Group Incorporated and TeleStructures, Inc. (collectively, "TEA")
On May 12, 1997, the Company acquired all of the common stock of TEA. TEA
provides telecommunications site selection, acquisition, design and
development services. The purchase price of
F-21
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
$14,215,000 consisted of $8,120,000 in cash (of which $2,001,000 was paid in
1996 as an option payment), promissory notes payable to the former
stockholders of TEA totaling $1,872,000, the assumption of $1,973,000 in
outstanding debt and 535,710 shares of the Company's Class B Common Stock
valued at $2,250,000 (the estimated fair value of such common stock on that
date). The Company recognized goodwill of $9,568,000 in connection with this
acquisition. The Company repaid the promissory notes with a portion of the
proceeds from the issuance of its 10 5/8% Senior Discount Notes (see Note 5).
Crown Communications ("CCM"), Crown Network Systems, Inc. ("CNS") and Crown
Mobile Systems, Inc. ("CMS") (collectively, "Crown")
On July 11, 1997, the Company entered into an asset purchase and merger
agreement with the owners of Crown. On August 15, 1997, such agreement was
amended and restated, and the Company acquired (i) substantially all of the
assets, net of outstanding liabilities, of CCM and (ii) all of the outstanding
common stock of CNS and CMS. Crown provides network services, which includes
site selection and acquisition, antenna installation, site development and
construction, network design and site maintenance, and owns and operates
telecommunications towers and related assets. The purchase price of
$185,021,000 consisted of $27,843,000 in cash, a short-term promissory note
payable to the former owners of Crown for $76,230,000, the assumption of
$26,009,000 in outstanding debt and 7,325,000 shares of the Company's Class B
Common Stock valued at $54,939,000 (the estimated fair value of such common
stock on that date). The Company recognized goodwill and other intangible
assets of $146,103,000 in connection with this acquisition. The Company
financed the cash portion of the purchase price with proceeds from the
issuance of redeemable preferred stock (see Note 7), and repaid the promissory
note with proceeds from the issuance of additional redeemable preferred stock
and borrowings under the Senior Credit Facility (see Note 5).
In 1997, the Company organized Crown Communication Inc. ("CCI," a Delaware
corporation) as a wholly owned subsidiary to own the net assets acquired from
CCM and the common stock of CNS and CMS. In January 1998, the Company merged
CTC with and into CCI, establishing CCI as the principal operating subsidiary
of the Company.
Pro Forma Results of Operations (Unaudited)
The following unaudited pro forma summary presents consolidated results of
operations for the Company as if (i) the Motorola and other acquisitions had
been consummated on January 1, 1996 and (ii) the TEA and Crown acquisitions
and the investment in Castle Transmission Services (Holdings) Ltd ("CTI") had
been consummated as of January 1 for both 1996 and 1997. Appropriate
adjustments have been reflected for depreciation and amortization, interest
expense, amortization of deferred financing costs, income taxes and certain
nonrecurring income and expenses recorded by the Company in connection with
the investment in CTI (see Note 4). The pro forma information does not
necessarily reflect the actual results that would have been achieved, nor is
it necessarily indicative of future consolidated results for the Company.
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------
1996 1997
------------ ------------
(In thousands of dollars,
except per share amounts)
<S> <C> <C>
Net revenues........................................ $ 45,480 $ 56,851
Net loss............................................ (14,475) (16,082)
Loss per common share--basic and diluted............ (4.13) (1.47)
</TABLE>
Agreement with Nextel
On July 11, 1997, the Company entered into an agreement with Nextel (the
"Nextel Agreement") whereby the Company has the option to purchase up to 50 of
Nextel's existing towers which are located in Texas, Florida
F-22
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and the metropolitan areas of Denver, Colorado and Philadelphia, Pennsylvania.
As of February 20, 1998, the Company had purchased 36 of such towers for an
aggregate price of $8,383,000 in cash. In addition, the Nextel Agreement
provides the Company with the option to construct or purchase up to 250 new
towers for Nextel in various geographic corridors.
3. Property and Equipment
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
Estimated --------------------------
Useful Lives 1996 1997
------------ ------------ ------------
(In thousands of dollars)
<S> <C> <C> <C>
Land.............................. $ 125 $ 1,053
Telecommunications towers ........ 5-20 years 24,295 72,834
Transportation and other equip-
ment............................. 5-10 years -- 4,379
Telecommunications equipment...... 20 years 3,690 4,013
Office furniture and equipment.... 5-7 years 612 4,541
------------ ------------
28,722 86,820
Less: accumulated depreciation.... (1,969) (4,852)
------------ ------------
$ 26,753 $ 81,968
============ ============
</TABLE>
Depreciation expense for the years ended December 31, 1996 and 1997 was
$1,151,000 and $2,886,000, respectively. Accumulated depreciation on
telecommunications towers and related equipment was $1,820,000 and $3,850,000
at December 31, 1996 and 1997, respectively. At December 31, 1997, minimum
rentals receivable under existing operating leases for towers are as follows:
years ending December 31, 1998--$15,307,000; 1999--$13,614,000; 2000--
$12,270,000; 2001--$10,108,000; 2002--$3,442,000; thereafter--$3,195,000.
4. Investments in Affiliates
Investment in Castle Transmission Services (Holdings) Ltd ("CTI")
On February 28, 1997, the Company used a portion of the net proceeds from
the sale of the Series C Convertible Preferred Stock (see Note 7) to purchase
an ownership interest of approximately 34.3% in CTI (a company incorporated
under the laws of England and Wales). The Company led a consortium of
investors which provided the equity financing for CTI. The funds invested by
the consortium were used by CTI to purchase, through a wholly owned
subsidiary, the domestic broadcast transmission division of the British
Broadcasting Corporation (the "BBC"). The cost of the Company's investment in
CTI amounted to approximately $57,542,000. The Company accounts for its
investment in CTI utilizing the equity method of accounting.
In March 1997, as compensation for leading the investment consortium, the
Company received a fee from CTI amounting to approximately $1,165,000. This
fee was recorded as other income by the Company when received. In addition,
the Company received approximately $1,679,000 from CTI as reimbursement for
costs incurred prior to the closing of the purchase from the BBC. At December
31, 1996, approximately $953,000 of such reimbursable costs are included in
other receivables on the Company's consolidated balance sheet.
The Company receives a monthly service fee from CTI of approximately $33,000
as compensation for certain management services. This fee is included in
network services and other revenues on the Company's consolidated statement of
operations.
F-23
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CTI uses the British pound as the functional currency for its operations.
The Company translates its equity in the earnings and losses of CTI using the
average exchange rate for the period, and translates its investment in CTI
using the exchange rate at the end of the period. The cumulative effect of
changes in the exchange rate is recorded as a translation adjustment in
stockholders' equity.
In June 1997, as compensation for the successful completion of the
investment in CTI and certain other acquisitions and investments, the Company
paid bonuses to two of its executive officers totaling $913,000. These bonuses
are included in corporate development expenses on the Company's consolidated
statement of operations.
Summarized financial information for CTI is as follows:
<TABLE>
<CAPTION>
December 31,
1997
-------------------------
(In thousands of dollars)
<S> <C>
Current assets................................... $ 37,510
Property and equipment, net...................... 341,737
Goodwill, net.................................... 76,029
--------
$455,276
========
Current liabilities.............................. $ 48,103
Long-term debt................................... 237,299
Other liabilities................................ 3,453
Redeemable preferred stock....................... 174,944
Stockholders' equity (deficit)................... (8,523)
--------
$455,276
========
</TABLE>
<TABLE>
<CAPTION>
Ten Months Ended
December 31,
1997
-------------------------
(In thousands of dollars)
<S> <C>
Net revenues..................................... $103,531
Operating expenses............................... 86,999
--------
Operating income................................. 16,532
Interest income.................................. 553
Interest expense and amortization of deferred fi-
nancing costs................................... (20,404)
Provision for income taxes....................... --
--------
Net loss......................................... $ (3,319)
========
</TABLE>
Investment in Visual Intelligence Systems, Inc. ("VISI")
On June 23, 1997, the Company made an investment in VISI of $2,000,000 (of
which $100,000 was paid in 1996). VISI intends to provide computerized
geographic information for a variety of business applications, including the
acquisition and design of telecommunications sites. The Company's investment
was made in the form of 15,000 shares of VISI's common stock at a price of
$2.00 per share, along with a Convertible Subordinated Note for $1,970,000
(the "VISI Note"). The VISI Note is convertible (at the option of the Company)
into shares of VISI's common stock at a conversion price of $2.00 per share,
bears interest at 7.11% per year and is due on May 31, 2007. The 15,000 shares
of common stock purchased by the Company represent an ownership interest of
approximately 1.14% in VISI. The Company accounts for its investment in VISI's
common stock utilizing the cost method of accounting.
F-24
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1996 1997
------- --------
(In thousands of
dollars)
<S> <C> <C>
Senior Credit Facility................................... $ -- $ 4,700
Bank Credit Agreement:
Revolving Credit Facility.............................. 15,700 --
Term Note.............................................. 2,300 --
10 5/8% Senior Discount Notes due 2007, net of discount.. -- 151,593
Promissory Note payable to PCI........................... 632 --
Convertible Secured Subordinated Notes payable to stock-
holder.................................................. 3,125 --
Other.................................................... 295 --
------- --------
22,052 156,293
Less: current maturities................................. (140) --
------- --------
$21,912 $156,293
======= ========
</TABLE>
Bank Credit Agreement and Senior Credit Facility
On April 26, 1995, CTC entered into a credit agreement with a bank (as
amended, the "Bank Credit Agreement"). The Bank Credit Agreement consisted of
secured revolving lines of credit (the "Revolving Credit Facility") and a
$2,300,000 term note (the "Term Note"). On January 17, 1997, the Bank Credit
Agreement was amended to: (i) increase the available borrowings under the
Revolving Credit Facility to $50,000,000; (ii) repay the Term Note, along with
accrued interest thereon, with borrowings under the Revolving Credit Facility;
and (iii) extend the termination date for the Bank Credit Agreement to
December 31, 2003. Available borrowings under the Revolving Credit Facility
were generally to be used to construct new towers and to finance a portion of
the purchase price for towers and related assets. The amount of available
borrowings was determined based on the current financial performance (as
defined) of: (i) the assets to be acquired; and (ii) assets acquired in
previous acquisitions. In addition, up to $5,000,000 of borrowing availability
under the Revolving Credit Facility could be used for letters of credit.
In October 1997, the Bank Credit Agreement was amended to (i) increase the
available borrowings to $100,000,000; (ii) include the lending bank under
Crown's bank credit agreement as a participating lender; and (iii) extend the
maturity date to December 31, 2004 (as amended, the "Senior Credit Facility").
On October 31, 1997, additional borrowings under the Senior Credit Facility,
along with the proceeds from the October issuance of Senior Preferred Stock
(see Note 7), were used to repay (i) the promissory note payable to the former
stockholders of Crown and (ii) the outstanding borrowings under Crown's bank
credit agreement (see Note 2). The Company repaid all of the outstanding
borrowings under the Senior Credit Facility with a portion of the proceeds
from the issuance of its 10 5/8% Senior Discount Notes (as discussed below).
As of December 31, 1997, approximately $93,600,000 of borrowings was available
under the Senior Credit Facility, of which $5,000,000 was available for
letters of credit. There were no letters of credit outstanding as of December
31, 1997. Upon the merger of CTC into CCI in January 1998, CCI became the
primary borrower under the Senior Credit Facility.
The amount of available borrowings under the Senior Credit Facility will
decrease by $5,000,000 at the end of each calendar quarter beginning on March
31, 2001 until December 31, 2004, at which time any remaining borrowings must
be repaid. Under certain circumstances, CCI may be required to make principal
prepayments
F-25
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
under the Senior Credit Facility in an amount equal to 50% of excess cash flow
(as defined), the net cash proceeds from certain asset sales or the net cash
proceeds from certain sales of equity or debt securities by the Company.
The Senior Credit Facility is secured by substantially all of the assets of
the Company's subsidiaries and the Company's pledge of the capital stock of
its subsidiaries. In addition, the Senior Credit Facility is guaranteed by the
Company. As of December 31, 1997, borrowings under the Senior Credit Facility
bear interest at a rate per annum, at the Company's election, equal to the
bank's prime rate plus 1.5% or a Eurodollar interbank offered rate (LIBOR)
plus 3.25% (10.0% and 8.98%, respectively, at December 31, 1997). The interest
rate margins may be reduced by up to 2.25% (non-cumulatively) based on a
financial test, determined quarterly. As of December 31, 1997, the financial
test permitted a reduction of 1.5% in the interest rate margin for prime rate
borrowings and 2.25% in the interest rate margin for LIBOR borrowings.
Interest on prime rate loans is due quarterly, while interest on LIBOR loans
is due at the end of the period (from one to three months) for which such
LIBOR rate is in effect. The Senior Credit Facility requires CCI to maintain
certain financial covenants and places restrictions on CCI's ability to, among
other things, incur debt and liens, pay dividends, make capital expenditures,
dispose of assets, undertake transactions with affiliates and make
investments.
10 5/8% Senior Discount Notes due 2007 (the "Notes")
On November 25, 1997, the Company issued $251,000,000 aggregate principal
amount of the Notes for cash proceeds of $150,010,000 (net of original issue
discount). The Company used a portion of the net proceeds from the sale of the
Notes to (i) repay all of the outstanding borrowings, including accrued
interest thereon, under the Senior Credit Facility; (ii) repay the promissory
notes payable, including accrued interest thereon, to the former stockholders
of TEA (see Note 2); (iii) repay the Promissory Note payable, including
accrued interest thereon, to PCI; and (iv) repay outstanding installment debt
assumed in connection with the Crown acquisition (see Note 2).
The Notes will not pay any interest until May 15, 2003, at which time semi-
annual interest payments will commence and become due on each May 15 and
November 15 thereafter. The maturity date of the Notes is November 15, 2007.
The Notes are net of unamortized discount of $99,407,000 at December 31, 1997.
The Notes are redeemable at the option of the Company, in whole or in part,
on or after November 15, 2002 at a price of 105.313% of the principal amount
plus accrued interest. The redemption price is reduced annually until November
15, 2005, after which time the Notes are redeemable at par. Prior to November
15, 2000, the Company may redeem up to 35% of the aggregate principal amount
of the Notes, at a price of 110.625% of the accreted value thereof, with the
net cash proceeds from a public offering of the Company's common stock.
The Notes are senior indebtedness of the Company; however, they are
unsecured and effectively subordinate to the liabilities of the Company's
subsidiaries, which include outstanding borrowings under the Senior Credit
Facility. The indenture governing the Notes (the "Indenture") places
restrictions on the Company's ability to, among other things, pay dividends
and make capital distributions, make investments, incur additional debt and
liens, issue additional preferred stock, dispose of assets and undertake
transactions with affiliates. As of December 31, 1997, the Company was
precluded from paying dividends on its capital stock under the terms of the
Indenture.
Reporting Requirements Under the Indenture (Unaudited)
As of December 31, 1997, the Company does not have any Unrestricted
Subsidiaries (as defined in the Indenture). The following information (as such
capitalized terms are defined in the Indenture) is presented solely
F-26
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
for the purpose of measuring compliance with respect to the terms of the
Indenture; such information is not intended as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles). Furthermore, the Company's
measure of the following information may not be comparable to similarly titled
measures of other companies.
<TABLE>
<CAPTION>
(In
thousands
of
dollars)
---------
<S> <C>
Tower Cash Flow, for the three months ended December 31, 1997.... $ 3,118
========
Consolidated Cash Flow, for the twelve months ended December 31,
1997............................................................ $ 13,150
Less: Tower Cash Flow, for the twelve months ended December 31,
1997............................................................ (10,625)
Plus: four times Tower Cash Flow, for the three months ended De-
cember 31, 1997................................................. 12,472
--------
Adjusted Consolidated Cash Flow, for the twelve months ended De-
cember 31, 1997................................................. $ 14,997
========
</TABLE>
Promissory Note Payable to PCI
This note bore interest at a rate of 8% per annum, called for equal annual
payments of principal and interest and was secured by the tower sites
purchased from PCI. The Company repaid this note with a portion of the
proceeds from the issuance of its 10 5/8% Senior Discount Notes (as discussed
above).
Convertible Secured Subordinated Notes Payable to Stockholder
These notes accrued interest at a rate of 8% per annum, payable at maturity,
and were secured by substantially all of CTC's assets. The notes provided that
the holder had the option, at any time, to convert such notes, in whole or in
part, into shares of the Company's Series A Convertible Preferred Stock at a
conversion price of $6.00 per share. On April 27, 1995, a portion of the notes
with aggregate principal balances of $743,000 was converted into 123,742
shares of the Company's stock and the related accrued interest was paid to the
holder. On February 24, 1997, the remaining $3,125,000 principal amount of the
notes was converted into 520,878 shares of the Company's stock and, by mutual
agreement with the holder, the related accrued interest was forfeited. Upon
conversion of the notes, the principal amount and the forfeited interest were
accounted for as increases to redeemable preferred stock and additional paid-
in capital, respectively.
Restricted Net Assets of Subsidiaries
Under the terms of the Senior Credit Facility, the Company's subsidiaries
are limited in the amount of dividends which can be paid to the Company. The
amount of such dividends is limited to (i) $6,000,000 per year until October
31, 2002, and $33,000,000 per year thereafter, and (ii) an amount to pay
income taxes attributable to the Company's subsidiaries. The restricted net
assets of the Company's subsidiaries totaled $232,229,000 at December 31,
1997.
Interest Rate Swap Agreement
The interest rate swap agreement has an outstanding notional amount of
$17,925,000 at January 29, 1997 (inception) and terminates on February 24,
1999. The Company pays a fixed rate of 6.28% on the notional amount and
receives a floating rate based on LIBOR. This agreement effectively changes
the interest rate on $17,925,000 of borrowings under the Senior Credit
Facility from a floating rate to a fixed rate of 6.28% plus the applicable
margin. The Company does not believe there is any significant exposure to
credit risk due to the creditworthiness of the counterparty. In the event of
nonperformance by the counterparty, the Company's loss would be limited to any
unfavorable interest rate differential.
F-27
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1995 1996 1997
------ ------ ------
(In thousands of dollars)
<S> <C> <C> <C>
Current:
Puerto Rico................................ $ -- $ 10 $ 49
====== ====== ======
</TABLE>
A reconciliation between the provision for income taxes and the amount
computed by applying the federal statutory income tax rate to the loss before
income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1995 1996 1997
------ ------ ------
(In thousands of dollars)
<S> <C> <C> <C>
Benefit for income taxes at statutory rate... $ (7) $ (322) $(4,044)
Amortization of intangible assets ........... -- -- 478
Puerto Rico taxes............................ -- 10 49
Expenses for which no federal tax benefit was
recognized.................................. 5 5 28
Changes in valuation allowances.............. 2 315 3,650
Other........................................ -- 2 (112)
------ ------ -------
$ -- $ 10 $ 49
====== ====== =======
</TABLE>
The components of the net deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1997
-------- --------
(In thousands of dollars)
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment........................ $ 1,307 $ 2,487
Intangible assets............................. 49 276
Puerto Rico earnings.......................... -- 75
Other......................................... -- 38
-------- --------
Total deferred income tax liabilities....... 1,356 2,876
-------- --------
Deferred income tax assets:
Net operating loss carryforwards.............. 1,639 6,800
Noncompete agreement.......................... 19 37
Receivables allowance......................... 15 6
Valuation allowances.......................... (317) (3,967)
-------- --------
Total deferred income tax assets, net....... 1,356 2,876
-------- --------
Net deferred income tax liabilities............. $ -- $ --
======== ========
</TABLE>
Valuation allowances of $317,000 and $3,967,000 were recognized to offset
net deferred income tax assets as of December 31, 1996 and 1997, respectively.
At December 31, 1997, the Company has net operating loss carryforwards of
approximately $20,000,000 which are available to offset future federal taxable
income. These loss carryforwards will expire in 2010 through 2012. The
utilization of the loss carryforwards is subject to certain limitations.
F-28
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Redeemable Preferred Stock
In August 1997, the Company issued 292,995 shares of its Senior Convertible
Preferred Stock (the "Senior Preferred Stock") at a price of $100 per share.
The net proceeds received by the Company from the sale of such shares amounted
to approximately $29,266,000, most of which was used to pay the cash portion
of the purchase price for Crown (see Note 2). In October 1997, the Company
issued an additional 364,500 shares of its Senior Preferred Stock at a price
of $100 per share. The net proceeds received by the Company from the sale of
such shares amounted to $36,450,000. This amount, along with borrowings under
the Senior Credit Facility, was used to repay the promissory note from the
Crown acquisition (see Note 2).
The holders of the Senior Preferred Stock are entitled to receive cumulative
dividends at the rate of 12.5% per share, compounded annually. At December 31,
1997, such accrued and unpaid dividends amounted to $2,199,000. Any payment of
such dividends would be in the form of additional shares of Senior Preferred
Stock until such time as the Company is permitted to pay cash dividends on its
capital stock under the terms of the Indenture (see Note 5). At the option of
the holder, each share of Senior Preferred Stock (plus any accrued and unpaid
dividends) is convertible, at any time, into shares of the Company's Class B
Common Stock at a conversion price of $7.50 (subject to adjustment in the
event of an underwritten public offering of the Company's common stock). At
the date of issuance of the Senior Preferred Stock, the Company believes that
its conversion price represents the estimated fair value of the Class B Common
Stock on that date. The holders of the Senior Preferred Stock are entitled to
vote together with the holders of the Company's other preferred stock on an
as-converted basis.
The Company has the one-time right, within one year from the date of
issuance, to redeem 50% of the outstanding shares of Senior Preferred Stock at
a price per share which represents an annualized cumulative rate of return of
18%. If not earlier converted or redeemed, the shares of Senior Preferred
Stock are subject to mandatory redemption by the Company, at a price per share
of $100 plus any accrued and unpaid dividends through that date, upon the
earlier of (i) 91 days after the tenth anniversary date of the issuance of the
Notes; or (ii) May 15, 2008. The Senior Preferred Stock also calls for a
preference, in the event of a liquidation or a change in voting control, equal
to a price per share which represents an annualized cumulative rate of return
of 18%. With respect to dividend, redemption and liquidation preferences, the
rights of the holders of the Senior Preferred Stock are senior to the
Company's other preferred and common stock.
The purchasers of the Senior Preferred Stock were also issued warrants to
purchase an aggregate 1,314,990 shares of the Company's Class B Common Stock
at an exercise price of $7.50 per share (subject to adjustment in the event of
an underwritten public offering of the Company's common stock). The warrants
are exercisable, in whole or in part, at any time until August and October of
2007. At the date of issuance of the warrants, the Company believes that the
exercise price represents the estimated fair value of the Class B Common Stock
on that date. As such, the Company has not assigned any value to the warrants
in its consolidated financial statements.
The holders of the Company's Series A Convertible Preferred Stock (the
"Series A Preferred Stock"), the Series B Convertible Preferred Stock (the
"Series B Preferred Stock") and the Series C Convertible Preferred Stock (the
"Series C Preferred Stock") (collectively, the "Series Preferred Stock") are
generally entitled to one vote per share on all matters presented to a vote of
the Company's stockholders. The holders of the Series Preferred Stock are also
entitled to receive dividends, if and when declared, at the same rate as
dividends are declared and paid with respect to the Company's common stock. At
the option of the holder, each share of Series Preferred Stock is convertible,
at any time, into five shares of the Company's Class B Common Stock. Each of
the outstanding shares of Series Preferred Stock will automatically convert
into five shares of Class B Common Stock in the event of an underwritten
public offering of the Company's common stock, subject to certain conditions.
F-29
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Upon the earlier of (i) 91 days after the tenth anniversary date of the
issuance of the Notes; or (ii) May 15, 2008, the outstanding shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are
redeemable, at the option of the holder, at a price per share of $6.00, $12.00
and $21.00, respectively, plus any accrued and unpaid dividends through the
date of redemption. The Series Preferred Stock also call for liquidation
preferences equal to such respective redemption prices. With respect to
redemption and liquidation preferences, the rights of the holders of the
Series C Preferred Stock and the Series B Preferred Stock are senior to the
Series A Preferred Stock and the common stock, and the rights of the holders
of the Series A Preferred Stock are senior to the common stock.
In February and April of 1997, the Company issued 3,529,832 shares of its
Series C Preferred Stock at a price of $21.00 per share. The net proceeds
received by the Company from the sale of the Series C Preferred Stock amounted
to approximately $74,024,000. A portion of this amount was used to purchase
the ownership interest in CTI (see Note 4).
8. Stockholders' Equity (Deficit)
Common Stock
At the option of the holder, each share of the Company's Class A Common
Stock is convertible, at any time, into 1.52315 shares of the Company's Class
B Common Stock. The holders of the Class B Common Stock are entitled to one
vote per share on all matters presented to a vote of the Company's
stockholders, and the holders of the Class A Common Stock are entitled to a
number of votes equivalent to the number of shares of Class B Common Stock
into which their shares of Class A Common Stock are convertible. The holders
of the Class A Common Stock are also entitled to receive dividends, if and
when declared, on an equivalent basis with the holders of the Class B Common
Stock. In the event of an underwritten public offering of its common stock
which results in the conversion of the Preferred Stock (see Note 7), the
Company may, at its option, require that all outstanding shares of Class A
Common Stock be converted into Class B Common Stock.
In March 1997, the Company repurchased, and subsequently retired, 814,790
shares of its common stock from a member of the Company's Board of Directors
at a cost of approximately $3,422,000. Of this amount, $1,311,000 was recorded
as compensation cost and is included in corporate development expense on the
Company's consolidated statement of operations.
F-30
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock Options
In 1995, the Company adopted the Crown Castle International Corp. 1995 Stock
Option Plan (as amended, the "1995 Stock Option Plan"). Up to 5,765,000 shares
of the Company's Class B Common Stock are reserved for awards granted to
certain employees, consultants and non-employee directors of the Company and
its subsidiaries or affiliates. These options generally vest over periods of
up to five years from the date of grant (as determined by the Company's Board
of Directors) and have a maximum term of ten years from the date of grant. A
summary of awards granted under the 1995 Stock Option Plan is as follows for
the years ended December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
------------------------ ------------------------ -------------------------
Weighted- Weighted- Weighted-
Number of Average Number of Average Number of Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year...... -- -- 825,000 $ .53 1,050,000 .89
Options granted......... 825,000 $.53 225,000 2.22 3,042,500 5.46
Options exercised....... -- -- -- -- (363,125) .53
Options forfeited....... -- -- -- -- (35,000) 1.20
------- --------- ---------
Options outstanding at
end of year............ 825,000 .53 1,050,000 .89 3,694,375 4.69
======= ========= =========
Options exercisable at
end of year............ -- -- 721,250 $ .43 728,875 2.49
======= ========= =========
</TABLE>
In November 1996, options which were granted in 1995 for the purchase of
690,000 shares were modified such that those options became fully vested. A
summary of options outstanding as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Number of Remaining Number of
Exercise Options Contractual Options
Price Outstanding Life Exercisable
-------- ----------- ----------- -----------
<S> <C> <C> <C>
$ .40 345,000 8.0 years 345,000
1.20 93,750 7.9 years 38,750
1.60 50,000 8.4 years 12,500
2.40 175,000 8.8 years 43,750
4.20 1,718,125 9.5 years 126,375
6.00 325,000 9.8 years 162,500
7.50 987,500 9.9 years --
--------- -------
3,694,375 9.4 years 728,875
========= =======
</TABLE>
F-31
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The weighted-average fair value of options granted during the years ended
December 31, 1995, 1996 and 1997 was $0.09, $0.50 and $1.30, respectively. The
fair value of each option was estimated on the date of grant using the Black-
Scholes option-pricing model and the following weighted-average assumptions
about the options (the minimum value method):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate........................ 5.3% 6.4% 6.1%
Expected life.................................. 3.2 years 4.0 years 4.5 years
Expected volatility............................ 0% 0% 0%
Expected dividend yield........................ 0% 0% 0%
</TABLE>
The exercise prices for options granted during the years ended December 31,
1995, 1996 and 1997 were equal to or in excess of the estimated fair value of
the Company's Class B Common Stock at the date of grant. As such, no
compensation cost was recognized for stock options during those years (see
Note 1). If compensation cost had been recognized for stock options based on
their fair value at the date of grant, the Company's pro forma net loss for
the years ended December 31, 1995, 1996 and 1997 would have been $33,000
($0.01 per share), $973,000 ($0.28 per share) and $12,586,000 ($2.37 per
share), respectively. The pro forma effect of stock options on the Company's
net loss for those years may not be representative of the pro forma effect for
future years due to the impact of vesting and potential future awards.
Shares Reserved For Issuance
At December 31, 1997, the Company had the following shares reserved for
future issuance:
<TABLE>
<S> <C>
Class B Common Stock:
Senior Preferred Stock.......................................... 9,050,060
Series A Preferred Stock........................................ 6,916,665
Series B Preferred Stock........................................ 4,322,840
Series C Preferred Stock........................................ 17,649,160
Class A Common Stock............................................ 1,586,460
1995 Stock Option Plan.......................................... 5,765,000
Warrants........................................................ 1,314,990
----------
46,605,175
==========
</TABLE>
9. Employee Benefit Plans
The Company and its subsidiaries have various defined contribution savings
plans covering substantially all employees. Depending on the plan, employees
may elect to contribute up to 15% or 20% of their eligible compensation.
Certain of the plans provide for partial matching of such contributions. The
cost to the Company for these plans amounted to $98,000 for the year ended
December 31, 1997.
10. Related Party Transactions
The Company leases office space in a building formerly owned by its Chief
Executive Officer. Lease payments for such office space amounted to $22,000,
$50,000 and $130,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
Included in other receivables at December 31, 1997 are amounts due from
employees of the Company totaling $499,000.
F-32
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Commitments and Contingencies
At December 31, 1997, minimum rental commitments under operating leases are
as follows: years ending December 31, 1998--$2,634,000; 1999--$2,483,000;
2000--$2,021,000; 2001--$1,791,000; 2002--$1,131,000; thereafter--$17,228,000.
Rental expense for operating leases was $208,000, $277,000 and $1,712,000 for
the years ended December 31, 1995, 1996 and 1997, respectively.
The Company is involved in various claims, lawsuits and proceedings arising
in the ordinary course of business. While there are uncertainties inherent in
the ultimate outcome of such matters and it is impossible to presently
determine the ultimate costs that may be incurred, management believes the
resolution of such uncertainties and the incurrence of such costs should not
have a material adverse effect on the Company's consolidated financial
position or results of operations.
12. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk are primarily cash and cash equivalents and trade receivables.
The Company mitigates its risk with respect to cash and cash equivalents by
maintaining such deposits at high credit quality financial institutions and
monitoring the credit ratings of those institutions.
The Company derives the largest portion of its revenues from customers in
the wireless telecommunications industry. In addition, the Company has
concentrations of operations in certain geographic areas (primarily
Pennsylvania, Texas, New Mexico, Arizona and Puerto Rico). The Company
mitigates its concentrations of credit risk with respect to trade receivables
by actively monitoring the creditworthiness of its customers. Historically,
the Company has not incurred any significant credit related losses.
For the years ended December 31, 1995, 1996 and 1997, the Company's revenues
from PCI and Nextel amounted to $2,566,000, $2,634,000 and $5,998,000,
respectively.
13. Quarterly Financial Information (Unaudited)
Summary quarterly financial information for the years ended December 31,
1996 and 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(In thousands of dollars, except per
share amounts)
<S> <C> <C> <C> <C>
1996:
Net revenues....................... $ 1,221 $1,238 $ 1,846 $ 1,902
Operating income................... 306 71 196 90
Net loss........................... (32) (280) (243) (402)
Loss per common share--basic and
diluted........................... (0.01) (0.08) (0.07) (0.11)
1997:
Net revenues....................... $ 1,994 $4,771 $11,481 $13,159
Operating income (loss)............ (1,293) (921) 61 (1,299)
Net loss........................... (443) (1,706) (4,001) (5,792)
Loss per common share--basic and
diluted........................... (0.13) (0.51) (0.62) (0.69)
</TABLE>
F-33
<PAGE>
CROWN CASTLE INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Subsequent Events (Unaudited)
On April 24, 1998, the Company entered into a share exchange agreement with
certain shareholders of CTI pursuant to which certain of CTI's shareholders
have agreed to exchange their shares of CTI for shares of the Company. Upon
the consummation of the exchange, the Company's ownership of CTI will increase
from approximately 34.3% to approximately 80%. Consummation of the share
exchange is subject to a number of significant conditions, including certain
third party consents and the consummation of an initial public offering of
common stock by the Company.
In connection with the share exchange, the Company intends to offer shares
of its common stock in an underwritten initial public offering during the
summer of 1998. On June 19, 1998, a registration statement in respect of such
initial public offering was filed with the Securities and Exchange Commission
(as amended, the "Registration Statement") and any securities offered in such
initial public offering will only be offered by means of a prospectus forming
a part of such Registration Statement.
In anticipation of such initial public offering, the Company (i) amended and
restated the 1995 Stock Option Plan to, among other things, authorize the
issuance of up to 18,000,000 shares of common stock pursuant to awards made
thereunder and (ii) approved an amendment to its certificate of incorporation
to increase the number of authorized shares of common and preferred stock to
690,000,000 shares and 10,000,000 shares, respectively, and to effect a five-
for-one stock split for the shares of common stock then outstanding. The
effect of the stock split has been presented retroactively in the Company's
consolidated financial statements for all periods presented.
During the period from April 24, 1998 through July 15, 1998, the Company
granted options to employees and executives for the purchase of 3,236,980
shares of its common stock at an exercise price of $7.50 per share. Of such
options, options for 1,810,730 shares will vest upon consummation of the
initial public offering and the remaining options for 1,426,250 shares will
vest at 20% per year over five years, beginning one year from the date of
grant. In addition, the Company has assigned its right to repurchase shares of
its common stock from a stockholder (at a price of $6.26 per share) to two
individuals (including an expected director nominee) with respect to 100,000
of such shares. Since the granting of these options and the assignment of
these rights to repurchase shares occurred subsequent to the date of the share
exchange agreement with CTI's shareholders and at prices substantially below
the expected price to the public in the initial public offering, the Company
will record a non-cash compensation charge related to these options and shares
based upon the difference between the respective exercise and purchase prices
and the price to the public in the initial public offering. Such compensation
charge will total approximately $18.4 million, of which approximately $10.6
million will be recognized upon consummation of the initial public offering
(for such options and shares which vest upon consummation of the initial
public offering), and the remaining $7.8 million will be recognized over five
years (approximately $1.6 million per year) through the second quarter of
2003.
F-34
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Owners of Crown Communications,
Crown Network Systems, Inc.,
Crown Mobile Systems, Inc., Airport
Communications, Inc. and E-90, Ltd.:
We have audited the accompanying combined statements of income and cash
flows of Crown Communications, Crown Network Systems, Inc., Crown Mobile
Systems, Inc., Airport Communications, Inc. and E-90, Ltd. (collectively,
Crown Communications) for the years ended December 31, 1995 and 1996 and for
the seven month period ended July 31, 1997. These combined financial
statements are the responsibility of Crown Communications' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined results of operations and cash
flows of Crown Communications for the years ended December 31, 1995 and 1996
and for the seven month period ended July 31, 1997 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
March 23, 1998
F-35
<PAGE>
CROWN COMMUNICATIONS
COMBINED STATEMENT OF INCOME
(In thousands of dollars)
<TABLE>
<CAPTION>
Seven
Years ended Months
December 31, Ended
---------------- July 31,
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Net revenues:
Site rental....................................... $ 3,632 $ 5,120 $ 4,550
Network services and other........................ 7,384 14,260 13,137
------- ------- -------
11,016 19,380 17,687
Operating costs and expenses:
Site rental....................................... 763 1,691 1,421
Network services and other........................ 3,944 8,632 5,841
General and administrative expenses............... 2,625 3,150 3,761
Depreciation and amortization..................... 568 1,168 1,006
------- ------- -------
7,900 14,641 12,029
------- ------- -------
Operating income................................ 3,116 4,739 5,658
Other income (expense):
Interest and other income (expense)............... 19 (53) (26)
Interest expense.................................. (785) (1,175) (925)
------- ------- -------
Net income...................................... $ 2,350 $ 3,511 $ 4,707
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-36
<PAGE>
CROWN COMMUNICATIONS
COMBINED STATEMENT OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Seven
Months
Years ended Ended
December 31, July
------------------ 31,
1995 1996 1997
-------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 2,350 $ 3,511 $ 4,707
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 568 1,168 1,006
Gain on sale of equipment....................... (71) -- --
Changes in operating assets and liabilities:
Accounts receivable............................ 205 (1,594) (1,612)
Inventory...................................... (173) 73 (527)
Prepaid expenses and other current assets...... (22) (117) (13)
Accrued network services....................... -- (653) 653
Deferred installation costs.................... 356 (154) 154
Other assets................................... (20) (36) (78)
Accounts payable............................... 149 1,195 419
Accrued expenses............................... 216 508 (350)
Customer deposits.............................. 43 (2) 106
Deferred revenue............................... (627) 263 734
-------- -------- -------
Net cash provided by operating activities..... 2,974 4,162 5,199
-------- -------- -------
Cash flows from investing activities:
Capital expenditures............................. (5,670) (8,658) (12,425)
Proceeds from sale of equipment.................. -- 6 --
-------- -------- -------
Net cash used for investing activities........ (5,670) (8,652) (12,425)
-------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of notes payable.......... 14,929 22,614 9,256
Principal payments on notes payable.............. (11,689) (15,808) (706)
Distributions to owners.......................... (873) (2,809) (1,532)
Capital contribution............................. -- 103 --
-------- -------- -------
Net cash provided by financing activities..... 2,367 4,100 7,018
-------- -------- -------
Net decrease in cash and cash equivalents......... (329) (390) (208)
Cash and cash equivalents at beginning of period.. 1,093 764 374
-------- -------- -------
Cash and cash equivalents at end of period........ $ 764 $ 374 $ 166
======== ======== =======
Supplemental disclosure of cash flow information--
interest paid.................................... $ 764 $ 1,175 $ 775
======== ======== =======
</TABLE>
See accompanying notes to combined financial statements.
F-37
<PAGE>
CROWN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(In thousands of dollars)
(1)Basis of Presentation and Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying combined financial statements include the accounts of Crown
Communications (CCM), a sole proprietorship, Crown Network Systems, Inc.
(CNS), a subchapter S corporation, Crown Mobile Systems, Inc. (CMS), a
subchapter S corporation, Airport Communications, Inc. (ACI), a subchapter S
corporation and E-90, Ltd. (E-90), a Pennsylvania Business Trust
(collectively, Crown Communications or the Company). These entities are all
under common ownership. All significant intercompany accounts and transactions
have been eliminated.
Crown Communications is a communication site development and management
company. The Company's core business is the development of high density
communication facilities. The majority of these facilities are located
throughout western Pennsylvania. The Company leases antenna and transmitter
space on communication towers to companies using or providing wireless
telephone, paging and specialized mobile radio services.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(b) Cash and Cash Equivalents
The Company considers cash in depository institutions and short-term
investments with original maturities of three months or less to be cash and
cash equivalents.
(c) Inventory
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(d) Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation.
Depreciation on property and equipment is computed utilizing methods which
approximate the straight-line method over the estimated useful lives of the
assets. Additions, renewals and improvements are capitalized, while
maintenance and repairs are expensed. Upon the sale or retirement of an asset,
the related cost and accumulated depreciation are removed from the accounts
and any gain or loss is recognized.
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("SFAS 121"). SFAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS 121 is effective for fiscal years beginning after December
15, 1995. The adoption of SFAS 121 by the Company in 1996 did not have a
material impact on its combined financial statements.
F-38
<PAGE>
CROWN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In thousands of dollars)
(e) Other Assets
Other assets include deferred financing costs which are amortized over the
estimated term of the related borrowing.
(f) Revenue Recognition
Equipment sales revenues are recognized when products are delivered to
customers.
Site rental revenue is recognized ratably over the terms of the respective
leases. Such leases have terms that are generally five years.
Network services revenues are recognized under a method which approximates
the completed contract method. This method is used because typical network
services are completed in 3 months or less and financial position and results
of operations do not vary significantly from those which would result from use
of the percentage-of-completion method. The network services are considered
complete at the point in time in which the terms and conditions of the
contract and/or agreement have been substantially completed. Revenues from
completed contracts which have not been billed at the end of an accounting
period are presented as accrued network services.
Costs and revenues associated with installations not complete at the end of
an accounting period are deferred and recognized when the installation becomes
operational. Any losses on contracts are recognized at such time as they
become known.
(2) Income Taxes
CCM is operated as a sole proprietorship and all income or loss is passed
through to the personal tax return of the owners. The shareholders for CNS,
CMS and ACI have elected under subchapter S of the Internal Revenue Code to
pass through all income or loss to the individual tax return of the
shareholders. E-90 is operated as a Pennsylvania Business Trust and has
elected to be taxed as a partnership. Accordingly, no provision for income
taxes has been recorded in the accompanying financial statements.
(3) Retirement Savings Plan
The Company sponsors a Retirement Savings Plan (the "Plan"), which qualifies
for treatment under section 401(k) of the Internal Revenue Code. Substantially
all full-time employees are eligible to participate by electing to contribute
1% to 15% of their gross pay to the Plan. Under the Plan, the Company matches
a portion of each employee's contribution up to certain limits. Each
employee's contribution is fully vested when contributed, and the Company's
matching contribution begins vesting after an employee has completed two years
of service and becomes fully vested after six years of service. For the years
ended December 31, 1995 and 1996, and the seven months ended July 31, 1997,
the Company's expense for the Plan was $6, $59 and $44, respectively.
F-39
<PAGE>
CROWN COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In thousands of dollars)
(4) Commitments and Contingencies
The Company leases land, office space and site space on towers and rooftops
through contracts that expire in various years through 2095. The Company has
purchase and renewal options and is committed to various escalation provisions
under certain of these leases. Rental expense under operating leases was $306,
$669 and $718 for the years ended December 31, 1995 and 1996, and the seven
months ended July 31, 1997, respectively. At July 31, 1997, minimum rental
commitments under operating leases are as follows:
<TABLE>
<CAPTION>
Years ending
December 31,
------------
<S> <C>
1997............................................................ $ 659
1998............................................................ 1,800
1999............................................................ 1,700
2000............................................................ 1,500
2001............................................................ 1,300
Thereafter...................................................... 17,200
-------
$24,159
=======
</TABLE>
The Company is involved in various claims and legal actions arising in the
ordinary course of business. While there are uncertainties inherent in the
ultimate outcome of such matters and it is impossible to presently determine
the ultimate costs that may be incurred, management believes the resolution of
such uncertainties and the incurrence of such costs should not have a material
adverse effect on the Company's combined financial position or results of
operations.
(5) Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk are primarily cash and cash equivalents and accounts
receivable. The Company mitigates its risk with respect to cash and cash
equivalents by maintaining such deposits at high credit quality financial
institutions and monitoring the credit ratings of those institutions.
The Company derives the largest portion of its revenues from customers in
the wireless telecommunications industry. In addition, the Company has
concentrations of operations in western Pennsylvania. The Company mitigates
its concentrations of credit risk with respect to accounts receivable by
actively monitoring the creditworthiness of its customers. Historically, the
Company has not incurred any significant credit related losses.
For the year ended December 31, 1995, the Company recognized revenues from
two individual customers in the amount of $4,139 and $668. For the year ended
December 31, 1996, the Company recognized revenues from three individual
customers in the amount of $3,700, $2,600 and $1,400. For the seven months
ended July 31, 1997, the Company recognized revenues from three individual
customers in the amount of $4,784, $4,246 and $2,377.
(6) Subsequent Events
In July 1997, the owners of CCM, CNS and CMS entered into an asset purchase
and merger agreement with Crown Castle International Corp. ("CCIC"). In August
1997, such agreement was amended and restated, and CCIC acquired (i)
substantially all of the assets, net of outstanding liabilities, of CCM and
(ii) all of the outstanding common stock of CNS and CMS.
F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
TEA Group Incorporated
We have audited the balance sheet of TEA Group Incorporated as of December
31, 1995, and the related statements of income, shareholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TEA Group Incorporated as
of December 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Atlanta, Georgia
February 28, 1996
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TEA Group Incorporated:
We have audited the accompanying balance sheet of TEA Group Incorporated as
of December 31, 1996, and the related statements of income, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TEA Group Incorporated as
of December 31, 1996, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
August 15, 1997
F-42
<PAGE>
TEA GROUP INCORPORATED
BALANCE SHEET
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
December 31,
--------------
1995 1996
ASSETS ------ ------
<S> <C> <C>
Current assets:
Cash.............................................................. $ 5 $ --
Accounts receivable, net of allowance for doubtful accounts of
$100 and $1 at December 31, 1995 and 1996, respectively (note 5):
Billed.......................................................... 4,637 3,553
Unbilled........................................................ 1,335 465
Employee advances................................................. -- 14
Note and accrued interest receivable--related party............... 58 6
Prepaid expenses.................................................. 24 3
------ ------
Total current assets.......................................... 6,059 4,041
------ ------
Property and equipment, at cost:
Leasehold improvements............................................ 9 9
Office and computer equipment..................................... 757 831
Furniture and fixtures............................................ 343 345
Computer software................................................. -- 85
------ ------
1,109 1,270
Less accumulated depreciation and amortization.................... (653) (787)
------ ------
456 483
Other assets........................................................ 62 47
------ ------
$6,577 $4,571
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable (note 2)............................................ $2,733 $ 107
Accounts payable.................................................. 1,328 1,366
Accrued compensation and related benefits......................... 557 445
Other accrued expenses............................................ -- 52
------ ------
Total current liabilities..................................... 4,618 1,970
Commitments (note 3)
Shareholders equity (note 7):
Common stock, $1 par value, 10,000 shares authorized; 550 shares
issued and
outstanding...................................................... 1 1
Additional paid-in capital........................................ 11 11
Retained earnings................................................. 1,947 2,589
------ ------
Total shareholders equity..................................... 1,959 2,601
------ ------
$6,577 $4,571
====== ======
</TABLE>
See accompanying notes to financial statements.
F-43
<PAGE>
TEA GROUP INCORPORATED
STATEMENT OF INCOME
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months
Years Ended Ended
December 31, March 31,
---------------- --------------
1995 1996 1996 1997
------- ------- ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Network services and other revenues, net
(note 6).................................... $23,585 $18,010 $4,376 $4,873
Operating costs and expenses:
Services and other (exclusive of deprecia-
tion and amortization).................... 18,770 14,406 3,280 4,048
General and administrative expenses........ 4,077 2,295 529 482
Depreciation and amortization.............. 127 134 31 38
------- ------- ------ ------
22,974 16,835 3,840 4,568
------- ------- ------ ------
Operating income......................... 611 1,175 536 305
Other income (expense):
Interest and other income.................. 17 3 -- --
Interest expense........................... (158) (127) (47) (5)
------- ------- ------ ------
Income before income taxes............... 470 1,051 489 300
Income taxes (note 1(d))..................... -- -- -- --
------- ------- ------ ------
Net income............................... $ 470 $ 1,051 $ 489 $ 300
======= ======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-44
<PAGE>
TEA GROUP INCORPORATED
STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
Common stock Additional Total
-------------- paid-in Retained shareholders'
Shares Amounts capital earnings equity
------ ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 550 $ 1 $11 $2,359 $2,371
Net income.............. -- -- -- 470 470
Shareholder distribu-
tions.................. -- -- -- (882) (882)
--- --- --- ------ ------
Balance at December 31,
1995................... 550 1 11 1,947 1,959
Net income.............. -- -- -- 1,051 1,051
Shareholder distribu-
tions.................. -- -- -- (409) (409)
--- --- --- ------ ------
Balance at December 31,
1996................... 550 $ 1 $11 $2,589 $2,601
=== === === ====== ======
</TABLE>
See accompanying notes to financial statements.
F-45
<PAGE>
TEA GROUP INCORPORATED
STATEMENT OF CASH FLOWS
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months
Years Ended Ended
December 31, March 31,
-------------- --------------
1995 1996 1996 1997
------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 470 $1,051 $ 489 $ 300
Adjustment to reconcile net income to net
cash provided by (used for) operating ac-
tivities:
Depreciation and amortization............. 127 134 31 38
Provision for doubtful accounts (note 6).. -- 355 125 --
Gain on sale of property and equipment,
and other assets......................... (12) (1) (1) --
Decrease (increase) in:
Billed accounts receivable.............. (1,714) 729 (103) (735)
Unbilled accounts receivable............ (336) 870 1,439 119
Other assets............................ (25) 29 (15) (73)
Increase (decrease) in:
Accounts payable........................ 381 37 (1,219) (925)
Accrued expenses........................ 142 (59) (101) 37
------ ------ ------ ------
Net cash provided by (used for) oper-
ating activities..................... (967) 3,145 645 (1,239)
------ ------ ------ ------
Cash flows from investing activities:
Purchases of property and equipment......... (250) (161) (29) (23)
Proceeds from sale of property and equip-
ment, and other assets..................... 25 1 1 --
Increase in deposits........................ 16 -- -- --
Payments received on note receivable........ -- 45 8 --
------ ------ ------ ------
Net cash used for investing activi-
ties................................. (209) (115) (20) (23)
------ ------ ------ ------
Cash flows from financing activities:
Net borrowings (repayments) under revolving
credit agreement........................... 2,057 (2,626) 276 1,262
Shareholder distributions................... (882) (409) -- --
------ ------ ------ ------
Net cash provided by (used for) fi-
nancing activities................... 1,175 (3,035) 276 1,262
------ ------ ------ ------
Net increase (decrease) in cash....... (1) (5) 901 --
Cash at beginning of period................... 6 5 5 --
------ ------ ------ ------
Cash at end of period......................... $ 5 $ -- $ 906 $ --
====== ====== ====== ======
Supplemental disclosure of cash flow informa-
tion--cash paid during the period for inter-
est.......................................... $ 149 $ 138 $ 47 $ --
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-46
<PAGE>
TEA GROUP INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
(1) Basis of Presentation and Summary of Significant Accounting Policies
(a) Basis of Presentation
TEA Group Incorporated (the "Company") provides services to the wireless
telecommunications and energy transmission industries. These services include
providing right-of-way, site acquisition, engineering design and drafting,
project management, and staff leasing to wireless telecommunications and
energy transmission companies in the United States and internationally.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of the financial statements
and revenues and expenses for the reporting period to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
The financial statements for the three months ended March 31, 1996 and 1997
are unaudited; however, they include all adjustments (consisting only of
normal recurring adjustments) which, in the opinion of management, are
necessary to present fairly the results of operations and cash flows for the
three months ended March 31, 1996 and 1997. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the entire year.
(b) Revenue Recognition
The Company's revenues are derived primarily from service contracts with
customers which provide for billings on a time and materials, cost plus
profit, or fixed price basis. Such contracts typically have terms from six
months to two years. Revenues are recognized as services are performed with
respect to the time and materials priced contracts, and are recognized using
the percentage-of-completion method for cost plus profit and fixed price
contracts, measured by the percentage of contract costs incurred to date to
estimated total contract costs. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
(c) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided over the estimated useful lives of the
assets on a straight-line basis. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the remaining lease term. Property
and equipment are depreciated over the following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Leasehold improvements.............................................. 5
Office and computer equipment....................................... 5
Furniture and fixtures.............................................. 7
Computer software................................................... 5
</TABLE>
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not
F-47
<PAGE>
TEA GROUP INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In thousands of dollars)
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. Adoption of this statement did not have an impact on
the Company's financial statements.
(d) Income Taxes
The shareholders of the Company have elected to be taxed under the
Subchapter S Corporation provisions of the Internal Revenue Code. As a result
of this election, Federal and state income taxes related to the results of
operations of the Company are passed through to, and are the responsibility
of, the Company's shareholders. Accordingly, no provision for income taxes has
been recorded in the accompanying financial statements.
(e) Fair Value of Financial Instruments
The carrying value of the notes payable approximates the estimated fair
value for this instrument since it bears interest at a floating market rate.
The estimated fair values of the Company's financial instruments, along with
the carrying amounts of the related assets (liabilities), are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
----------------- --------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -----
<S> <C> <C> <C> <C>
Cash....................................... $ 5 $ 5 $ -- $ --
Notes payable.............................. (2,733) (2,733) (107) (107)
</TABLE>
(2) Notes Payable
The Company has a revolving line of credit with a bank for working capital
purposes (as amended, the "Bank Line of Credit"). The Bank Line of Credit
provides for up to $5,000 of working capital borrowings and up to $200 of
borrowings for purchases of equipment. At December 31, 1996, outstanding
working capital borrowings under the Bank Line of Credit amounted to $107.
Borrowings are secured by the Company's receivables, property and equipment,
intangibles and cash balances, and bear interest at a rate per annum equal to
(i) the bank's prime rate or (ii) a Eurodollar interbank offered rate (LIBOR)
plus 2.45% (8.25% and 7.95%, respectively, at December 31, 1996). Interest is
payable monthly. The Bank Line of Credit requires the Company to maintain
certain financial covenants and places limitations on its ability to, among
other things, incur debt and liens, undertake transactions with affiliates and
make investments.
On July 30, 1997, the Bank Line of Credit was amended to decrease the
available borrowings to $3,000 and extend the maturity date to June 30, 1998.
Borrowings now bear interest at a rate per annum equal to LIBOR plus 2.7%
(8.39% at July 31, 1997). In addition, the amended Bank Line of Credit now
restricts the ability of the Company to pay dividends.
F-48
<PAGE>
TEA GROUP INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In thousands of dollars)
(3) Commitments
The Company has noncancelable operating leases for office space. Future
minimum lease payments under the operating leases with remaining terms of one
year or more at December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Years ending
December 31,
------------
<S> <C>
1997............................................................... $316
1998............................................................... 315
1999............................................................... 289
2000............................................................... 43
----
$963
====
</TABLE>
Rent expense under all cancelable and noncancelable operating leases for
1995 and 1996 was $459 and $608, respectively.
(4)Employee Benefit Plan
The Company maintains a 401(k) profit sharing and retirement plan (the
"Plan") for the benefit of all eligible employees. Employees may elect to
contribute up to 15% of their eligible compensation to the Plan. The Plan
provides for employer matching contributions at the discretion of the
Company's Board of Directors. The Company provided $66 and $29 in expense for
contributions for 1995 and 1996, respectively.
(5)Related Party Transactions
Accounts receivable balances at December 31, 1995 and 1996 include
approximately $398 and $94, respectively, from an affiliated company related
to expenses incurred by the Company on behalf of the affiliated company.
(6) Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk are primarily cash and trade receivables. The Company mitigates
its risk with respect to cash by maintaining such deposits at high credit
quality financial institutions and monitoring the credit ratings of those
institutions.
The Company derives the largest portion of its revenues from customers in
the wireless telecommunications and energy transmission industries. The
Company mitigates its concentrations of credit risk with respect to trade
receivables by actively monitoring the creditworthiness of its customers. In
connection with a disputed receivable with a customer, the Company wrote off
$310 during 1996.
For the year ended December 31, 1995, the Company had five customers
representing 19%, 18%, 16%, 13% and 11% of net revenues, respectively. For the
year ended December 31, 1996, the Company had two customers which accounted
for 35% and 14% of net revenues, respectively, and one customer which
accounted for approximately 59% of accounts receivable at December 31, 1996.
(7)Subsequent Event
In July 1996, the Company, its shareholders, and certain affiliated
companies entered into an agreement with Crown Castle International Corp.
("CCIC") which provided CCIC with an option to acquire various ownership
interests in the Company. On May 12, 1997, CCIC acquired all of the Company's
common stock.
F-49
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Castle Transmission Services (Holdings) Ltd:
We have audited the accompanying balance sheet of the BBC Home Service
Transmission business ("Home Service") at March 31, 1996 and the consolidated
balance sheets of Castle Transmission Services (Holdings) Ltd and its
subsidiaries ("Castle Transmission") at March 31, 1997 and December 31, 1997
and the profit and loss accounts, cash flow statements and reconciliations of
movements in corporate funding for Home Service for the year ended March 31,
1996 and the period from April 1, 1996 to February 27, 1997 and the related
consolidated profit and loss accounts, cash flow statements and
reconciliations of movements in shareholders' funds for Castle Transmission
for the period from February 28, 1997 to March 31, 1997 and the period from
April 1, 1997 to December 31, 1997. These financial statements are the
responsibility of Castle Transmission's and Home Service's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom, which do not differ in any material respect
from generally accepted auditing standards in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Home Service at March 31,
1996 and the consolidated financial position of Castle Transmission at March
31, 1997 and December 31, 1997 and the results of operations and cash flows of
Home Service for the year ended March 31, 1996 and for the period from April
1, 1996 to February 27, 1997 and of Castle Transmission for the period from
February 28, 1997 to March 31, 1997 and for the period from April 1, 1997 to
December 31, 1997 in conformity with generally accepted accounting principles
in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in
certain respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected results of operations for the year ended March 31,
1996 and the period from April 1, 1996 to February 27, 1997 for Home Service
and the period from February 28, 1997 to March 31, 1997 and from April 1, 1997
to December 31, 1997 for Castle Transmission and shareholders' equity at
March 31, 1996 for Home Service and at March 31, 1997 and December 31, 1997
for Castle Transmission to the extent summarised in Note 27 to these financial
statements.
KPMG
Chartered Accountants
Registered Auditor
London, England
March 31, 1998
F-50
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
Castle Transmission Services
BBC Home Service Transmission (Holdings) Ltd
-------------------------------------- --------------------------------------
Period Period Period
from April 1, Two from from April 1, Eight
1996 Months February 28, 1997 Months
Year Ended to Ended 1997 to Ended
March 31, February 27, February 27, to March 31, December 31, August 31,
Note 1996 1997 1997 1997 1997 1998
------ ----------- ------------- ------------ ------------ ------------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Turnover................ 3 70,367 70,614 12,805 6,433 56,752 59,033
Changes in stocks and
work in progress....... (635) (554) (150) 340 747 (1,279)
Own work capitalised.... 4,653 3,249 308 170 1,127 2,440
Raw materials and
consumables............ 14 (1,155) (387) (446) (2,410) (281)
Other external charges.. (34,750) (26,191) (4,130) (1,668) (13,811) (14,900)
Staff costs............. 4 (17,197) (16,131) (3,104) (1,421) (14,345) (16,032)
Depreciation and other
amounts written off
tangible and intangible
assets................. 5 (12,835) (13,038) (2,464) (1,819) (16,854) (15,594)
Other operating
charges................ (1,832) (2,792) (181) (344) (2,430) (2,175)
------- ------- ------- ------ ------- -------
(62,582) (56,612) (10,108) (5,188) (47,976) (47,821)
Operating profit........ 7,785 14,002 2,697 1,245 8,776 11,212
Other interest
receivable and similar
income................. -- -- -- 49 288 440
Interest payable and
similar charges........ 7 -- -- -- (969) (12,419) (9,507)
------- ------- ------- ------ ------- -------
Profit/(loss) on
ordinary activities
before and after
taxation............... 3-6, 8 7,785 14,002 2,697 325 (3,355) 2,145
Additional finance cost
of non-equity shares... -- -- -- (318) (2,862) --
------- ------- ------- ------ ------- -------
Retained profit/(loss)
for the
period................. 7,785 14,002 2,697 7 (6,217) 2,145
======= ======= ======= ====== ======= =======
</TABLE>
Neither BBC Home Service nor Castle Transmission have any recognised gains or
losses other than those reflected in the profit and loss accounts.
The accompanying notes are an integral part of these consolidated financial
statements.
F-51
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
BBC Home Service Castle Transmission Services
Transmission (Holdings) Ltd
---------------- ------------------------------------------
At March 31, At March 31, At December 31, At August 31,
1996 1997 1997 1998
Note ---------------- ------------ --------------- -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited)
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible............ 9 -- 46,573 46,056 44,404
Tangible.............. 10 202,592 206,162 206,134 229,124
------- -------- -------- --------
202,592 252,735 252,190 273,528
Current assets
Stocks................ 11 1,750 807 1,340 2,620
Debtors............... 12 4,714 10,344 13,230 11,639
Amounts owed by group
undertakings......... -- -- -- 1,273
Cash at bank and in
hand................. -- 9,688 8,152 9,198
------- -------- -------- --------
6,464 20,839 22,722 24,730
Creditors: amounts fall-
ing due within one
year................... 13 (6,627) (14,820) (29,139) (36,514)
------- -------- -------- --------
Net current
assets/(liabilities)... (163) 6,019 (6,417) (11,784)
------- -------- -------- --------
Total assets less cur-
rent liabilities....... 202,429 258,754 245,773 261,744
Creditors: amounts fall-
ing due after more than
one year............... 14 -- (154,358) (143,748) (149,535)
Provisions for liabili-
ties and charges....... 15 -- (1,723) (2,157) (2,461)
------- -------- -------- --------
Net assets.............. 202,429 102,673 99,868 109,748
======= ======== ======== ========
Capital and reserves
Corporate funding..... 202,429 -- -- --
Called up share capi-
tal.................. 16 -- 102,348 102,898 108,303
Profit and loss ac-
count................ 17 -- 325 (3,030) 1,445
------- -------- -------- --------
202,429 102,673 99,868 109,748
======= -------- -------- --------
Shareholders'
funds/(deficit)
Equity................ 109 (6,107) 109,748
Non-equity............ 102,564 105,975 --
-------- -------- --------
102,673 99,868 109,748
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-52
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
Castle Transmission Services
BBC Home Service Transmission (Holdings) Ltd
---------------------------------------- ----------------------------------------
Period from Period from Eight
Year Period from Two Months February 28, April 1, Months
Ended April 1, 1996 Ended 1997 1997 Ended
March 31, to February 27, February 27, to March 31, to December 31, August 31,
1996 1997 1997 1997 1997 1998
Note ----------- --------------- ------------ ------------ --------------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash inflow from
operating activities... 21 24,311 26,427 5,161 5,756 27,983 37,302
Returns on investment
and servicing of
finance................ 22 -- -- -- (885) (2,428) (10,076)
Capital expenditure and
financial investments.. 22 (17,190) (20,092) (711) (748) (14,361) (36,135)
Acquisitions and
disposals.............. 22 -- -- -- (251,141) (307) --
------- ------- ------ -------- -------- --------
Cash inflow/(outflow)... 7,121 6,335 4,450 (247,018) 10,887 (8,909)
Financing............... 22
Net (decrease) in
corporate funding...... (7,121) (6,335) (4,450) -- -- --
Issuance of shares...... -- -- -- 102,348 550 5,405
Increase/(decrease) in
debt................... -- -- -- 154,358 (12,973) 5,000
Capital element of
finance
lease rentals.......... -- -- -- -- -- (450)
------- ------- ------ -------- -------- --------
(7,121) (6,335) (4,450) 256,706 (12,423) 9,955
------- ------- ------ -------- -------- --------
Increase/(decrease) in
cash................... -- -- -- 9,688 (1,536) 1,046
======= ======= ====== ======== ======== ========
Reconciliation of net
cash flow to movement
in net debt............ 23
Increase/(decrease) in
cash in the period..... -- -- -- 9,688 (1,536) 1,046
Cash (inflow)/outflow
from
(increase)/decrease in
debt................... -- -- -- (154,358) 12,973 (4,550)
------- ------- ------ -------- -------- --------
Change in net debt
resulting from cash
flow................... -- -- -- (144,670) 11,437 (3,504)
New finance leases...... -- -- -- -- (711) (797)
Amortisation of bank
loan issue costs....... -- -- -- -- (2,087) (159)
Amortisation of
Guaranteed Bonds....... -- -- -- -- (55) (179)
------- ------- ------ -------- -------- --------
Movement in net debt in
the period............. -- -- -- (144,670) 8,584 (4,639)
Net debt at beginning of
the period............. -- -- -- -- (144,670) (136,086)
------- ------- ------ -------- -------- --------
Net debt at end of the
period................. -- -- -- (144,670) (136,086) (140,725)
======= ======= ====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN CORPORATE
FUNDING/SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
Castle Transmission Services
BBC Home Service Transmission (Holdings) Ltd
---------------------------------------- ----------------------------------------
Two Period from Eight
Year Period from Months February 28, Period from Months
Ended April 1, 1996 Ended 1997 April 1, 1997 Ended
March 31, to February 27, February 27, to March 31, to December 31, August 31,
1996 1997 1997 1997 1997 1998
----------- --------------- ------------ ------------ --------------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Profit/(loss) for the
period................. 7,785 14,002 2,697 325 (3,355) 2,145
Net (decrease) in
corporate funding...... (7,121) (6,335) (4,450) -- -- --
New share capital
subscribed............. -- -- -- 102,348 550 5,405
Charge on share option
arrangements........... -- -- -- -- -- 2,330
------- ------- ------- ------- ------- -------
Net
additions/(deductions)
to corporate
funding/shareholders'
funds.................. 664 7,667 (1,753) 102,673 (2,805) 9,880
Opening corporate
funding/shareholders'
funds.................. 201,765 202,429 211,849 -- 102,673 99,868
------- ------- ------- ------- ------- -------
Closing corporate
funding/shareholders'
funds.................. 202,429 210,096 210,096 102,673 99,868 109,748
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of preparation
As used in the financial statements and related notes, the terms "Castle
Transmission" or "the Group" refers to the operations of Castle Transmission
Services (Holdings) Ltd and its subsidiaries, Castle Transmission
International Ltd ("CTI") which is the successor business and Castle
Transmission (Finance) plc ("CTF"). The term "Home Service" refers to the
operations of the Home Service Transmission business of the British
Broadcasting Corporation ("BBC") which was the predecessor business.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") applicable in the
United Kingdom (UK) and comply with the financial reporting standards of the
Institute of Chartered Accountants in England and Wales. A summary of the
differences between UK GAAP and United States (US) GAAP as applicable to
Castle Transmission is set out in Note 27.
Castle Transmission Services (Holdings) Ltd (the "Company") was incorporated
on August 27, 1996 and did not trade in the period to February 27, 1997. CTI
was incorporated by the BBC on May 9, 1996 and did not trade in the period to
February 27, 1997. On February 27, 1997, the assets and liabilities of Home
Service were transferred to CTI. On February 28, 1997 CTI was acquired by the
Company. During the period between August 27, 1996 and February 27, 1997
Castle Transmission did not trade and received no income and incurred no
expenditure. Accordingly the first consolidated profit and loss account for
Castle Transmission represents the trading of Castle Transmission for the
period from February 28, 1997 to March 31, 1997. CTF was incorporated
April 9, 1997.
The financial statements for the year ended March 31, 1996 and the period
from April 1, 1996 to February 27, 1997 represent the profit and loss
accounts, balance sheet, cash flow statements and reconciliations of movements
in corporate funding of Home Service. They have been prepared from the
separate financial records and management accounts of Home Service.
Home Service was charged a management fee by the BBC representing an
allocation of certain costs including pension, information technology,
occupancy and other administration costs which were incurred centrally by the
BBC but which were directly attributable to Home Service. Management believes
such allocation is reasonable. Such costs are based on the pension arrangement
and the cost structure of the BBC and are not necessarily representative of
such costs of Castle Transmission under separate ownership.
Home Service did not incur any costs in relation to financing as necessary
funding was provided from the BBC through the corporate funding account. No
interest is charged by the BBC on such funds because there is no debt at BBC
which is attributable to Home Service.
Home Service was not a separate legal entity and therefore was not directly
subject to taxation on its results. The BBC is a not-for-profit organisation
and is not subject to taxation except to the extent of activities undertaken
with the objective of making a profit, including all external activities
(principally site sharing and commercial projects). The tax charge
attributable to Home Service has been calculated as if Home Service were under
separate ownership since April 1, 1994 and as if all of its results of
operations were subject to normal taxation.
Redundancy costs were incurred by the BBC which related to Home Service
staff. The redundancy costs amounted to (Pounds)1.1m in 1996 and (Pounds)0.6m
in the period from April 1, 1996 to February 27, 1997. The redundancy
programmes were controlled by the BBC and the costs were not recharged to Home
Service. No adjustment has been made in the Home Service financial statements
for these costs because any costs incurred would have been reflected in the
cost base of Home Service, and as described in note 25 would have been off-set
by an increase in turnover from the BBC.
The consolidated financial statements for the two months ended February 27,
1997 and as of and for the eight months ended August 31, 1998 are unaudited;
however, in the opinion of all the directors, all adjustments
F-55
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(consisting of normal recurring adjustments) necessary for a fair presentation
have been made. Accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. Operating results for the
eight month period ended August 31, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
2 Accounting policies
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the financial
statements of Home Service and the consolidated financial statements of Castle
Transmission.
Basis of consolidation
The consolidated financial statements include the financial statements of
the Company and its subsidiaries made up to March 31, 1997 and December 31,
1997 after elimination of all significant inter-company accounts and
transactions. The acquisition method of accounting has been adopted. Under
this method, the results of subsidiaries acquired or disposed of in the period
are included in the consolidated profit and loss account from the date of
acquisition or up to the date of disposal.
Goodwill
Purchased goodwill on acquisitions (representing the excess of the fair
value of the consideration given over the fair value of the separable net
assets acquired) is capitalised and amortised over 20 years, the period over
which the Directors consider that the Group will derive economic benefits.
Tangible fixed assets and depreciation
Depreciation is provided to write off the cost or valuation less the
estimated residual value of tangible fixed assets by equal instalments over
their estimated useful economic lives as follows:
Land and buildings
<TABLE>
<CAPTION>
Home Service Castle Transmission
-------------- -------------------
<S> <C> <C>
Freehold and long leasehold buildings... 50 years 50 years
Freehold and long leasehold improve-
ments.................................. 20 years 20 years
Short leasehold land and buildings...... Unexpired term Unexpired term
No depreciation is provided on freehold
land...................................
</TABLE>
Plant and equipment
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ -------------------
<S> <C> <C>
Transmitters and power plant............... 25 years 20 years
Electric and mechanical infrastructure..... 10-20 years 10-20 years
Other plant and machinery.................. 3-10 years 3-10 years
Computer equipment......................... 5 years 5 years
Motor vehicles............................. -- 3 years
</TABLE>
Strategic spares, which comprise those spares that are vital to the
operation of the transmission system, are included in the capitalised value of
the asset to which they relate and are depreciated over the life of the asset.
Assets under construction are included within fixed assets. The associated
labour costs are capitalised using a predetermined labour rate, and any over
or under recoveries are recognised in the profit and loss account in the
period in which they arise.
F-56
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign currencies
Transactions in foreign currencies are translated at the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities, to the
extent that they are denominated in foreign currency, are retranslated at the
rate of exchange ruling at the balance sheet date and gains or losses are
included in the profit and loss account.
Leases
Where the Company enters into a lease which entails taking substantially all
the risks and rewards of ownership of an asset, the lease is treated as a
"finance lease'. The asset is recorded in the balance sheet as a tangible
fixed asset and is depreciated over its useful life or term of the lease,
whichever is shorter. Future instalments under such leases, net of finance
charges, are included within creditors. Rentals payable are apportioned
between the finance element, which is charged to the profit and loss account,
and the capital element which reduces the outstanding obligation for future
instalments.
Operating lease rentals are charged to the profit and loss account on a
straight line basis over the period of the lease.
Pensions
The pension costs charged in the period include costs incurred, at the
agreed employer's contribution rate. See note 20 for further details.
Stocks
Stocks held are general maintenance spares and manufacturing stocks. Stocks
are stated at the lower of weighted average cost and net realisable value.
Work in progress
For individual projects, the fees on account and project costs are recorded
in work in progress. When a project is complete, the project balances are
transferred to turnover and cost of sales as appropriate, and the net profit
is recognised. Where the payments on account are in excess of project costs,
these are recorded as payments on account.
Provision is made for any losses as soon as they are foreseen.
Taxation
The charge for taxation is based on the result for the period and takes into
account taxation deferred because of timing differences between the treatment
of certain items for taxation and accounting purposes. Provision is made for
deferred tax only to the extent that it is probable that an actual liability
will crystallise.
Turnover
Turnover represents the amounts (excluding value added tax) derived from the
provision of transmission and maintenance contracts, site sharing arrangements
and commercial projects. Revenue is recognised on the basis of contracts or as
services are provided to customers.
Issue costs
Costs incurred in raising funds are deducted from the amount raised and
amortised over the life of the debt facility on a constant yield basis.
F-57
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3 Analysis of turnover
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------------------ ------------------------------
Period from Period from
April 1, Period from April 1,
Year Ended 1996 to February 28, 1997 1997 to
March 31, February 27, to March 31, December 31,
1996 1997 1997 1997
----------- ------------ ----------------- ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
By activity
BBC..................... 45,704 49,903 3,982 35,640
Other--non BBC.......... 24,663 20,711 2,451 21,112
------ ------ ----- ------
70,367 70,614 6,433 56,752
====== ====== ===== ======
</TABLE>
4 Staff numbers and costs
The average number of persons employed by the Group (including directors)
during the period, analysed by category was as follows:
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------------------ ------------------------------
Period from Period from
April 1, Period from April 1,
Year Ended 1996 to February 28, 1997 1997 to
March 31, February 27, to March 31, December 31,
1996 1997 1997 1997
----------- ------------ ----------------- ------------
<S> <C> <C> <C> <C>
Operational staff....... 381 357 313 289
Project staff........... 154 125 108 97
Management, finance,
personnel and other
support services....... 53 70 69 89
------ ------ ----- ------
588 552 490 475
====== ====== ===== ======
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------------------ ------------------------------
Period from Period from
April 1, Period from April 1,
Year Ended 1996 to February 28, 1997 1997 to
March 31, February 27, to March 31, December 31,
1996 1997 1997 1997
----------- ------------ ----------------- ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Wages and salaries...... 15,517 14,579 1,189 12,087
Social security costs... 1,159 1,061 76 768
Other pension costs..... 521 491 156 1,490
------ ------ ----- ------
17,197 16,131 1,421 14,345
====== ====== ===== ======
</TABLE>
F-58
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5 Profit/(loss) on ordinary activities before taxation
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------------------- ------------------------------
Period from Period from
April 1, Period from April 1,
Years Ended 1996 to February 28, 1997 1997 to
March 31, February 27, to March 31, December 31,
1996 1997 1997 1997
----------- ------------- ----------------- ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Profit (loss) on
ordinary activities
before taxation is
stated after charging:
Depreciation and other
amounts written off
tangible fixed assets:
Owned................... 12,835 13,038 1,624 14,953
Leased.................. -- -- -- 147
Goodwill amortisation... -- -- 195 1,754
Hire of plant and ma-
chinery--rentals pay-
able under operating
leases................. 112 53 79
Hire of other assets--
under operating
leases................. 396 36 530
====== ====== ===== ======
</TABLE>
The information in respect of hire of plant and machinery and other assets
under operating leases is not available for the year ended March 31, 1996.
6 Remuneration of directors
There were no directors of Home Service.
The directors of Castle Transmission received no emoluments for the period
February 28, 1997 to March 31, 1997 and (Pounds)277,000 for the period April
1, 1997 to December 31, 1997. The amounts paid to third parties in respect of
directors' services were (Pounds)2,000 for the period from February 28, 1997
to March 31, 1997 and (Pounds)23,000 for the period from April 1, 1997 to
December 31, 1997.
The aggregate emoluments of the highest paid director were (Pounds)170,000.
The highest paid director is not a member of any Group pension scheme.
Pension entitlements
On retirement the directors participating in the Group defined benefit
scheme are entitled to 1/60th of their final pensionable salary for each year
of service.
F-59
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7 Interest payable and similar charges
<TABLE>
<CAPTION>
Home Service Castle Transmission
---------------------------- ------------------------------
Period from
Period from Period from April 1,
Year Ended April 1, 1996 to February 28, 1997 1997 to
March 31, February 27, to March 31, December 31,
1996 1997 1997 1997
----------- ---------------- ----------------- ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
On bank loans and over-
drafts................. -- -- 934 3,315
On all other loans...... -- -- -- 6,934
Finance charges payable
in respect of finance
leases and hire pur-
chase contracts........ -- -- -- 28
Finance charges
amortised in respect of
bank loans (see note
14).................... -- -- 35 2,087
Finance charges
amortised in respect of
the Bonds.............. -- -- -- 55
--- --- --- ------
-- -- 969 12,419
=== === === ======
</TABLE>
8 Taxation
Home Service
There is no tax charge in respect of the results of Home Service for the
year ended March 31, 1996 or for the period from April 1, 1996 to February 27,
1997. As a separate legal entity subject to normal taxation, Home Service
would have capital allowances available as discussed below which would result
in taxable losses for all periods. Deferred tax assets have not been
recognised on such tax losses as management has concluded that it is not
likely that the deferred tax asset would be realised.
Castle Transmission
There is no tax charge in respect of the period from February 28, 1997 to
March 31, 1997 and April 1, 1997 to December 31, 1997. Based on an agreement
with the Inland Revenue Service, Castle Transmission will have capital
allowances available on capital expenditure incurred by Home Service and the
BBC prior to the acquisition of approximately (Pounds)179 million. The
accelerated tax deductions associated with such capital allowances result in a
taxable loss for both periods. Deferred tax assets have not been recognised on
such tax losses as management has concluded that it is not likely that the
deferred tax asset would be realised based on the limited operating history of
Castle Transmission.
F-60
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9 Intangible assets
Castle Transmission
<TABLE>
<CAPTION>
As at As at
March 31, December 31,
1997 1997
----------- ------------
(Pounds)000 (Pounds)000
<S> <C> <C>
Goodwill
Cost
At beginning of period............................. -- 46,768
Arising on acquisition of Home Service............. 46,768 --
Adjustment to the allocation of fair value arising
on acquisition of Home Service (see notes 18 and
24)............................................... -- 1,237
------ ------
At end of the period............................... 46,768 48,005
====== ======
Amortisation
At beginning of period............................. -- 195
Charged in period.................................. 195 1,754
------ ------
At end of the period............................... 195 1,949
====== ======
Net book value
At end of the period............................... 46,573 46,056
====== ======
</TABLE>
10 Tangible fixed assets
Home Service
<TABLE>
<CAPTION>
Land and Plant and Computer Assets under
buildings machinery equipment construction Total
----------- ----------- ----------- ------------ -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
(i) Year ended March 31,
1996
Cost or valuation
At April 1, 1995........ 26,789 178,205 1,337 22,309 228,640
Additions............... -- 111 40 17,928 18,079
Disposals............... -- -- (1,325) -- (1,325)
Transfers............... 474 13,354 -- (13,828) --
------ ------- ------ ------- -------
At March 31, 1996....... 27,263 191,670 52 26,409 245,394
------ ------- ------ ------- -------
Depreciation
At April 1, 1995........ 7,291 22,671 441 -- 30,403
Charge for period....... 819 12,008 8 -- 12,835
On disposal............. -- -- (436) -- (436)
------ ------- ------ ------- -------
At March 31, 1996....... 8,110 34,679 13 -- 42,802
------ ------- ------ ------- -------
Net book value
At March 31, 1996....... 19,153 156,991 39 26,409 202,592
====== ======= ====== ======= =======
</TABLE>
F-61
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Land and Plant and Computer Assets under
buildings machinery equipment construction Total
----------- ----------- ----------- ------------ -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
(ii) Period ended
February 27, 1997
Cost or valuation
At April 1, 1996........ 27,263 191,670 52 26,409 245,394
Additions............... -- 24 179 14,283 14,486
Disposals............... -- (1,816) -- (1,718) (3,534)
Transfers............... 2,585 23,972 252 (26,809) --
Transfer between
business units......... 10,824 (2,061) (4) 612 9,371
------ ------- --- ------- -------
At February 27, 1997.... 40,672 211,789 479 12,777 265,717
------ ------- --- ------- -------
Depreciation
At April 1, 1996........ 8,110 34,679 13 -- 42,802
Charge for period....... 807 12,158 73 -- 13,038
On disposal............. -- (1,816) -- -- (1,816)
Transfers............... 46 (108) 62 -- --
Transfers between
business units......... 2,185 (137) (1) -- 2,047
------ ------- --- ------- -------
At February 27, 1997.... 11,148 44,776 147 -- 56,071
------ ------- --- ------- -------
Net book value
At February 27, 1997.... 29,524 167,013 332 12,777 209,646
====== ======= === ======= =======
</TABLE>
The transfers between business units reflect transactions made between the
predecessor business and other business units of the BBC, in preparation for
the sale of Home Service. These include the transfer of the head office at
Warwick into the books of Home Service prior to the sale.
Castle Transmission
<TABLE>
<CAPTION>
Land and Plant and Computer Assets under
buildings machinery equipment construction Total
----------- ----------- ----------- ------------ -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
(i) Period ended March
31, 1997
Cost
On acquisition.......... 30,373 163,556 332 12,777 207,038
Additions............... -- 56 -- 692 748
Transfers............... 17 59 -- (76) --
------ ------- --- ------- -------
At March 31, 1997....... 30,390 163,671 332 13,393 207,786
------ ------- --- ------- -------
Depreciation
On acquisition.......... -- -- -- -- --
Charge for period....... 86 1,529 9 -- 1,624
------ ------- --- ------- -------
At March 31, 1997....... 86 1,529 9 -- 1,624
------ ------- --- ------- -------
Net book value
At March 31, 1997....... 30,304 162,142 323 13,393 206,162
====== ======= === ======= =======
(ii) Period ended
December 31, 1997
Cost
At April 1, 1997........ 30,390 163,671 332 13,393 207,786
Addition................ 10 3,602 582 10,878 15,072
Transfers............... 651 12,772 -- (13,423) --
------ ------- --- ------- -------
At December 31, 1997.... 31,051 180,045 914 10,848 222,858
------ ------- --- ------- -------
Depreciation
At April 1, 1997........ 86 1,529 9 -- 1,624
Charge for period....... 847 13,975 278 -- 15,100
------ ------- --- ------- -------
At December 31, 1997.... 933 15,504 287 -- 16,724
------ ------- --- ------- -------
Net book value
At December 31, 1997.... 30,118 164,541 627 10,848 206,134
====== ======= === ======= =======
</TABLE>
F-62
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The net book value of land and buildings comprises:
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ ----------------------------
At March 31, At March 31, At December 31,
1996 1997 1997
------------ ------------ ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Freehold........................... 16,268 21,558 21,375
Long leasehold..................... 1,540 7,468 7,472
Short leasehold.................... 1,345 1,278 1,271
------ ------ ------
19,153 30,304 30,118
====== ====== ======
</TABLE>
Included within fixed assets are the following assets held under finance
leases:
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ ----------------------------
At March 31, At March 31, At December 31,
1996 1997 1997
------------ ------------ ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Motor vehicles..................... -- -- 270
Computer equipment................. -- -- 441
--- --- ---
-- -- 711
=== === ===
</TABLE>
11 Stocks
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ ------------------------------------------
At March 31, At March 31, At December 31, At August 31,
1996 1997 1997 1998
------------ ------------ --------------- -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited)
<S> <C> <C> <C> <C>
Work in progress (see
note 13)............... -- -- 274 1,421
Spares and manufacturing
stocks................. 1,750 807 1,066 1,199
----- --- ----- -----
1,750 807 1,340 2,620
===== === ===== =====
</TABLE>
12 Debtors
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ ----------------------------
At March 31, At March 31, At December 31,
1996 1997 1997
------------ ------------ ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Trade debtors..................... 3,780 7,503 10,250
Other debtors..................... 212 2,259 2,200
Prepayments and accrued income.... 722 582 780
----- ------ ------
4,714 10,344 13,230
===== ====== ======
</TABLE>
13 Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ ----------------------------
At March 31, At March 31, At December 31,
1996 1997 1997
------------ ------------ ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Payments on account.............. 426 347 --
Obligations under finance leases
and hire purchase contracts..... -- -- 490
Trade creditors.................. 872 4,123 1,916
Other creditors.................. -- 1,519 2,153
Accruals and deferred income..... 5,329 8,831 24,580
----- ------ ------
6,627 14,820 29,139
===== ====== ======
</TABLE>
F-63
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Payments on account (and work in progress) relate to commercial projects and
are shown net in the financial statements. The gross billings amount to
(Pounds)3,222,000 in 1996, (Pounds)3,836,000 in March 1997 and
(Pounds)2,458,000 in December 1997. The related gross costs amounted to
(Pounds)2,796,000 in 1996, (Pounds)3,489,000 in March 1997 and
(Pounds)2,732,000 in December 1997.
14 Creditors: amounts falling due after more than one year
<TABLE>
<CAPTION>
Castle Transmission
------------------------------------------
At March 31, At December 31, At August 31,
1997 1997 1998
------------ --------------- -------------
(Pounds)000 (Pounds)000 (Pounds)000
(Unaudited)
<S> <C> <C> <C>
Guaranteed Bonds................ -- 120,582 120,761
Bank loans and overdrafts....... 154,358 22,945 28,104
Obligations under finance leases
and hire purchase contracts.... -- 221 670
------- ------- -------
154,358 143,748 149,535
======= ======= =======
Debts can be analysed as falling
due:
in one year or less, or on de-
mand........................... -- --
between one and two years....... 7,244 59
between two and five years...... 29,160 162
in five years or more........... 117,954 143,527
------- -------
154,358 143,748
======= =======
</TABLE>
On May 21, 1997, CTF issued and Castle Transmission guaranteed,
(Pounds)125,000,000 9 percent Guaranteed Bonds due 2007 (the "Guaranteed
Bonds"). The Guaranteed Bonds are redeemable at their principal amount, unless
previously redeemed or purchased and cancelled, on March 30, 2007.
The Guaranteed Bonds may be redeemed in whole but not in part, at the option
of CTF, at their principal amount plus accrued interest if, as a result of
certain changes in the laws and regulations of the United Kingdom, CTF or
Castle Transmission becomes obliged to pay additional amounts.
The Guaranteed Bonds may be redeemed in whole or in part, at the option of
CTF, at any time at the higher of their principal amount and such a price as
will provide a gross redemption yield 0.50 percent per annum above the gross
redemption yield on the benchmark gilt plus (in either case) accrued interest.
Bondholders may, in certain circumstances including but not limited to a
change in control of CTF, or the early termination of the agreement between
CTI and the BBC relating to the domestic analogue transmission of radio and
television programmes by CTI, require the Guaranteed Bonds to be redeemed at
101 percent of their principal amount plus accrued interest.
The Guaranteed Bonds were issued at an issue price of 99.161 percent. The
Guaranteed Bonds are shown net of unamortised discount and issue costs.
Interest accrues from the date of issue and is payable in arrears on March 30
each year commencing March 30, 1998.
On February 28, 1997 the Group entered into term and revolving loan
facilities with a syndicate of banks. There are three facilities. Facility A
and Facility B are (Pounds)122,500,000 and (Pounds)35,000,000 term loan
facilities. Facility A is repayable in instalments, the last of which is due
in June 2004, and Facility B is repayable in two instalments in December 2004
and June 2005. These facilities were made available to finance the amount owed
to the BBC on the acquisition of the Home Service transmission business and
were drawn down in full on February 28, 1997.
F-64
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The third facility, Facility C, is a (Pounds)5,000,000 revolving loan
facility maturing in June 2005 under which advances are to be made to the
Group to finance its working capital requirements and for general corporate
purposes. This facility was undrawn at March 31, 1997.
Borrowings under the facilities are secured by fixed and floating charges
over substantially all of the assets and undertakings of the Group and bear
interest at 2.25 percent above LIBOR for Facility B and between 0.875 percent
and 1.75 percent above LIBOR (depending on the annualised debt coverage and
the outstanding percentage of the facilities) for Facilities A and C.
The net proceeds of the Guaranteed Bonds were used to repay substantially
all of the amounts outstanding under Facilities A, B and C. The remaining
balance of Facilities A, B and C was replaced by a (Pounds)64,000,000
revolving loan facility maturing in May 2002 (the "New Facility"), under which
advances will be made to CTI to finance its working capital requirements and
finance capital expenditures in respect of Digital Terrestrial Television.
Borrowings under the New Facility are secured by fixed and floating charges
over substantially all of the assets and undertakings of Castle Transmission
and bear interest at LIBOR plus the applicable margin plus cost rate.
Included within bank loans and overdrafts is an amount of (Pounds)3,142,000
at March 31, 1997 and (Pounds)1,055,000 at December 31, 1997 representing
finance costs deferred to future accounting periods in accordance with FRS4.
As a result of the issuance of the Guaranteed Bonds and the New Facility, the
remaining deferred financing costs of (Pounds)1,930,000, relating to
Facilities A, B and C were charged to the profit and loss account during the
period from April 1, 1997 to December 31, 1997.
15 Provision for liabilities and charges
<TABLE>
<CAPTION>
Castle Transmission
----------------------------
At March 31, At December 31,
1997 1997
------------ ---------------
(Pounds)000 (Pounds)000
<S> <C> <C>
On acquisition/at the start of the period.......... 1,723 1,723
Fair value adjustments (see note 24)............... -- 1,016
Established in the period (see below).............. -- 417
Utilised in the period............................. -- (999)
----- -----
At the end of the period........................... 1,723 2,157
===== =====
</TABLE>
Home Service did not make any provisions for liabilities and charges. On the
acquisition by Castle Transmission, a provision was established for costs
associated with the split of the BBC transmission business between Home
Service and World Service comprising redundancy costs and costs relating to
the relocation and reorganisation of shared sites. No payments or additional
provisions were made in the one month period and the balance on acquisition
and at March 31, 1997 was (Pounds)1,723,000.
As a result of the completion of the fair value exercise this provision was
reduced by (Pounds)234,000 and a further provision was made of
(Pounds)1,250,000 in respect of a contingent liability for wind loading fees
that existed at February 27, 1997. See notes 18 and 24 for further details.
A further provision of (Pounds)417,000, in respect of these wind loading
fees, was charged to the profit and loss account during the period from April
1, 1997 to December 31, 1997.
F-65
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16 Share capital
<TABLE>
<CAPTION>
At March 31, At December 31,
1997 1997 At March 31, At December 31,
Number of Number of 1997 1997
shares shares (Pounds)000 (Pounds)000
-------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Authorised
Equity: Ordinary Shares
of 1 pence each........ 11,477,290 11,477,290 115 115
Non-equity: Redeemable
Preference Shares of 1
pence each............. 11,465,812,710 11,465,812,710 114,658 114,658
-------------- -------------- ------- -------
11,477,290,000 11,477,290,000 114,773 114,773
============== ============== ======= =======
Allotted, called up and
fully paid
Equity: Ordinary Shares
of 1 pence each........ 10,234,790 10,289,790 102 103
Non-equity: Redeemable
Preference Shares of 1
pence each............. 10,224,555,210 10,279,500,210 102,246 102,795
-------------- -------------- ------- -------
10,234,790,000 10,289,790,000 102,348 102,898
============== ============== ======= =======
</TABLE>
On incorporation the Company had an authorised share capital of 100 Ordinary
Shares of (Pounds)1 each of which 1 share was allotted, called up and fully
paid.
On January 23, 1997, the 100 issued and unissued Ordinary Shares of
(Pounds)1 each were subdivided into Ordinary Shares of 1 pence each and the
authorised share capital of the Company was increased to (Pounds)114,772,900
by the creation of 11,467,290 additional Ordinary Shares of 1 pence each and
by the creation of 11,465,812,710 Redeemable Preference Shares of 1 pence
each.
On February 28, 1997 the Company issued for cash 10,234,690 Ordinary Shares
of 1 pence each at par and 10,224,555,210 Redeemable Preference Shares of 1
pence each at par.
On September 19, 1997 a further 55,000 Ordinary Shares of 1 pence each and
54,945,000 Redeemable Preference Shares of 1 pence each were issued at par for
cash. These shares were issued to certain members of the management team.
Management believes that this sale price reflects the fair value of the shares
at that date.
The Redeemable Preference Shares are redeemable on December 31, 2050. The
Company may also redeem any number of Redeemable Preference Shares at any time
by giving at least two business days' notice in writing to the holders. In
addition, the Company shall redeem in full all the Redeemable Preference
Shares on or before the earlier or any listing or sale of 87.5 percent or more
of the issued share capital. No premium is payable on redemption.
The holders of the Redeemable Preference Shares are entitled to receive a
dividend in respect of periods from January 1, 2004 at a rate of 5 percent per
annum. Dividends shall accrue on a daily basis and shall, unless the Company
is prohibited from paying dividends by the Companies Act 1985 or is not
permitted by any financing agreement to which it is a party to pay such
dividend, become a debt due from and payable to the holders of the Redeemable
Preference Shares on January 1 of each year beginning January 1, 2005.
In accordance with FRS4: Capital Instruments, a finance cost has been
calculated to result in a constant rate of return over the period and carrying
amount for these Redeemable Preference Shares and has been included in the
profit and loss account as an appropriation.
F-66
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On a winding up of the Company, the holders of the Redeemable Preference
Shares would be entitled, in priority to any payment to the holders of the
Ordinary Shares, to receive an amount equal to the nominal amount paid up on
each Redeemable Preference Share together with all arrears and accruals of the
preferential dividend payable thereon, whether or not such dividend has become
due and payable.
The holders of the Redeemable Preference Shares have no right to vote at any
general meeting of the Company.
At December 31, 1997 two of the shareholders held share warrants which
entitled them to a maximum of 772,500 Ordinary Shares and 771,727,500
Redeemable Preference Shares issued at par. These are subject to adjustment in
accordance with the conditions set out in the warrant instrument which relate
to any reorganisation of the Company's share capital. The rights under the
share warrants can be exercised by giving 7 days' notice to the Company. The
rights lapse on the earliest of the following dates: the date of a listing of
any part of the share capital on the Official List of the London Stock
Exchange or any other stock exchange; the date of any sale of 85 percent or
more of the issued share capital of the Company; the date on which the Company
goes into liquidation; and February 28, 2007.
17 Reserves
<TABLE>
<CAPTION>
Castle
Transmission
-----------------------------------
Period from Period from
February 28, 1997 April 1, 1997 to
to March 31, 1997 December 31, 1997
----------------- -----------------
(Pounds)000 (Pounds)000
<S> <C> <C>
Profit and loss account
At the start of the period............. -- 325
Retained profit/(loss) for the period.. 7 (6,217)
Additional finance cost of non-equity
shares................................ 318 2,862
--- ------
At the end of the period............... 325 (3,030)
=== ======
</TABLE>
18 Acquisition
On February 28, 1997 the Company acquired the entire share capital of CTI.
CTI had itself acquired the assets and liabilities of Home Service on February
27, 1997, with the intention of CTI's ensuing disposal to the Company.
As the two transactions were enacted for the purpose of the sale and
purchase of Home Service, a provisional fair value exercise was performed by
CTI on the acquisition of the trade and net assets of Home Service on 27
February 1997, giving rise to acquisition goodwill of (Pounds)39.6 million.
The fair value exercise was only provisional at March 31, 1997 as the
elapsed time had not been sufficient to form a final judgement on the fair
value adjustments. The fair value exercise has now been finalised and as a
result goodwill has been increased by (Pounds)1.2 million. See note 24.
The consideration paid for the acquisition of the shares of CTI by the
Company amounted to (Pounds)45 million plus fees of (Pounds)7.5 million.
(Pounds)7.2 million had been paid or accrued at March 31, 1997, which gave
rise to additional goodwill of (Pounds)7.5 million.
F-67
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition, the BBC was paid (Pounds)199 million by CTI as a repayment of
the loan made by the BBC on the transfer of the assets and liabilities of Home
Service. The total consideration paid by the Group amounted to (Pounds)244
million (excluding fees), which resulted in total goodwill in the Consolidated
Financial Statements of (Pounds)48 million. This goodwill has been capitalised
and will be written off over 20 years, the period over which the Directors
consider that the Group will derive economic benefits.
19 Commitments
(a) Capital commitments at the end of the financial period for which no
provision has been made, were as follows:
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ ----------------------------
At March 31, At March 31, At December 31,
1996 1997 1997
------------ ------------ ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Contracted........................ 4,192 4,785 11,431
Authorised but not contracted..... 7,969 6,490 89,729
===== ===== ======
</TABLE>
(b) Annual commitments under non-cancellable operating leases were as
follows:
<TABLE>
<CAPTION>
Castle
Transmission
-----------------------
At December 31,
1997
-----------------------
Land and
buildings Other
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Operating leases which expire:
Within one year...................................... 90 159
In the second to fifth years inclusive............... 343 385
Over five years...................................... 235 --
--- ---
668 544
=== ===
</TABLE>
20 Pension scheme
Home Service
Home Service participated in a multi-employer pension scheme operated by the
BBC. The scheme is a defined benefit scheme whereby retirement benefits are
based on the employees' final remuneration and length of service and is funded
through a separate trustee administered scheme. Contributions to the scheme
are based on pension costs for all members of the scheme across the BBC and
are made in accordance with the recommendations of independent actuaries who
value the scheme at regular intervals, usually triennially. Pension scheme
assets are not apportioned between different parts of the BBC.
The pension rate charged to Home Service was 4.5 percent for the year ended
March 31, 1996 and for the period from April 1, 1996 to February 27, 1997.
This charge took into account the surplus shown by the last actuarial
valuation of the BBC scheme. Amounts charged were as follows: (Pounds)521,000
in 1996 and (Pounds)491,000 in the period from April 1, 1996 to February 27,
1997.
F-68
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Castle Transmission
The pension charge is not comparable between Home Service and Castle
Transmission due to the former having a reduced charge as a result of the
surplus in the BBC Pension scheme.
Under the terms of the sale agreement Castle Transmission was temporarily
participating in the BBC Pension scheme until July 31, 1997. From August 1,
1997 the Group was committed under the sale agreement to establish its own
pension scheme.
In respect of past service benefits, members were able to choose between
transferring past service benefits to the Group scheme or leaving them in the
BBC Pension scheme. To the extent that past service benefits were transferred,
the BBC Pension scheme made a full transfer payment to the Group scheme
calculated in accordance with the actuarial basis as set out in the sale
agreement.
The pension charge for the period from February 28, 1997 to March 31, 1997
included in the accounts represented contributions payable to the BBC Pension
scheme and amounted to (Pounds)156,000. Contributions are calculated at the
employers' contribution rate of 17.7 per cent of pensionable salary. The
contribution rate has been determined by a qualified actuary and is specified
in the sale agreement.
At August 1, 1997 Castle Transmission established its own pension scheme.
This is a defined benefit scheme and assets were transferred from the BBC
Pension scheme to the extent that members chose to transfer past benefits.
From August 1, the Castle Transmission Pension Scheme will be liable in
respect of future pension benefits. The pension charge for the period from
April 1, 1997 to December 31, 1997 was (Pounds)1,490,000.
There were no outstanding or prepaid contributions at either the beginning
or end of the financial periods.
The Group also established a defined contribution scheme which will have a
backdated start date of August 1, 1997. This scheme will be open to employees
joining the Group after March 1, 1997. The defined benefit scheme will not be
open to these employees. The pensionable charge for the period from April 1,
1997 to December 31, 1997 represents contributions under this scheme amounting
to (Pounds)nil.
21 Reconciliation of operating profit to operating cash flows
<TABLE>
<CAPTION>
Home Service Castle Transmission
--------------------------- ---------------------------------
Period from Period from Period from
Year Ended April 1, 1996 February 28, 1997 April 1, 1997
March 31, to February 27, to March 31, to December 31,
1996 1997 1997 1997
----------- --------------- ----------------- ---------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Operating profit........ 7,785 14,002 1,245 8,776
Depreciation and
amortisation charge.... 12,835 13,038 1,819 16,854
(Increase)/Decrease in
stocks................. (678) 294 (2) (746)
Decrease/(Increase) in
debtors................ 2,571 (258) (5,372) (2,937)
Increase/(Decrease) in
creditors.............. 1,798 (649) 8,066 6,036
------ ------ ------ ------
Cash inflow from
operating activities... 24,311 26,427 5,756 27,983
====== ====== ====== ======
</TABLE>
F-69
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
22 Analysis of cash flows for headings noted in the cash flow statement
<TABLE>
<CAPTION>
Home Service Castle Transmission
---------------------------- ---------------------------------
Period from Period from Period from
Year Ended April 1, 1996 to February 28, 1997 April 1, 1997
March 31, February 27, to March 31, to December 31,
1996 1997 1997 1997
----------- ---------------- ----------------- ---------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Returns on investment
and servicing of
finance
Interest received....... -- -- 49 242
Interest paid........... -- -- (934) (2,670)
------- ------- -------- --------
Net cash outflow for
returns on investment
and servicing of
finance................ -- -- (885) (2,428)
======= ======= ======== ========
Capital expenditure and
financial investments
Purchase of tangible
fixed assets........... (18,079) (21,810) (748) (14,361)
Proceeds on disposal of
tangible fixed assets.. 889 1,718 -- --
------- ------- -------- --------
Net cash outflow for
capital expenditure and
financial investments.. (17,190) (20,092) (748) (14,361)
======= ======= ======== ========
Acquisitions and
disposals
Purchase of subsidiary
undertaking (see note
24).................... -- -- (52,141) (307)
Amount paid to BBC on
acquisition............ -- -- (199,000) --
------- ------- -------- --------
Net cash outflow for
acquisition and
disposals.............. -- -- (251,141) (307)
======= ======= ======== ========
Financing
Issue of shares......... -- -- 102,348 550
Increase/(decrease) in
corporate funding...... (7,121) (6,335) -- --
Debt due beyond a year:
Facility A (net of issue
costs)................. -- -- 120,056 --
Facility B (net of issue
costs)................. -- -- 34,302 --
Repayment of Facility A
and B.................. -- -- -- (157,500)
New Facility............ -- -- -- 24,000
Guaranteed Bonds........ -- -- -- 120,527
------- ------- -------- --------
Net cash
inflow/(outflow) from
financing.............. (7,121) (6,335) 256,706 (12,423)
======= ======= ======== ========
</TABLE>
23 Analysis of net debt due after one year
<TABLE>
<CAPTION>
Other
At February 27, non-cash At March 31,
1997 Cashflow changes 1997
--------------- ----------- ----------- ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Cash at bank and in
hand................... -- 9,688 -- 9,688
Debt due after 1 year... -- (154,358) -- (154,358)
--- -------- --- --------
-- (144,670) -- (144,670)
=== ======== === ========
</TABLE>
<TABLE>
<CAPTION>
Other
At March 31, non-cash At December 31,
1997 Cashflow changes 1997
------------ ----------- ----------- ---------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Cash at bank and in
hand................... 9,688 (1,536) -- 8,152
Finance leases.......... -- -- (711) (711)
Debt due after 1 year... (154,358) 12,973 (2,142) (143,527)
-------- ------ ------ --------
(144,670) 11,437 (2,853) (136,086)
======== ====== ====== ========
</TABLE>
F-70
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
24 Purchase of subsidiary undertaking
<TABLE>
<CAPTION>
At March 31, Fair value At December 31,
1997 adjustments 1997
------------ ----------- ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net assets acquired:
Tangible fixed assets........... 207,038 -- 207,038
Stocks.......................... 119 134 253
Debtors......................... 4,972 (97) 4,875
Creditors--trade................ (6,033) 49 (5,984)
--owed to BBC on
acquisition............... (199,000) -- (199,000)
Provisions (see note 15)........ (1,723) (1,016) (2,739)
-------- ------ --------
Adjusted net assets acquired.... 5,373 (930) 4,443
Goodwill........................ 46,768 1,237 48,005
-------- ------ --------
Cost of acquisition including
related fees................... 52,141 307 52,448
======== ====== ========
Satisfied by:
Cash............................ 52,141 307 52,448
======== ====== ========
</TABLE>
The total consideration paid by Castle Transmission included the assumption
and subsequent repayment of (Pounds)199 million paid to the BBC, see note 18.
Fair value adjustments
The fair value adjustments result from the completion of the fair value
exercise performed by CTI on the acquisition of Home Service and the under
accrual of fees by the Company, in relation to the acquisition of CTI, at
March 31, 1997. The (Pounds)1,237,000 increase in goodwill relates
predominantly to the provision of (Pounds)1,250,000 in respect of a dispute
over wind loading fees. This dispute was an existing contingent liability at
the date of acquisition and consequently provision has been made against the
fair value of the assets and liabilities of Home Service at February 27, 1998.
25 Related party disclosures
Home Service
Throughout the year ended March, 31 1996 and the period from April 1, 1996
to February 27, 1997, Home Service entered into a number of transactions with
other parts of the BBC. Substantially all of these transactions are exempt
from the disclosure provisions of FRS 8 "Related Party Disclosures" as they
have been undertaken between different parts of the BBC, and are eliminated in
the consolidated accounts of the BBC. However, brief details of the nature of
these transactions are set out below.
The majority of Home Service's income arises from trading with other parts
of the BBC. Prices are set at BBC group level on the basis of cost budgets
prepared by Home Service. The aggregate value of such sales in each of the
years covered by the combined financial statements is given in Note 3.
Administrative costs include expenses re-charged to Home Service by the BBC.
These re-charges related to costs incurred centrally in respect of pension,
information technology, occupancy and other administration costs. These
charges amounted to (Pounds)5.8 million in 1996 and (Pounds)1.2 million in the
period between April 1, 1996 and February 27, 1997. The reduced charge for the
period to February 27, 1997 is a result of more functions being carried out by
employees of Home Service in preparation for the change to a stand alone
entity.
F-71
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition, re-charges were also made for distribution costs relating to
telecommunication links between the BBC and the transmitting stations and
these were then internally re-charged to other parts of the BBC. The charges
amounted to (Pounds)5.6 million in 1996 and (Pounds)6.4 million in the period
between April 1, 1996 and February 27, 1997.
Castle Transmission
The Shareholders of Castle Transmission are:
Crown Castle International Corp. ("CCIC", formerly Castle Tower Holding
Corp.), Candover Investments plc and funds managed by it ("Candover"),
TeleDiffusion de France International S.A ("TdF") and Berkshire Partners LLC
and funds managed by it ("Berkshire"). They are considered to be related
parties as they are the consortium who own 99 percent of the shares of the
Company.
Castle Transmission paid fees to shareholders in respect of expenses
incurred during the acquisition and success fees. Castle Transmission also has
management agreements with CCIC (for commercial and financial advice and
training and consultancy) and TdF (for technical advice and consulting), these
agreements run for five years from February 28, 1997. Fees are payable on the
basis of an annual fee for agreed services provided to Castle Transmission,
together with fees on a commercial arm's length basis for any additional
services provided. In addition Castle Transmission has agreed to reimburse
shareholders' expenses in relation to attendance at board meetings. The
amounts paid and accrued by the Company during the period were as follows:
<TABLE>
<CAPTION>
Total amounts
payable at
Amounts Amounts Amounts March 31,
Related party expensed capitalised paid 1997
------------- ----------- ----------- ----------- -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
CCIC....................... 20 1,763 1,763 20
Candover................... 1 244 244 1
TdF........................ -- 129 -- 129
Berkshire.................. 1 315 316 --
--- ----- ----- ---
22 2,451 2,323 150
=== ===== ===== ===
</TABLE>
<TABLE>
<CAPTION>
Total amounts Total amounts
payable at payable at
March 31, Amounts Amounts Amounts December 31,
Related party 1997 expensed capitalised paid 1997
------------- ------------- ----------- ----------- ----------- -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
CCIC.................... 20 253 -- 246 27
Candover................ 1 16 -- 13 4
TdF..................... 129 -- -- 129 --
Berkshire............... -- 55 -- 43 12
--- --- --- --- ---
150 324 -- 431 43
=== === === === ===
</TABLE>
Ongoing BBC relationship
At the time of the acquisition of Home Service, Castle Transmission entered
into a ten year transmission contract with the BBC for the provision of
domestic terrestrial analogue television and radio transmission services
expiring on March 31, 2007. Thereafter, the contract continues until
terminated by twelve months notice by either party on March 31 in any contract
year from and including March 31, 2007. It may also be terminated early if
certain conditions are met.
F-72
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THF BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The contract provides for charges of approximately (Pounds)46 million to be
payable by the BBC to Castle Transmission for the year to March 31, 1998.
Castle Transmission's charges for subsequent years of the contract are largely
determined by a formula which escalates the majority of the charges by a
factor which is 1% below the rate of increase in the Retail Price Index over
the previous calendar year. Those elements of the charges which are subject to
the escalation formula for the contract year commencing April 1, 1998 amount
to approximately (Pounds)46 million.
26 Post balance sheet events
On January 23, 1998, the Board of Directors adopted: (i) the All Employee
Share Option Scheme; (ii) the Management Share Option Scheme; and (iii)
individual share option arrangements for certain directors of the Company.
The All Employee Share Option Scheme provides for an unlimited number of
shares to be granted to all employees of the Company. The Board may select any
number of individuals to apply for the grant of an option. Not later than
thirty days following the date by which an application must be made, the Board
may grant to each applicant the number of options specified in his
application. These options may be exercised at the earliest of the third
anniversary of the date of grant, in the event of a flotation or in the event
of a take-over, reconstruction, liquidation or option exchange as set out in
the Scheme rules. For options granted under this scheme the option price and
the number of shares will not change during the life of the option.
Under the terms of the Management Share Option Scheme and the individual
share option arrangements, share options may be granted to employees or
directors of the Company as determined by the Board of Directors up to a
maximum of 460,000 Ordinary Shares and 459,540,000 Redeemable Preference
Shares. Options will vest over periods of up to four years and have a maximum
term of up to nine years. For options over 223,333 Ordinary Shares and
223,110,000 Redeemable Preference Shares, the option price and the number of
shares will not change during the life of the option. The remaining options
are subject to certain performance criteria.
On January 23, 1998 and January 30, 1998 the Company granted options to
purchase an aggregate of 460,000 Ordinary Shares and 459,540,000 Redeemable
Preference Shares under the terms of the individual share option arrangements
and the Management Share Option Scheme, respectively. The weighted average
price for such options is 1.16 pence for Ordinary Shares and 1.16 pence for
Redeemable Preference Shares. The weighted average vesting period for such
options is 1.13 years. Any accounting charge resulting from a difference
between the fair value of the rights to the shares at the date of grant and
the amount of consideration to be paid for the shares will be charged to the
profit and loss account in the year to December 31, 1998 and subsequent years
according to the vesting provisions of the arrangements. Where the options are
subject to performance criteria, the amount initially recognised will be based
on a reasonable expectation of the extent to which these criteria will be met
and will be subject to subsequent adjustments as necessary to deal with
changes in the probability of performance criteria being met.
Update of post balance sheet events (Unaudited)
On March 23, 1998, the Company granted options to purchase an aggregate of
40,750 Ordinary Shares and 40,709,250 Redeemable Preference Shares under the
terms of the All Employee Share Option Scheme. The price for such options is
1.00 pence for both Ordinary Shares and Redeemable Preference Shares. The
vesting period for such options is three years.
The accounting charge related to all share options included within the
unaudited consolidated financial statements for the eight months ended August
31, 1998 is (Pounds)2,330,000.
F-73
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On April 23, 1998, the Board of Directors adopted share option arrangements
for certain individuals. On that same date, the Company granted options to
purchase 60,000 Ordinary Shares and 59,940,000 Redeemable Preference Shares
under the terms of such share option arrangements. These options will vest
over a period of four years and have a maximum term of six years. The weighted
average price of such options is 1.75 pence for both Ordinary Shares and
Redeemable Preference Shares. The weighted average vesting period for such
options is two years.
On July 1, 1998 and July 15, 1998, CCIC granted options to purchase 59,932
ordinary shares in CCIC to employees of CTI under terms of individual share
option arrangements. The weighted average price for such options is $37.54.
These options vested on August 18, 1998. The accounting charge related to
these options included in the unaudited consolidated financial statements for
the eight months ended August 31, 1998 is (Pounds)978,000.
On July 15, 1998, the Board of Directors of the Company resolved that the
Management Share Option Scheme would not be subject to any performance
criteria and would vest on a time basis only.
An August 11, 1998, the Company granted options to purchase 15,690 Ordinary
Shares and 15,674,310 Redeemable Preference Shares under the terms of the
Management Share Option Scheme. The weighted average price for such options is
2.5 pence for both Ordinary Shares and Redeemable Preference Shares. The
weighted average vesting period for such options is 2.7 years.
On August 21, 1998, the Company issued 515,000 Ordinary Shares and
514,485,000 Redeemable Preference Shares to CCIC for cash at par under the
terms of the warrant. In addition, CCIC subscribed for 10,210 Ordinary Shares
and 10,199,790 Redeemable Preference Shares for cash at a premium of 1.5 pence
per share.
On August 21, 1998, the Company became an 80% owned subsidiary of CCIC. On
that same date, (i) all issued and unissued Redeemable Preference Shares were
redesignated as Ordinary Shares; and (ii) all existing options to purchase
shares in the Company were converted into options to purchase shares in CCIC
at the rate of 7 shares in CCIC for every 1000 shares in the Company.
27 Summary of differences between United Kingdom and United States generally
accepted accounting principles
These consolidated financial statements have been prepared in accordance
with UK GAAP, which differ in certain respects from US GAAP. The differences
that affect Home Service and Castle Transmission are set out below:
(a) Tangible fixed assets
During 1993 Home Service revalued upwards its investments in certain
identifiable tangible fixed assets. Such upward revaluation is not permissible
under US GAAP. Rather, depreciated historical cost must be used in financial
statements prepared in accordance with US GAAP.
In the period between April 1, 1996 and February 27, 1997 there were a
number of transfers of fixed assets to and from other parts of the BBC as
explained in note 10. For US GAAP purposes these transfers have been accounted
for under the as-if-pooling-of-interests method for transactions between
entities under common control.
F-74
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(b) Deferred taxation
Under UK GAAP, deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystallise in the
foreseeable future. Under US GAAP, deferred taxes are accounted for on all
timing differences and a valuation allowance is established in respect of
those deferred tax assets where it is more likely than not that some portion
will remain unrealised. Deferred tax also arises in relation to the tax effect
of other US GAAP adjustments.
(c) Pensions
The Group accounts for costs of pensions under the rules set out in the UK
accounting standards. US GAAP is more prescriptive in respect of actuarial
assumptions and the allocation of costs to accounting periods.
(d) Capitalised interest
Under US GAAP, interest incurred during the construction periods of tangible
fixed assets is capitalised and depreciated over the life of the assets.
(e) Redeemable preference shares
Under UK GAAP, preference shares with mandatory redemption features or
redeemable at the option of the security holder are classified as a component
of total shareholders' funds. US GAAP requires such redeemable preference
shares to be classified outside of shareholders' funds.
F-75
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THF BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(f) Cash flow statement
Under US GAAP various items would be reclassified within the consolidated
cash flow statement. In particular, interest received, interest paid and
taxation would be part of net cash flows from operating activities, and
dividends paid would be included within net cash flow from financing. In
addition, under US GAAP, acquisitions and disposals would be included as
investing activities.
Movements in those current investments which are included under the heading
of cash under US GAAP form part of the movements entitled "Management of liquid
resources" in the consolidated cash flow statements.
Summary combined statements of cash flows for Castle Transmission prepared in
accordance with US GAAP are set out below:
<TABLE>
<CAPTION>
Home Service Castle Transmission
---------------------------------------- ----------------------------------------
Two Period from Eight
Year Period from Months February 28, Period from Months
Ended April 1, 1996 Ended 1997 April 1, 1997 Ended
March 31, to February 27, February 27, to March 31, to December 31, August 31,
1996 1997 1997 1997 1997 1998
----------- --------------- ------------ ------------ --------------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by
operating activities... 24,311 28,146 5,161 4,871 25,555 27,226
Net cash used by
investing activities... (17,190) (21,811) (711) (52,889) (14,668) (36,135)
Net cash (used)/provided
by financing
activities............. (7,121) (6,335) (4,450) 57,706 (12,423) 9,955
------- ------- ------ ------- ------- -------
Net increase/(decrease)
in cash and cash
equivalents............ -- -- -- 9,688 (1,536) 1,046
Cash and cash
equivalents at
beginning of period.... -- -- -- -- 9,688 8,152
------- ------- ------ ------- ------- -------
Cash and cash
equivalents at end of
period................. -- -- -- 9,688 8,152 9,198
======= ======= ====== ======= ======= =======
</TABLE>
The following is a summary of the approximate effect on Home Service's and
Castle Transmission's net profit and corporate funding/shareholders' funds of
the application of US GAAP.
<TABLE>
<CAPTION>
Home Service Castle Transmission
---------------------------------------- ---------------------------------------------
Two Eight
Year Period from Months Period from Period from Months
Ended April 1, 1996 Ended February 28, 1997 April 1, 1997 Ended
March 31, to February 27, February 27, to March 31, to December 31, August 31,
1996 1997 1997 1997 1997 1998
----------- --------------- ------------ ----------------- --------------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net profit/(loss) as re-
ported in the profit
and loss accounts...... 7,785 14,002 2,697 325 (3,355) 2,145
US GAAP adjustments:
Depreciation
adjustment on
tangible fixed
assets............... 3,707 3,993 726 -- -- --
Pensions.............. -- -- -- -- 65 108
Capitalised interest.. -- -- -- 78 801 1,385
------ ------ ----- ---- ------ -----
Net income/(loss) under
US GAAP................ 11,492 17,995 3,423 403 (2,489) 3,638
Additional finance cost
of non-equity shares... -- -- -- (318) (2,862) --
------ ------ ----- ---- ------ -----
Net income/(loss)
attributable to
ordinary shareholders
under US GAAP.......... 11,492 17,995 3,423 85 (5,351) 3,638
====== ====== ===== ==== ====== =====
</TABLE>
F-76
<PAGE>
CASTLE TRANSMISSION SERVICES (HOLDINGS) LTD AND SUBSIDIARIES AND
THE BBC HOME SERVICE TRANSMISSION BUSINESS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Home Service Castle Transmission
------------ -----------------------------------------
At March 31,
------------------------ At December 31, At August 31,
1996 1997 1997 1998
------------ ----------- --------------- -------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(Unaudited)
<S> <C> <C> <C> <C>
Corporate
funding/shareholders'
funds as reported in
the balance sheets..... 202,429 102,673 99,868 109,748
US GAAP adjustments:
Depreciation adjust-
ment on tangible
fixed assets......... (35,945) -- -- --
Pensions.............. -- -- 65 173
Capitalised interest.. -- 78 879 2,264
Redeemable preference
shares (including ad-
ditional finance cost
of non-equity
shares).............. -- (102,564) (105,975) --
------- -------- -------- -------
Corporate
funding/shareholders'
funds/(deficit) under
US GAAP................ 166,484 187 (5,163) 112,185
======= ======== ======== =======
</TABLE>
F-77
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Crown Castle
International Corp.:
We have audited the accompanying statement of net assets of Bell Atlantic
Mobile Tower Operations as of September 30, 1998, and the related statements
of revenues and direct expenses for the nine months ended September 30, 1998
and the year ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets and the
related statements of revenues and direct expenses are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of net assets and the
related statements of revenues and direct expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement of
net assets and the related statements of revenues and direct expenses. We
believe that our audit provides a reasonable basis for our opinion.
The statements of net assets and revenues and direct expenses were prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission. As discussed in note 1, such statements do not
reflect certain corporate overhead expenses incurred by Bell Atlantic Mobile,
the contributor of the net assets, on behalf of the tower operations.
In our opinion, the statements referred to above present fairly, in all
material respects, the net assets of Bell Atlantic Mobile Tower Operations as
of September 30, 1998, and the related revenues and direct expenses for the
nine months ended September 30, 1998 and the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG LLP
December 8, 1998
F-78
<PAGE>
BELL ATLANTIC MOBILE
TOWER OPERATIONS
STATEMENT OF NET ASSETS
(In thousands of dollars)
September 30, 1998
<TABLE>
<S> <C>
Prepaid expenses and other current assets.............................. $ 48
Property and equipment, net............................................ 84,089
-------
Net Assets......................................................... $84,137
=======
</TABLE>
See notes to financial statements.
F-79
<PAGE>
BELL ATLANTIC MOBILE
TOWER OPERATIONS
STATEMENTS OF REVENUES AND DIRECT EXPENSES
(In thousands of dollars)
<TABLE>
<CAPTION>
Nine months
Year ended ended
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Site rental revenues................................. $ 6,480 $ 8,302
Costs of operations.................................. 15,131 12,285
Depreciation and amortization........................ 7,221 6,206
-------- --------
Loss from Tower Operations......................... $(15,872) $(10,189)
======== ========
</TABLE>
See notes to financial statements.
F-80
<PAGE>
BELL ATLANTIC MOBILE TOWER OPERATIONS
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars)
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
On December 8, 1998 Crown Castle International Corp. ("CCIC") and Bell
Atlantic Mobile and certain entities controlled by Bell Atlantic Mobile
("BAM") entered into a formation agreement in order to create Crown Atlantic
Company LLC ("Crown Atlantic"). Under the terms of the agreement, BAM will
contribute tower structures and certain related assets while CCIC will
contribute cash and shares of its common stock to Crown Atlantic and its
parent company, respectively. The tower structures and related assets consist
of the tower facilities that were previously part of BAM's cellular
operations. Their locations span New York, New England, Philadelphia,
Pittsburgh, Washington-Baltimore and certain areas in the Southeast and
Southwest.
Under the formation agreement, Crown Atlantic will assume all obligations of
BAM as landlord, licensor or tenant relating to the tower space leases with
respect to the period after the closing date. Crown Atlantic will also assume
all obligations of BAM subsequent to the closing date relating to the
operation of the towers and any contracts entered into by BAM during the
ordinary course of business of BAM relating to the towers but only to the
extent that such contracts were chosen to be included in the obligations
assumed by Crown Atlantic. Under the terms of the formation agreement, Crown
Atlantic did not assume certain liabilities as defined in the actual terms of
the formation agreement.
The accompanying statement of net assets reflects the assets to be
contributed by BAM to Crown Atlantic pursuant to the formation agreement. The
statement of net assets reflects BAM's historical carrying values of the
contributed assets, adjusted to exclude certain assets which will not be
contributed as part of the formation agreement.
The accompanying statements of revenue and direct expenses reflect
operations related to the tower assets to be contributed by BAM to Crown
Atlantic per the formation agreement. Certain direct and indirect operating
costs of BAM have been allocated and included in the costs of operations. The
allocated amounts totaled $3,501 and $2,811 for the year ended December 31,
1997 and the nine months ended September 30, 1998, respectively. Such
allocations are based on determinations that management believes are
reasonable, but may not be necessarily indicative of such costs incurred by
Crown Atlantic in the future. The statements of revenues and direct expenses
do not include allocated costs related to general corporate overhead, interest
expense and income taxes and therefore may not be indicative of future
operations.
The accompanying statement of net assets and the related statements of
revenues and direct expenses were prepared for the purpose of complying with
the requirements of the Securities and Exchange Commission and are not
intended to be a complete presentation of Bell Atlantic Mobile's assets and
liabilities or revenues and expenses.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Site rental revenues are recognized on a monthly basis under lease or
management agreements. Site rental revenues represent charges for tower usage
billed to third party customers under lease arrangements.
F-81
<PAGE>
BELL ATLANTIC MOBILE
TOWER OPERATIONS
NOTES TO FINANCIAL STATEMENTS--(Continued)
(In thousands of dollars)
2. Property and Equipment
Property and equipment are stated at historical costs. Depreciation of
property and equipment is provided on the straight-line method over the
estimated useful lives of the assets. Property and equipment at September 30,
1998 consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives
------------
<S> <C> <C>
Land..................................................... $ 20,941
Telecommunication towers and related equipment........... 12 years 96,379
--------
117,320
Less: accumulated depreciation........................... (33,231)
--------
$ 84,089
========
</TABLE>
F-82
<PAGE>
$200,000,000
CROWN CASTLE INTERNATIONAL CORP.
Offer to Exchange all Outstanding 12 3/4% Senior Exchangeable Preferred Stock
due 2010 for
12 3/4% Senior Exchangeable Preferred Stock due 2010, which have been
Registered under the Securities Act of 1933
----------------
Prospectus
, 1999
----------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
provides that a corporation has the power to indemnify any director or
officer, or former director or officer, 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 (other
than an action by or in the right of the corporation) against the expenses
(including attorney's fees), judgments, fines or amounts paid in settlement
actually and reasonably incurred by them in connection with the defense of any
action by reason of being or having been directors or officers, if such person
shall have acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding; provided that such person had no reasonable
cause to believe his conduct was unlawful, except that, if such action shall
be in the right of the corporation, no such indemnification shall be provided
as to any claim, issue or matter as to which such person shall have been
judged to have been liable to the corporation unless and to the extent that
the Court of Chancery of the State of Delaware (the "Court of Chancery"), or
any court in such suit or action was brought, shall determine upon application
that, in view of all of the circumstances of the case, such person is fairly
and reasonably entitled to indemnify for such expenses as such court shall
deem proper.
Accordingly, the Restated Certificate of Incorporation of the Company (filed
herewith as Exhibit 3.1) provide that the Company shall, to the maximum extent
permitted under the DGCL indemnify each person who is or was a director or
officer of the Company. The Company may, by action of the Board of Directors,
indemnify other employees and agents of the Corporation, directors, officers,
employees or agents of a subsidiary, and each person serving as a director,
officer, partner, member, employee or agent or another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, at the request of the Company, with the same scope and effect as
the indemnification of directors and officers of the Company. Notwithstanding
the foregoing, the Company shall be required to indemnify any person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors or is a proceeding to enforce such person's claim to
indemnification pursuant to the rights granted by the Restated Certificate of
Incorporation or otherwise by the Company. The Company may also enter into one
or more agreements with any person which provide for indemnification greater
or different than that provided in the Restated Certificate of Incorporation.
Furthermore, a director of the Company shall not be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (1) for any breach of the director's duty of
loyalty to the Company or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the DGCL, or (4) for any transaction from which
the director derived an improper personal benefit.
The Company's By-laws provide that each person who was or is made a party or
is threatened to be made a party to or is involved in any manner in any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding"), by reason of the
fact that he or she or a person of whom he or she is the legal representative
is or was a director or officer of the Company or, while a director or officer
of the Company, a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall be indemnified and
held harmless by the Company to the fullest extent permitted by the DGCL. Such
indemnification shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that the Company shall indemnify any such
person seeking indemnification in connection with a Proceeding (or part
thereof) initiated by such person only if such Proceeding (or part thereof)
was authorized by the Board of Directors or is a Proceeding to enforce such
person's claim to indemnification pursuant to the rights granted by the
Company's By-laws. The Company shall pay the expenses incurred by any person
described in the first two sentences of this paragraph in defending any such
Proceeding in advance of its final disposition upon, to the extent such an
II-1
<PAGE>
undertaking is required by applicable law, receipt of an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Company
as authorized in the Company's By-laws or otherwise.
The Company's By-laws further provide that the indemnification and the
advancement of expenses incurred in defending a Proceeding prior to its final
disposition provided by, or granted pursuant to, the Company's By-laws shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Restated Certificate of
Incorporation, other provision of the Company's By-laws or otherwise. The
Company may also maintain insurance, at its expense, to protect itself and any
person who is or was a director, officer, partner, member, employee or agent
of the Company or a subsidiary or of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the DGCL.
The Company's By-laws further provide that the Company may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and rights to be paid by the Company the expenses incurred in
defending any Proceeding in advance of its final disposition, to any person
who is or was an employee or agent (other than a director or officer) of the
Company or a subsidiary thereof and to any person who is or was serving at the
request of the Company or a subsidiary thereof as a director, officer,
partner, member, employee or agent of another corporation, partnership,
limited liability company, joint venture, trust or other enterprise, including
service with respect to employee benefit plans maintained or sponsored by the
Company or a subsidiary thereof, to the fullest extent of the provisions of
the Company's By-laws with respect to the indemnification and advancement of
expenses of directors and officers of the Company.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
**2.1 Asset Purchase and Merger Agreement among Crown Network Systems, Inc.,
Crown Mobile Systems, Inc., Robert A. Crown, Barbara Crown and Castle
Acquisition Corp. I, Castle Acquisition Corp. II, Castle Tower Holding
Corp. dated July 11, 1997
**2.2 First Amended and Restated Asset Purchase and Merger Agreement among
Crown Network Systems, Inc., Crown Mobile Systems, Inc., Robert A.
Crown, Barbara Crown and Castle Acquisition Corp. I, Castle
Acquisition Corp. II, Castle Tower Holding Corp. dated July 11, 1997,
as amended and restated on August 14, 1997
**2.3 Stock Purchase Agreement by and between Castle Tower Holding Corp.,
Bruce W. Neurohr, Charles H. Jones, Ronald J. Minnich, Ferdinand G.
Neurohr and Terrel W. Pugh dated May 12, 1997 ("TEA Stock Purchase
Agreement")
***2.4 Share Exchange Agreement among Castle Transmission Services (Holdings)
Ltd., Crown Castle International Corp., T 1 Diffusion de France
International S.A., Digital Future Investments B.V. and certain
shareholders of Castle Transmission Services (Holdings) Ltd. dated as
of April 24, 1998
3.1 Restated Certificate of Incorporation of Crown Castle International
Corp. dated August 21, 1998
3.2 Amended and Restated By-laws of Crown Castle International Corp. dated
August 21, 1998
3.3 Certificate of Designations, Preferences and Relative, Participating,
Optional and other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions thereof of 12 3/4% Senior
Exchangeable Preferred Stock due 2010 and 12 3/4% Series B Senior
Exchangeable Preferred Stock due 2010 of Crown Castle International
Corp.
**4.1 Indenture dated as of November 25, 1997 between Crown Castle
International Corp. and United States Trust Company of New York, as
Trustee (including exhibits).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------
<C> <S>
**4.2 Amended and Restated Stockholders Agreement among Castle Tower
Holding Corp., Edward C. Hutcheson, Jr., Ted B. Miller, Jr., Robert
A. Crown and Barbara Crown and the persons listed on Schedule I
thereto dated August 15, 1997
**4.3 Article Fourth of Certificate of Incorporation of Castle Tower
Holding Corp. (included in Exhibits 3.1 and 3.3)
**4.4 Trust Deed related to (Pounds)125,000,000 9 percent. Guaranteed Bonds
due 2007 among Castle Transmission (Finance) PLC, as Issuer, Castle
Transmission International Ltd. and Castle Transmission Services
(Holdings) Ltd., as Guarantors, and The Law Debenture Trust
Corporation p.l.c., as Trustee, dated May 21, 1997
**4.5 First Supplemental Trust Deed related to (Pounds)125,000,000 9
percent Guaranteed Bonds due 2007 among Castle Transmission (Finance)
PLC, as Issuer, Castle Transmission International Ltd. and Castle
Transmission Services (Holdings) Ltd., as Guarantors, and The Law
Debenture Trust Corporation p.l.c., as Trustee, dated October 17,
1997
***4.6 Specimen Certificate of Common Stock
*4.7 Indenture dated as of December 21, 1998 between Crown Castle
International Corp. and the United States Trust Company, as Trustee
(including exhibits)
*5 Opinion of Cravath, Swaine & Moore.
**10.1 Registration Rights Agreement by and among Crown Castle International
Corp. and Lehman Brothers Inc. and Credit Suisse First Boston
Corporation dated as of November 25, 1997
***10.2 Amended and Restated Loan Agreement by and among Crown Communication
Inc., Crown Castle International Corp. de Puerto Rico, Key Corporate
Capital Inc. and certain lenders dated July 10, 1998
**10.8 Amended and Restated Limited Holdco Guaranty by Crown Castle
International Corp., in favor of KeyBank National Association, as
Agent, dated November 25, 1997
**10.9 Memorandum of Understanding regarding Management and Governance of
Castle Tower Holding Corp. and Crown Communications, Inc. dated
August 15, 1997
**10.10 Site Commitment Agreement between Nextel Communications, Inc. and
Castle Tower Corporation dated July 11, 1997
**10.11 Independent Contractor Agreement by and between Crown Network
Systems, Inc. and Sprint Spectrum L.P. dated July 8, 1996, including
addendum dated November 12, 1997
**10.12 Independent Contractor Agreement between Crown Network Systems, Inc.
and Powerfone, Inc. d/b/a Nextel Communications dated September 30,
1996
**10.13 Independent Contractor Agreement by and between APT Pittsburgh
Limited Partnership and Crown Network Systems, Inc. dated December 3,
1996
**10.14 Master Lease Agreement between Sprint Spectrum, L.P. and Robert Crown
d/b/a Crown Communications dated June 11, 1996 ("Sprint Master Lease
Agreement")
**10.15 First Amendment to Sprint Master Lease Agreement, dated July 5, 1996
(included in Exhibit 10.14)
**10.16 Second Amendment to Sprint Master Lease Agreement, dated January 27,
1997 (included in Exhibit 10.14)
**10.17 Master Lease Agreement between Powerfone, Inc. d/b/a Nextel
Communications and Robert A. Crown d/b/a Crown Communications dated
October 3, 1996
**10.18 Master Lease Agreement between APT Pittsburgh Limited Partnership and
Robert Crown d/b/a Crown Communications dated December 3, 1996
**10.19 Master Tower Lease Agreement between Cellco Partnership d/b/a Bell
Atlantic NYNEX Mobile, Pittsburgh SMSA, L.P. and Pennsylvania RSN No.
6(II) and Robert A. Crown d/b/a Crown Communications dated December
29, 1995, as amended by a letter agreement dated as of October 28,
1997
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------
<C> <S>
**10.20 Master Tower Lease Agreement between Cellco Partnership d/b/a Bell
Atlantic NYNEX Mobile, Pittsburgh SMSA, L.P. and Pennsylvania RSN No.
6(II) and Robert A. Crown d/b/a Crown Communications dated December
29, 1995, as amended by a letter agreement dated as of October 28,
1997
**10.21 Castle Tower Holding Corp. 1995 Stock Option Plan (Third Restatement)
**10.22 Services Agreement between Castle Transmission International Ltd.
(formerly known as Castle Transmission Services Ltd.) and Castle
Tower Holding Corp. dated February 28, 1997
**10.23 Shareholders Agreement among Berkshire Fund IV Investment Corp.,
Berkshire Investors LLC, Berkshire Partners LLC, Candover Investments
PLC, Candover (Trustees) Limited, Candover Partners Limited (as
general partner for four limited partnerships), Castle Tower Holding
Corp., T 1 Diffusion de France International S.A., and Diohold
Limited (now known as Castle Transmission Services (Holdings) Ltd.)
dated January 23, 1997
**10.24 First Amendment to Amended and Restated Stockholders Agreement by and
among Crown Castle International Corp., Edward C. Hutcheson, Jr., Ted
B. Miller, Jr., Robert A. Crown and Barbara Crown and the persons
listed as Investors dated January 28, 1998
**10.25 Third Amendment to Sprint Master Lease Agreement, dated February 12,
1998
10.26 Stockholders Agreement between Crown Castle International Corp. and
certain stockholders listed on Schedule 1 thereto, dated as of August
21, 1998
***10.27 Agreement among Castle Transmission Services (Holdings) Ltd., Digital
Future Investments B.V., Berkshire Partners LLC and certain
shareholders of Castle Transmission Services (Holdings) Ltd. for the
sale and purchase of certain shares of Castle Transmission Services
(Holdings) Ltd., for the amendment of the Shareholders Agreement in
respect of Castle Transmission Services (Holdings) Ltd. and for the
granting of certain options dated April 24, 1998
10.28 Governance Agreement among Crown Castle International Corp.,
TeleDiffusion de France International S.A. and Digital Future
Investments B.V., dated as of August 21, 1998
*10.29 Form of Severance Agreement entered into between Crown Castle
International Corp., and Ted Miller, George Reese, John Gwyn, Charles
Green, Alan Rees and David Ivy
*10.30 Shareholders Agreement among Crown Castle International Corp., T 1
Diffusion de France International S.A. and Castle Transmission
Services (Holdings) Limited dated August 1998
***10.31 Site Sharing Agreement between National Transcommunications Limited
and The British Broadcasting Corporation dated September 10, 1991
***10.32 Transmission Agreement between The British Broadcasting Corporation
and Castle Transmission Services Limited dated February 27, 1997
***10.33 Digital Terrestrial Television Transmission Agreement between The
British Broadcasting Corporation and Castle Transmission
International Ltd. dated February 10, 1998
***10.34 Agreement for the Provision of Digital Terrestrial Television
Distribution and Transmission Services between British Digital
Broadcasting plc and Castle Transmission International Ltd. dated
December 18, 1997
***10.35 Loan Amendment Agreement among Castle Transmission International,
Castle Transmission Services (Holdings) Ltd. and certain lenders
dated May 21, 1997
***10.36 Crown Castle International Corp. 1995 Stock Option Plan (Fourth
Restatement)
***10.37 Contract between British Telecommunications PLC and Castle
Transmission International Inc. for the Provision of Digital
Terrestrial Television Network Distribution Service dated May 13,
1998
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------
<C> <S>
***10.38 Site Marketing Agreement dated June 25, 1998 between BellSouth
Mobility Inc. and Crown Communication Inc.
***10.39 Commitment Agreement between the British Broadcasting Corporation,
Castle Tower Holding Corp., T 1 Diffusion de France International
S.A. and T 1 Diffusion de France S.A.
*10.40 Amended and Restated Services Agreement between Castle Transmission
International Limited and T 1 Diffusion de France S.A. dated August
1998
***10.41 Castle Transmission Services (Holdings) Ltd. All Employee Share
Option Scheme dated as of January 23, 1998
***10.42 Rules of the Castle Transmission Services (Holdings) Ltd. Bonus Share
Plan
*10.43 Employee Benefit Trust between Castle Transmission Services
(Holdings) Ltd. and Castle Transmission (Trustees) Limited
***10.44 Castle Transmission Services (Holdings) Ltd. Unapproved Share Option
Scheme dated as of January 23, 1998
***10.45 Amending Agreement between the British Broadcasting Corporation and
Castle Transmission International Limited dated July 16, 1998
10.46 Rights Agreement dated as of August 21, 1998, between Crown Castle
International Corp. and Chasemellon Shareholder Services, L.L.C.
***10.47 Deed of Grant of Option between Castle Transmission Series (Holdings)
Ltd. and George Reese dated January 23, 1998
***10.48 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and David Ivy dated January 23, 1998
***10.49 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and David Ivy dated April 23, 1998
***10.50 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and Ted B. Miller, Jr., dated April 23, 1998
***10.51 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and Ted B. Miller, Jr., dated January 23, 1998
***10.52 Memorandum Regarding Proposed Initial Public Offering and Certain
Transitional Changes Affecting Management dated July 2, 1998, between
Crown Castle International Corp. and Robert A. and Barbara A. Crown
***10.53 Services Agreement dated July 2, 1998, by and between Crown Castle
International Corp. and Robert A. and Barbara A. Crown
10.56 Registration Rights Agreement dated as of December 21, 1998 by and
among Crown Castle International Corp. and Lehman Brothers, Salomon
Smith Barney and Goldman, Sachs & Co.
*10.57 Formation Agreement relating to the formation of Crown Atlantic
Company LLC, Crown Atlantic Holding Sub LLC, and Crown Atlantic
Holding Company LLC dated December 1998 (including exhibits)
*11 Computation of net loss per common share
*12 Computation of Ratio of Earnings to Fixed Charges
*21 Subsidiaries of Crown Castle International Corp.
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
*23.3 Consent of Cravath, Swaine & Moore (included in Exhibit 5)
</TABLE>
II-5
<PAGE>
- --------
* To be filed by amendment.
** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Registration Statement on Form S-4 previously filed by the
Registrant (Registration No. 333-43873).
*** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Registration Statement on Form S-1 previously filed by the
Registrant (Registration No. 333-57283).
Schedule I--Condensed Financial Information of Registrant
All other schedules are omitted because they are not applicable or because
the required information is contained in the financial statements or notes
thereto included in this Registration Statement.
Item 22. Undertakings
The undersigned Registrant hereby undertakes that insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions described under Item 20 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes (i) to respond to requests for
information that are incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This undertaking also includes documents filed
subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the undersigned undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The undersigned Registrant hereby undertakes that every prospectus: (i) that
is filed pursuant to the immediately preceding paragraph or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on this 1st day of February, 1999
Crown Castle International Corp.,
/s/ Charles C. Green, III
by: _________________________________
Name: Charles C. Green, III
Title: Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles C. Green, III and Wesley D. Cunningham,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement or any registration statement for this offering that is
to be effective upon the filing pursuant to rule 462(b) under the Securities
Act of 1933, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that each of said attorney-in-fact or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 1st day of February, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Ted B. Miller, Jr. Chief Executive Officer and Vice Chairman of the
______________________________________ Board (Principal Executive Officer)
Ted B. Miller, Jr.
/s/ David L. Ivy President and Director
______________________________________
David L. Ivy
/s/ Charles C. Green, III Executive Vice President and Chief Financial
______________________________________ Officer (Principal Financial Officer)
Charles C. Green, III
/s/ Wesley D. Cunningham Vice President, Chief Accounting Officer and
______________________________________ Corporate Controller (Principal Accounting
Wesley D. Cunningham Officer)
/s/ Carl Ferenbach Chairman of the Board
______________________________________
Carl Ferenbach
/s/ Michel Azibert Director
______________________________________
Michel Azibert
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Bruno Chetaille Director
______________________________________
Bruno Chetaille
/s/ Robert A. Crown Director
______________________________________
Robert A. Crown
/s/ Randall A. Hack Director
______________________________________
Randall A. Hack
/s/ Edward C. Hutcheson, Jr. Director
______________________________________
Edward C. Hutcheson, Jr.
/s/ Robert F. McKenzie Director
______________________________________
Robert F. McKenzie
Director
______________________________________
William A. Murphy
/s/ Jeffrey H. Schutz Director
______________________________________
Jeffrey H. Schutz
/s/ Charles C. Green, III
______________________________________
Charles C. Green, III
Attorney-in-Fact
</TABLE>
II-8
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET (Unconsolidated)
(In thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,093 $ 53,092
Receivables and other current assets...................... 1,073 424
Advances to subsidiaries, net............................. 388 2,611
------- --------
Total current assets.................................. 7,554 56,127
Property and equipment, net of accumulated depreciation of
$0 and $27 at December 31, 1996 and 1997, respectively..... -- 808
Investment in subsidiaries.................................. 5,766 232,229
Investments in affiliates................................... 2,101 59,082
Deferred financing costs and other assets, net of
accumulated amortization of $0 and $69 at December 31, 1996
and 1997, respectively..................................... 49 7,075
------- --------
$15,470 $355,321
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and other accrued liabilities............ $ 130 $ 1,187
------- --------
Total current liabilities............................. 130 1,187
Long-term debt.............................................. -- 151,593
------- --------
Total liabilities..................................... 130 152,780
------- --------
Redeemable preferred stock, $.01 par value; 6,435,228 shares
authorized:
Senior Convertible Preferred Stock; shares issued:
December 31, 1996--none and December 31, 1997--657,495
(stated at redemption value; aggregate liquidation value
of $0 and $68,916, respectively)......................... -- 67,948
Series A Convertible Preferred Stock; shares issued:
December 31, 1996--862,455 and December 31, 1997--
1,383,333 (stated at redemption and aggregate liquidation
value)................................................... 5,175 8,300
Series B Convertible Preferred Stock; 864,568 shares
issued (stated at redemption and aggregate liquidation
value)................................................... 10,375 10,375
Series C Convertible Preferred Stock; shares issued:
December 31, 1996--none and December 31, 1997--3,529,832
(stated at redemption and aggregate liquidation value)... -- 74,126
------- --------
Total redeemable preferred stock...................... 15,550 160,749
------- --------
Stockholders' equity (deficit):
Common stock, $.01 par value; 11,511,109 shares
authorized:
Class A Common Stock; shares issued: December 31, 1996--
1,350,000 and December 31, 1997--1,041,565............. 3 2
Class B Common Stock; shares issued: December 31, 1996--
1,488,330 and December 31, 1997--9,367,165............. 3 19
Additional paid-in capital................................ 762 58,248
Cumulative foreign currency translation adjustment........ -- 562
Accumulated deficit....................................... (978) (17,039)
------- --------
Total stockholders' equity (deficit).................. (210) 41,792
------- --------
$15,470 $355,321
======= ========
</TABLE>
See notes to consolidated financial statements and accompanying notes.
S-1
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(Continued)
STATEMENT OF OPERATIONS (Unconsolidated)
(In thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1995 1996 1997
------ -------- --------
<S> <C> <C> <C>
Other revenues..................................... $ -- $ -- $ 329
Interest and other income.......................... -- 171 2,028
General and administrative expenses................ -- -- (149)
Corporate development expenses..................... -- (1,249) (3,867)
Depreciation and amortization...................... -- -- (27)
Interest expense and amortization of deferred
financing costs................................... -- -- (4,594)
----- ------- --------
Loss before income taxes and equity in earnings
(losses) of subsidiaries and unconsolidated
affiliate......................................... -- (1,078) (6,280)
Credit (provision) for income taxes................ -- 49 (49)
Equity in earnings (losses) of subsidiaries........ (21) 72 (4,475)
Equity in losses of unconsolidated affiliate....... -- -- (1,138)
----- ------- --------
Net loss........................................... (21) (957) (11,942)
Dividends on Senior Convertible Preferred Stock.... -- -- (2,199)
----- ------- --------
Net loss after deduction of dividends on Senior
Convertible Preferred Stock....................... $ (21) $(1,957) $(14,141)
===== ======= ========
</TABLE>
See notes to consolidated financial statements and accompanying notes.
S-2
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(Continued)
STATEMENT OF CASH FLOWS (Unconsolidated)
(In thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1995 1996 1997
------- ------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................ $ (21) $ (957) $ (11,942)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Equity in losses (earnings) of subsidiaries... 21 (72) 4,475
Amortization of deferred financing costs and
discount on long-term debt................... -- -- 1,652
Equity in losses of unconsolidated affiliate.. -- -- 1,138
Depreciation and amortization................. -- -- 27
Decrease (increase) in receivables and other
assets....................................... -- (1,122) 551
Increase (decrease) in accounts payable and
other accrued liabilities.................... -- 130 (103)
------- ------- ---------
Net cash provided by (used for) operating
activities................................. -- (2,021) (4,202)
------- ------- ---------
Cash flows from investing activities:
Investment in subsidiaries...................... (4,972) -- (89,989)
Investments in affiliates....................... -- (2,101) (59,487)
Net advances to subsidiaries.................... (100) (288) (2,223)
Capital expenditures............................ -- -- (835)
------- ------- ---------
Net cash used for investing activities...... (5,072) (2,389) (152,534)
------- ------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt........ -- -- 150,010
Proceeds from issuance of capital stock......... 5,072 10,503 139,867
Principal payments on long-term debt............ -- -- (78,102)
Incurrence of financing costs................... -- -- (5,908)
Purchase of capital stock....................... -- -- (2,132)
------- ------- ---------
Net cash provided by financing activities... 5,072 10,503 203,735
------- ------- ---------
Net increase in cash and cash equivalents......... -- 6,093 46,999
Cash and cash equivalents at beginning of year.... -- -- 6,093
------- ------- ---------
Cash and cash equivalents at end of year.......... $ -- $ 6,093 $ 53,092
======= ======= =========
Supplementary schedule of noncash investing and
financing activities:
Issuance of long-term debt in connection with
acquisitions................................... $ -- $ -- $ 78,102
Issuance of Class B Common Stock in connection
with acquisitions.............................. -- -- 57,189
Conversion of subsidiary's Convertible Secured
Subordinated Notes to Series A Convertible
Preferred Stock................................ 743 -- 3,657
Supplemental disclosure of cash flow information:
Interest paid................................... $ -- $ -- $ 2,943
Income taxes paid............................... -- -- --
</TABLE>
See notes to consolidated financial statements and accompanying notes.
S-3
<PAGE>
CROWN CASTLE INTERNATIONAL CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(Continued)
NOTES TO FINANCIAL STATEMENTS (Unconsolidated)
1. Investment in Subsidiaries
The Company's investment in subsidiaries is presented in the accompanying
unconsolidated financial statements using the equity method of accounting.
Under the terms of the Senior Credit Facility, the Company's subsidiaries are
limited in the amount of dividends which can be paid to the Company. The
amount of such dividends is limited to (i) $6,000,000 per year until October
31, 2002, and $33,000,000 per year thereafter, and (ii) an amount to pay
income taxes attributable to the Company's subsidiaries. The restricted net
assets of the Company's subsidiaries totaled $232,229,000 at December 31,
1997.
2. Long-term Debt
Long-term debt consists of the Company's 10 5/8% Senior Discount Notes due
2007.
3. Income Taxes
Income taxes reported in the accompanying unconsolidated financial
statements are determined by computing income tax assets and liabilities on a
consolidated basis, for the Company and members of its consolidated federal
income tax return group, and then reducing such consolidated amounts for the
amounts recorded by the Company's subsidiaries on a separate tax return basis.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
------- ----------------------
<C> <S>
**2.1 Asset Purchase and Merger Agreement among Crown Network Systems, Inc.,
Crown Mobile Systems, Inc., Robert A. Crown, Barbara Crown and Castle
Acquisition Corp. I, Castle Acquisition Corp. II, Castle Tower Holding
Corp. dated July 11, 1997
**2.2 First Amended and Restated Asset Purchase and Merger Agreement among
Crown Network Systems, Inc., Crown Mobile Systems, Inc., Robert A.
Crown, Barbara Crown and Castle Acquisition Corp. I, Castle
Acquisition Corp. II, Castle Tower Holding Corp. dated July 11, 1997,
as amended and restated on August 14, 1997
**2.3 Stock Purchase Agreement by and between Castle Tower Holding Corp.,
Bruce W. Neurohr, Charles H. Jones, Ronald J. Minnich, Ferdinand G.
Neurohr and Terrel W. Pugh dated May 12, 1997 ("TEA Stock Purchase
Agreement")
***2.4 Share Exchange Agreement among Castle Transmission Services (Holdings)
Ltd., Crown Castle International Corp., T 1 Diffusion de France
International S.A., Digital Future Investments B.V. and certain
shareholders of Castle Transmission Services (Holdings) Ltd. dated as
of April 24, 1998
3.1 Restated Certificate of Incorporation of Crown Castle International
Corp., dated August 21, 1998
3.2 Amended and Restated By-laws of Crown Castle International Corp.,
dated August 21, 1998
3.3 Certificate of Designations, Preferences and Relative, Participating,
Optional and other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions thereof of 12 3/4% Senior
Exchangeable Preferred Stock due 2010 and 12 3/4% Series B Senior
Exchangeable Preferred Stock due 2010 of Crown Castle International
Corp.
**4.1 Indenture dated as of November 25, 1997 between Crown Castle
International Corp. and United States Trust Company of New York, as
Trustee (including exhibits).
**4.2 Amended and Restated Stockholders Agreement among Castle Tower Holding
Corp., Edward C. Hutcheson, Jr., Ted B. Miller, Jr., Robert A. Crown
and Barbara Crown and the persons listed on Schedule I thereto dated
August 15, 1997
**4.3 Article Fourth of Certificate of Incorporation of Castle Tower Holding
Corp. (included in Exhibits 3.1 and 3.3)
**4.4 Trust Deed related to (Pounds)125,000,000 9 percent. Guaranteed Bonds
due 2007 among Castle Transmission (Finance) PLC, as Issuer, Castle
Transmission International Ltd. and Castle Transmission Services
(Holdings) Ltd., as Guarantors, and The Law Debenture Trust
Corporation p.l.c., as Trustee, dated May 21, 1997
**4.5 First Supplemental Trust Deed related to (Pounds)125,000,000 9 percent
Guaranteed Bonds due 2007 among Castle Transmission (Finance) PLC, as
Issuer, Castle Transmission International Ltd. and Castle Transmission
Services (Holdings) Ltd., as Guarantors, and The Law Debenture Trust
Corporation p.l.c., as Trustee, dated October 17, 1997
***4.6 Specimen Certificate of Common Stock
*4.7 Indenture dated as of December 21, 1998 between Crown Castle
International Corp. and the United States Trust Company, as Trustee
(including exhibits)
**5 Opinion of Cravath, Swaine & Moore.
**10.1 Registration Rights Agreement by and among Crown Castle International
Corp. and Lehman Brothers Inc. and Credit Suisse First Boston
Corporation dated as of November 25, 1997
***10.2 Amended and Restated Loan Agreement by and among Crown Communication
Inc., Crown Castle International Corp. de Puerto Rico, Key Corporate
Capital Inc. and certain lenders dated July 10, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------
<C> <S>
**10.8 Amended and Restated Limited Holdco Guaranty by Crown Castle
International Corp., in favor of KeyBank National Association, as
Agent, dated November 25, 1997
**10.9 Memorandum of Understanding regarding Management and Governance of
Castle Tower Holding Corp. and Crown Communications, Inc. dated
August 15, 1997
**10.10 Site Commitment Agreement between Nextel Communications, Inc. and
Castle Tower Corporation dated July 11, 1997
**10.11 Independent Contractor Agreement by and between Crown Network
Systems, Inc. and Sprint Spectrum L.P. dated July 8, 1996, including
addendum dated November 12, 1997
**10.12 Independent Contractor Agreement between Crown Network Systems, Inc.
and Powerfone, Inc. d/b/a Nextel Communications dated September 30,
1996
**10.13 Independent Contractor Agreement by and between APT Pittsburgh
Limited Partnership and Crown Network Systems, Inc. dated December 3,
1996
**10.14 Master Lease Agreement between Sprint Spectrum, L.P. and Robert Crown
d/b/a Crown Communications dated June 11, 1996 ("Sprint Master Lease
Agreement")
**10.15 First Amendment to Sprint Master Lease Agreement, dated July 5, 1996
(included in Exhibit 10.14)
**10.16 Second Amendment to Sprint Master Lease Agreement, dated January 27,
1997 (included in Exhibit 10.14)
**10.17 Master Lease Agreement between Powerfone, Inc. d/b/a Nextel
Communications and Robert A. Crown d/b/a Crown Communications dated
October 3, 1996
**10.18 Master Lease Agreement between APT Pittsburgh Limited Partnership and
Robert Crown d/b/a Crown Communications dated December 3, 1996
**10.19 Master Tower Lease Agreement between Cellco Partnership d/b/a Bell
Atlantic NYNEX Mobile, Pittsburgh SMSA, L.P. and Pennsylvania RSN No.
6(II) and Robert A. Crown d/b/a Crown Communications dated December
29, 1995, as amended by a letter agreement dated as of October 28,
1997
**10.20 Master Tower Lease Agreement between Cellco Partnership d/b/a Bell
Atlantic NYNEX Mobile, Pittsburgh SMSA, L.P. and Pennsylvania RSN No.
6(II) and Robert A. Crown d/b/a Crown Communications dated December
29, 1995, as amended by a letter agreement dated as of October 28,
1997
**10.21 Castle Tower Holding Corp. 1995 Stock Option Plan (Third Restatement)
**10.22 Services Agreement between Castle Transmission International Ltd.
(formerly known as Castle Transmission Services Ltd.) and Castle
Tower Holding Corp. dated February 28, 1997
**10.23 Shareholders Agreement among Berkshire Fund IV Investment Corp.,
Berkshire Investors LLC, Berkshire Partners LLC, Candover Investments
PLC, Candover (Trustees) Limited, Candover Partners Limited (as
general partner for four limited partnerships), Castle Tower Holding
Corp., T 1 Diffusion de France International S.A., and Diohold
Limited (now known as Castle Transmission Services (Holdings) Ltd.)
dated January 23, 1997
**10.24 First Amendment to Amended and Restated Stockholders Agreement by and
among Crown Castle International Corp., Edward C. Hutcheson, Jr., Ted
B. Miller, Jr., Robert A. Crown and Barbara Crown and the persons
listed as Investors dated January 28, 1998
**10.25 Third Amendment to Sprint Master Lease Agreement, dated February 12,
1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------
<C> <S>
10.26 Stockholders Agreement between Crown Castle International Corp. and
certain stockholders listed on Schedule 1 thereto, dated as of August
21, 1998
***10.27 Agreement among Castle Transmission Services (Holdings) Ltd., Digital
Future Investments B.V., Berkshire Partners LLC and certain
shareholders of Castle Transmission Services (Holdings) Ltd. for the
sale and purchase of certain shares of Castle Transmission Services
(Holdings) Ltd., for the amendment of the Shareholders Agreement in
respect of Castle Transmission Services (Holdings) Ltd. and for the
granting of certain options dated April 24, 1998
10.28 Governance Agreement among Crown Castle International Corp.
TeleDiffusion de France International S.A. and Digital Future
Investments B.V., dated as of August 21, 1998
*10.29 Form of Severance Agreement entered into between Crown Castle
International Corp. and Ted Miller, George Reese, John Gwyn, Charles
Green, Alan Rees and David Ivy.
*10.30 Shareholders Agreement among Crown Castle International Corp., T 1
Diffusion de France International S.A. and Castle Transmission
Services (Holdings) Limited dated August 1998
***10.31 Site Sharing Agreement between National Transcommunications Limited
and The British Broadcasting Corporation dated September 10, 1991
***10.32 Transmission Agreement between The British Broadcasting Corporation
and Castle Transmission Services Limited dated February 27, 1997
***10.33 Digital Terrestrial Television Transmission Agreement between The
British Broadcasting Corporation and Castle Transmission
International Ltd. dated February 10, 1998
***10.34 Agreement for the Provision of Digital Terrestrial Television
Distribution and Transmission Services between British Digital
Broadcasting plc and Castle Transmission International Ltd. dated
December 18, 1997
***10.35 Loan Amendment Agreement among Castle Transmission International,
Castle Transmission Services (Holdings) Ltd. and certain lenders
dated May 21, 1997
***10.36 Crown Castle International Corp. 1995 Stock Option Plan (Fourth
Restatement)
***10.37 Contract between British Telecommunications PLC and Castle
Transmission International Inc. for the Provision of Digital
Terrestrial Television Network Distribution Service dated May 13,
1998
***10.38 Site Marketing Agreement dated June 25, 1998 between BellSouth
Mobility Inc. and Crown Communication Inc.
***10.39 Commitment Agreement between the British Broadcasting Corporation,
Castle Tower Holding Corp., T 1 Diffusion de France International
S.A. and T 1 Diffusion de France S.A.
*10.40 Amended and Restated Services Agreement between Castle Transmission
International Limited and T 1 Diffusion de France S.A. dated August
1998
***10.41 Castle Transmission Services (Holdings) Ltd. All Employee Share
Option Scheme dated as of January 23, 1998
***10.42 Rules of the Castle Transmission Services (Holdings) Ltd. Bonus Share
Plan
*10.43 Employee Benefit Trust between Castle Transmission Services
(Holdings) Ltd. and Castle Transmission (Trustees) Limited
***10.44 Castle Transmission Services (Holdings) Ltd. Unapproved Share Option
Scheme dated as of January 23, 1998
***10.45 Amending Agreement between the British Broadcasting Corporation and
Castle Transmission International Limited dated July 16, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------
<C> <S>
10.46 Rights Agreement dated as of August 21, 1998, between Crown Castle
International Corp. and Chasemellon Shareholders Services, L.L.C.
***10.47 Deed of Grant of Option between Castle Transmission Series (Holdings)
Ltd. and George Reese dated January 23, 1998
***10.48 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and David Ivy dated January 23, 1998
***10.49 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and David Ivy dated April 23, 1998
***10.50 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and Ted B. Miller, Jr., dated April 23, 1998
***10.51 Deed of Grant of Option between Castle Transmission Services
(Holdings) Ltd. and Ted B. Miller, Jr., dated January 23, 1998
***10.52 Memorandum Regarding Proposed Initial Public Offering and Certain
Transitional Changes Affecting Management dated July 2, 1998, between
Crown Castle International Corp. and Robert A. and Barbara A. Crown
***10.53 Services Agreement dated July 2, 1998, by and between Crown Castle
International Corp. and Robert A. and Barbara A. Crown
10.56 Registration Rights Agreement dated as of December 21, 1998 by and
among Crown Castle International Corp. and Lehman Brothers, Salomon
Smith Barney and Goldman, Sachs & Co.
*10.57 Formation Agreement relating to the formation of Crown Atlantic
Company LLC, Crown Atlantic Holding Sub LLC, and Crown Atlantic
Holding Company LLC dated December 1998 (including exhibits)
*11 Computation of net loss per common share
*12 Computation of Ratio of Earnings to Fixed Charges
*21 Subsidiaries of Crown Castle International Corp.
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
*23.3 Consent of Cravath, Swaine & Moore (included in Exhibit 5)
</TABLE>
- --------
* To be filed by amendment.
** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Registration Statement on Form S-4 previously filed by the
Registrant (Registration No. 333-43873).
*** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Registration Statement on Form S-1 previously filed by the
Registrant (Registration No. 333-57283).
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CROWN CASTLE INTERNATIONAL CORP.
The present name of the corporation is Crown Castle International
Corp. The corporation was originally incorporated on April 20, 1995, under the
name "Castle Tower Holding Corp." by the filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware. This
Restated Certificate of Incorporation of the corporation, which both restates
and further amends the provisions of the corporation's Certificate of
Incorporation, was duly adopted in accordance with the provisions of Sections
228, 242 and 245 of the General Corporation Law of the State of Delaware. The
Certificate of Incorporation of the corporation is hereby amended and restated
to read in its entirety as follows:
ARTICLE I
Name
----
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
Crown Castle International Corp.
ARTICLE II
Address
-------
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Company.
ARTICLE III
Purpose
-------
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware.
<PAGE>
2
ARTICLE IV
Capitalization
--------------
The total number of shares of stock which the Corporation shall have
authority to issue is seven hundred million (700,000,000), consisting of ten
million (10,000,000) shares of Preferred Stock, par value $0.01 per share
(hereinafter referred to as "Preferred Stock"), six hundred million
(600,000,000) shares of Common Stock, par value $0.01 per share (hereinafter
referred to as "Common Stock") and ninety million (90,000,000) shares of Class A
Common Stock, par value $0.01 per share (hereinafter referred to as "Class A
Common Stock").
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest in,
such share on the part of any other person, whether or not the Corporation shall
have notice thereof, except as expressly provided by applicable law.
Each issued and outstanding share of Class B Common Stock, par value
$.01 per share, of the Corporation outstanding immediately prior to the
effectiveness of this Restated Certificate of Incorporation, is hereby
reclassified into five (5) shares of Common Stock.
A. Undesignated Preferred Stock. The undesignated Preferred Stock
-----------------------------
may be issued from time to time in one or more series. The Board of Directors is
hereby authorized to provide for the issuance of shares of Preferred Stock in
series and, by filing a certificate pursuant to the applicable law of the State
of Delaware (hereinafter referred to as a "Preferred Stock Designation"), 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 rights of the shares
of each such series and the qualifications, limitations and restrictions
thereof. The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
1. The designation of the series, which may be by distinguishing
number, letter or title.
2. The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the Preferred Stock
Designation)
<PAGE>
3
increase or decrease (but not below the number of shares thereof then
outstanding).
3. The amounts payable on, and the preferences, if any, of shares of
the series in respect of dividends, and whether such dividends, if any, shall be
cumulative or noncumulative.
4. Dates at which dividends, if any, shall be payable.
5. The redemption rights and price or prices, if any, for shares of
the series.
6. The terms and amount of any sinking fund provided for the purchase
or redemption of shares of the series.
7. The amounts payable on, and the preferences, if any, of shares of
the series in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation.
8. Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other security, of
the Corporation or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates at which
such shares shall be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made.
9. Restrictions on the issuance of shares of the same series or of
any other class or series.
10. The voting rights, if any, of the holders of shares of the
series.
B. Common Stock. The holders of shares of Common Stock shall be
-------------
entitled to one vote for each such share upon all questions presented to the
stockholders. The holders of the shares of Common Stock shall at all times,
except as otherwise provided in this Restated Certificate of Incorporation or as
required by law, vote together with the holders of any other class or series of
stock of the Corporation accorded such general voting rights, as one class.
<PAGE>
4
C. Class A Common Stock.
---------------------
1. General. The holders of shares of Class A Common Stock shall be
--------
entitled to one vote for each such share upon all questions presented to the
stockholders, except with respect to the election of Directors by the
Stockholders; provided, however, that the holders of shares of Class A Common
-------- -------
Stock shall have the right to vote on Directors as set forth in Section C.2 of
this Article IV. The holders of the shares of Class A Common Stock shall at all
times, except as otherwise provided in this Restated Certificate of
Incorporation (including the immediately preceding sentence) or as required by
applicable law, (i) vote, together with the holders of shares of Common Stock
and any other class or series of stock of the Corporation accorded such general
voting rights, as a single class and (ii) receive any dividends or distributions
declared or paid on the Common Stock in equal amounts per share and without
preference or priority of either the Common Stock or the Class A Common Stock
over the other. Shares of Class A Common Stock may only be issued by the
Corporation to members of the TDF Group (as hereinafter defined) or to any other
person with the approval of the holders of a majority of the Class A Common
Stock outstanding, in each case in accordance with Section 7.08 of the
Governance Agreement (hereinafter as defined in Section C.7 of this Article IV).
2. Election of Directors.
----------------------
(a) General Right of Election. So long as TDF (as hereinafter
--------------------------
defined) is Qualified (as such term is defined in the Governance
Agreement), holders of shares of Class A Common Stock voting as a separate
class shall have the right to elect two Directors (the "Class A Directors")
to the Board of Directors of the Corporation; provided, however, that if
-------- -------
TDF is not Qualified, so long as the Ownership Interest (as such term is
defined in the Governance Agreement) of the TDF Group is at least 5%,
holders of Class A Common Stock voting as a separate class shall have the
right to elect one Director to the Board of Directors of the Corporation.
(b) Mandatory Termination and Replacement. Each Class A Director
--------------------------------------
shall serve until the next annual meeting of the stockholders and until
such Director's successor has been elected and qualified, subject to such
Director's earlier death, resignation, removal or retirement. Upon (i) the
number of Directors the holders of the Class A Common Stock are entitled to
<PAGE>
5
elect being reduced from two to one Director as a result of TDF no longer
being Qualified, the term of office of one Class A Director then in office
shall terminate forthwith; provided, however, that the selection of which
-------- -------
Class A Director's term of office shall terminate shall be at the
discretion of a majority of holders of Class A Common Stock, and (ii) the
conversion of all outstanding shares of Class A Common Stock pursuant to
Section C.4 of this Article IV, the term of office of all Class A Directors
then in office shall thereupon terminate. The vacancies resulting from any
such termination pursuant to the preceding clauses (i) or (ii) shall be
filled by the remaining Directors then in office acting by majority vote of
such remaining Directors, though less than a quorum. The Directors so
elected to fill such vacancies shall not be treated hereunder or under the
By-laws of the Corporation as Class A Directors.
(c) Replacement. Subject to Section C.2(b) of this Article IV, in
------------
the case of any vacancy occurring among the Class A Directors, the holders
of Class A Common Stock then outstanding, voting separately as a class may,
either by written consent or at a special meeting of such holders called in
accordance with the By-laws of the Corporation, elect successors to hold
office for the unexpired term(s) of the Director(s) whose place(s) shall be
vacant.
(d) Except as set forth in this Section C.2 of this Article IV, the
holders of Class A Common Stock shall not be entitled to vote in respect of
the election of Directors of the Corporation.
3. Certain Significant Actions. Subject to the terms and conditions
----------------------------
of the Governance Agreement, the Corporation shall not take any Significant
Action (as such term is defined in the Governance Agreement) without the
approval of the holders of a majority of the Class A Common Stock then
outstanding, voting separately as a single class, either by written consent or
at a special meeting of such holders called in accordance with the By-laws of
the Corporation.
4. Conversion of Class A Common Stock.
-----------------------------------
(a) Voluntary Conversion. Each share of Class A Common Stock shall
---------------------
be convertible, at the option of its record holder, into one validly issued
fully paid and non-assessable share of Common Stock at any time.
<PAGE>
6
(b) Voluntary Conversion Procedure. At the time of a voluntary
-------------------------------
conversion, the record holder of shares of Class A Common Stock shall
deliver to the principal office of the Corporation or any transfer agent
for shares of Common Stock (i) the certificate or certificates representing
the shares of Class A Common Stock to be converted, duly endorsed in blank
or accompanied by proper instruments of transfer and (ii) written notice to
the Corporation stating that the record holder elects to convert such share
or shares and stating the name or names (with addresses) and denominations
in which the certificate or certificates representing the shares of Common
Stock issuable upon the conversion are to be issued and including
instructions for the delivery thereof. Conversion shall be deemed to have
been effected at the time when delivery is made to the Corporation or its
transfer agent of such written notice and the certificate or certificates
representing the shares of Class A Common Stock to be converted, and as of
such time each Person named in such written notice as the Person to whom a
certificate representing shares of Common Stock is to be issued, shall be
deemed to be the holder of record of the number of shares of Common Stock
to be evidenced by that certificate. Upon such delivery, the Corporation or
its transfer agent shall promptly issue and deliver at the stated address
of such record holder of shares of Common Stock a certificate or
certificates representing the number of shares of Common Stock to which
such record holder is entitled by reason of such conversion, and shall
cause such shares of Common Stock to be registered in the name of the
record holder.
(c) Automatic Conversion. (i) Subject to paragraph (iii) below, in
---------------------
the event of any Transfer (as hereinafter defined) of any share of Class A
Common Stock to any Person other than an Affiliate (as hereinafter defined)
of the TDF Group in accordance with Section 7.08 of the Governance
Agreement, such share of Class A Common Stock shall automatically, without
any further action, convert into one share of Common Stock.
(ii) Each share of Class A Common Stock shall automatically convert
into one share of Common Stock on the first date on which the Ownership
Interest of the TDF Group is less than 5%.
(iii) Notwithstanding anything to the contrary set forth in this
Section C of Article IV, a holder of shares of Class A Common Stock may
pledge such holder's
<PAGE>
7
shares of Class A Common Stock to a financial institution pursuant to a
bona fide pledge of such shares of Class A Common Stock as collateral
security for any indebtedness or other obligation of any Person (the
"Pledged Stock") due to the pledgee or its nominee without any conversion
of the Class A Common Stock into Common Stock; provided, however, that (A)
-------- -------
such shares shall not be voted by or registered in the name of the pledgee
and shall remain subject to the provisions of this Section C.4 and (B) upon
any foreclosure, realization or other similar action by the pledgee, such
Pledged Stock shall automatically convert into shares of Common Stock on a
share for share basis unless all right, title and interest in such Pledged
Stock shall be Transferred concurrently by the pledgee or the purchaser in
such foreclosure to an Affiliate of such holder.
(iv) The foregoing automatic conversion events described in this
paragraph (c) shall be referred to hereinafter as "Events of Automatic
Conversion." The determination of whether an Event of Automatic Conversion
shall have occurred will be made by the Board of Directors in accordance
with paragraph (h) below.
(d) Automatic Conversion Procedure. Any conversion pursuant to an
-------------------------------
Event of Automatic Conversion shall be deemed to have been effected at the
time the Event of Automatic Conversion occurred (the "Conversion Time"). At
the Conversion Time, the certificate or certificates that represented
immediately prior thereto the shares of Class A Common Stock which were so
converted (the "Converted Class A Common Stock") shall, automatically and
without further action, represent the same number of shares of Common
Stock. Holders of Converted Class A Common Stock shall deliver their
certificates, duly endorsed in blank or accompanied by proper instruments
of transfer, to the principal office of the Corporation or the office of
any transfer agent for shares of the Common Stock, together with a notice
setting out the name or names (with addresses) and denominations in which
the certificate or certificates representing such shares of Common Stock
are to be issued and including instructions for delivery thereof. Upon such
delivery, the Corporation or its transfer agent shall promptly issue and
deliver at such stated address to such holder of shares of Common Stock a
certificate or certificates representing the number of shares of Common
Stock to which such holder is entitled by reason of such conversion. The
Person entitled to
<PAGE>
8
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common
Stock at and as of the Conversion Time, and the rights of such Person as a
holder of shares of Class A Common Stock that have been converted shall
cease and terminate at and as of the Conversion Time, in each case without
regard to any failure by such holder to deliver the certificates or the
notice required by this Section.
(e) Unconverted Shares; Notice Required. In the event of the
------------------------------------
conversion of less than all the shares of Class A Common Stock evidenced by
a certificate surrendered to the Corporation in accordance with the
procedures of this Section C.4, the Corporation shall execute and deliver
to or upon the written order of the holder of such unconverted shares,
without charge to such holder, a new certificate evidencing the number of
shares of Class A Common Stock not converted.
(f) Retired Shares. Shares of Class A Common Stock that are
---------------
converted into shares of Common Stock as provided herein shall not be re-
issued as shares of Class A Common Stock and shall be retired and canceled.
(g) Reservation. The Corporation shall at all times reserve and keep
------------
available, out of its authorized and unissued shares of Common Stock, for
the purposes of effecting conversions, such number of duly authorized
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of Class A Common Stock. All the
shares of Common Stock so issuable shall, when so issued, be duly and
validly issued, fully paid and non-assessable, and free from liens and
charges with respect to such issuance.
(h) Determination of Voting Rights and Events of Automatic
------------------------------------------------------
Conversion. The Board of Directors of the Corporation shall have the power
-----------
to determine by a two-thirds vote of the entire Board of Directors, in good
faith after reasonable inquiry, whether an Event of Automatic Conversion
has occurred with respect to any share of Class A Common Stock. As a
condition to counting the votes cast by any holder of shares of Class A
Common Stock at any annual or special meeting of shareholders or as a
condition to registration of transfer of shares of Class A Common Stock, or
for any other purpose, the Board of Directors, in its discretion, may
require the holder of such shares to furnish such affidavits or other proof
as the Board of
<PAGE>
9
Directors reasonably deems necessary or advisable to determine whether an
Event of Automatic Conversion shall have occurred.
(i) Stock Legend. The Corporation shall include on the certificates
-------------
representing the shares of Class A Common Stock a conspicuous legend
referring to the restrictions on transfer and registration of transfer
imposed by this Section C.4.
(j) Taxes. The issuance of a certificate for shares of Common Stock
------
upon conversion of shares of Class A Common Stock shall be made without
charge for any stamp or other similar tax in respect of such issuance.
However, if any such certificate is to be issued in a name other than that
of the holder of the shares of Class A Common Stock converted, the Person
or Persons requesting the issuance thereof shall pay to the Corporation the
amount of any tax which may be payable in respect of any Transfer involved
in such issuance or shall establish to the satisfaction of the Corporation
that such tax has been paid or is not required to be paid.
5. Certain Adjustments. In case the Corporation shall at any time
--------------------
(i) pay a dividend or make a distribution on the Common Stock in shares of
Common Stock or other capital stock of the Corporation, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) otherwise reclassify the Common Stock, the Class A Common Stock shall be
comparably adjusted.
6. Action by Written Consent. Notwithstanding Article VI, any action
--------------------------
to be taken at any annual or special meeting of the holders of Class A Common
Stock may be taken without a meeting of such holders in accordance with Section
228 of the General Corporation Law of the State of Delaware.
7. Definitions. For purposes of this Section C of Article IV:
------------
(a) Affiliate and Associate. "Affiliate" and "Associate", when used
------------------------
with reference to any Person (as hereinafter defined), shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the Securities
Exchange Act of 1934, as in effect on the date of this Restated Certificate
of Incorporation.
<PAGE>
10
(b) Beneficial Owner. A Person shall be deemed the "Beneficial
----------------
Owner" of, and to "Beneficially Own" and to have "Beneficial Ownership" of
(i) any securities that such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as in effect on the date of this
Restated Certificate of Incorporation; and (ii) any securities (the
"underlying securities") that such Person or any of such Person's
Affiliates or Associates has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (written or oral), or upon the
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise (it being understood that such Person shall also be
deemed to be the beneficial owner of the securities convertible into or
exchangeable for the underlying securities).
(c) Governance Agreement. The term "Governance Agreement" shall mean
--------------------
the Governance Agreement, dated as of August 21, 1998, among the
Corporation, TDF and Digital Future Investments B.V., a copy of which is
attached hereto as Exhibit A.
(d) Nominee. The term "Nominee" shall mean a partnership or other
-------
entity that is acting as a bona fide nominee for the registration of record
ownership of securities Beneficially Owned by another Person.
(e) Person. The term "Person" means any natural person, corporation,
------
association, partnership, limited liability company, organization,
business, other entity, government or political subdivision thereof or
governmental agency.
(f) Stockholders Agreement. The term "Stockholders Agreement" shall
----------------------
mean the Stockholders Agreement, dated as of August 21, 1998, among the
Corporation and certain stockholders of the Corporation, a copy of which is
attached hereto as Exhibit B.
(g) TDF. The term "TDF" shall mean TeleDiffusion de France
---
International S.A.
(h) TDF Group. The term "TDF Group" shall mean TDF and its
---------
Affiliates, collectively.
<PAGE>
11
(i) Transfer. The term "Transfer" shall mean any sale, transfer
--------
(including a transfer made in whole or in part without consideration as a
gift), exchange, assignment, pledge, encumbrance, alienation or any other
disposition or hypothecation of record ownership or of Beneficial Ownership
of any share, whether by merger, operation of law or otherwise; provided,
--------
however, that (i) a pledge of any share made in accordance with the
-------
provisions of paragraph (iii) of Section C.4(c) and (ii) a grant of a proxy
with respect to any share to a Person designated by the Board of Directors
of the Corporation who is soliciting proxies on behalf of the Corporation
shall not be considered a "Transfer"; and provided further that in the case
-------- -------
of any transferee of record ownership that is a Nominee, such Transfer of
record ownership shall be deemed to be made to the Person or Persons for
whom such Nominee is acting.
8. Liquidation, Dissolution or Winding Up. In the event of any
--------------------------------------
voluntary or involuntary liquidation, dissolution or winding up on the
Corporation, after payment of all preferential amounts required to be paid to
the holders of Preferred Stock, the holders of shares of Common Stock and Class
A Common Stock then outstanding shall share ratably in any distribution of the
remaining assets and funds of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full. For this purpose, each share of Class A Common Stock shall be
entitled to receive the amount which would be payable to shares of Common Stock
issued on conversion of such Class A Common Stock if such conversion had
occurred immediately prior to such distribution.
ARTICLE V
By-laws
-------
In furtherance of, and not in limitation of, the powers conferred by
law and subject to the other provisions of this Restated Certificate of
Incorporation and subject to Article IX of the Amended and Restated By-laws of
the Corporation, the Board of Directors is expressly authorized and empowered:
(1) To adopt, amend or repeal the By-laws of the Corporation;
provided, however, that the By-laws adopted by the Board of Directors under
-------- -------
the powers hereby conferred may be amended or repealed by the
<PAGE>
12
Board of Directors or by the stockholders having voting power with respect
thereto, provided further that the affirmative vote of the holders of at
least 80% of the voting power of the then outstanding Voting Stock (as
hereinafter defined), voting together as a single class, shall be required
in order for the stockholders to alter, amend or repeal any provision of
the By-laws or to adopt any additional By-law; and
(2) from time to time to determine whether and to what extent, and at
what times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open to
inspection of stockholders; and, except as so determined or as expressly
provided in this Restated Certificate of Incorporation or in any Preferred
Stock Designation, no stockholder shall have any right to inspect any
account, book or document of the Corporation other than such rights as may
be conferred by applicable law.
The Corporation may in its By-laws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
ARTICLE VI
Action of Stockholders
----------------------
Except as otherwise specified with respect to any series of Preferred
Stock and the Class A Common Stock, 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 of the Corporation and may not be effected by
any consent in writing in lieu of a meeting of such stockholders.
ARTICLE VII
Board of Directors
------------------
Subject to the rights of the holders of any series of Preferred Stock
to elect additional Directors under specified circumstances, the number of
Directors of the Corporation shall initially be 12 (including the two Directors
to be elected by the holders of the Class A Common Stock) and may hereafter be
changed from time to time solely by the Board of Directors.
<PAGE>
13
Unless and except to the extent that the By-laws of the Corporation
shall so require, the election of Directors of the Corporation need not be by
written ballot.
The Directors, other than those Directors who may be elected by the
holders of any series of Preferred Stock or holders of Class A Common Stock (the
"Non-Classified Directors"), shall be divided into three classes, as nearly
equal in number as possible, initially consisting of 3, 3 and 4 Directors. One
class of Directors initially consisting of 3 Directors shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
1999, another class initially consisting of 3 Directors shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
2000, and another class initially consisting of 4 Directors shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
2001. Upon the termination of the term of any Class A Director or Directors
then in office pursuant to Section C.2(b) or Section C.4 of Article IV, the
number of Directors in one or both, as applicable, of the classes consisting of
three Directors shall be increased by one such that the three classes of
Directors shall consist of 3, 4 and 4 Directors, or 4, 4 and 4 Directors, as
applicable. Members of each class shall hold office until their successors are
elected and qualified. At each annual meeting of the stockholders of the
Corporation commencing with the 1999 annual meeting, Directors (other than Non-
Classified Directors) elected to succeed those Directors whose terms expire
shall be elected by a plurality vote at such meeting to hold office for a term
expiring at the third succeeding annual meeting of stockholders after their
election, with each Director to hold office until his or her successor shall
have been duly elected and qualified.
Subject to the rights of the holders of any series of Preferred Stock
or holders of Class A Common Stock, vacancies resulting from death, resignation,
retirement, disqualification, removal from office or other cause, and newly
created Directorships resulting from any increase in the authorized number of
Directors, may be filled only by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of Directors, and
Directors so chosen shall hold office for a term expiring at the next annual
meeting of stockholders at which the term of office of the class to which they
have been elected expires and until such Director's successor shall have been
duly elected and qualified. No decrease in the number of authorized Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
<PAGE>
14
Except for such additional Directors, if any, as are elected by the
holders of any series of Preferred Stock or holders of Class A Common Stock, any
Director may be removed from office at any time, but only for cause and by the
affirmative vote of the holders of at least 80 percent of the voting power of
the then outstanding Voting Stock (other than the Class A Common Stock), voting
together as a single class. Notwithstanding the foregoing, holders of Class A
Common Stock, voting separately as a class, either by written consent or at a
special meeting of such holders called in accordance with the By-laws of the
Corporation, may remove any Class A Director with or without cause.
ARTICLE VIII
Indemnification
---------------
Each person who is or was a Director or officer of the Corporation
shall be indemnified by the Corporation to the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended or any other applicable laws as presently or hereafter in
effect. The Corporation may, by action of the Board of Directors, provide
indemnification to other employees and agents of the Corporation, to directors,
officers, employees or agents of a subsidiary, and to each person serving as a
director, officer, partner, member, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, at the request of the Corporation, with the same scope and effect as
the foregoing indemnification of Directors and officers of the Corporation.
Notwithstanding the foregoing, the Corporation shall be required to indemnify
any person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors or is a proceeding to enforce such person's
claim to indemnification pursuant to the rights granted by this Restated
Certificate of Incorporation or otherwise by the Corporation. Without limiting
the generality of the effect of the foregoing, the Corporation may enter into
one or more agreements with any person which provide for indemnification greater
or different than that provided in this Article VIII. Any amendment or repeal
of this Article VIII shall not adversely affect any right or protection existing
hereunder in respect of any act or omission occurring prior to such amendment or
repeal.
<PAGE>
15
ARTICLE IX
Directors' Liability
--------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (1) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) under Section 174 of the General Corporation Law of the
State of Delaware, or (4) for any transaction from which the Director derived an
improper personal benefit. Any amendment or repeal of this Article IX shall not
adversely affect any right or protection of a Director of the Corporation
existing hereunder in respect of any act or omission occurring prior to such
amendment or repeal.
If the General Corporation Law of the State of Delaware shall be
amended, to authorize corporate action further eliminating or limiting the
liability of Directors, then a Director of the Corporation, in addition to the
circumstances in which he is not liable immediately prior to such amendment,
shall be free of liability to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
ARTICLE X
Stockholder Rights Issuances
----------------------------
The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities or property, rights entitling the holders of securities of the
Corporation to purchase from the Corporation shares of stock or other securities
of the Corporation or any other corporation, recognizing that, under certain
circumstances, the creation and issuance of such rights could have the effect of
discouraging third parties from seeking, or impairing their ability to seek, to
acquire a significant portion of the outstanding securities of the Corporation,
to engage in any transaction which might result in a change of control of the
Corporation or to enter into any agreement, arrangement or understanding with
another party to accomplish the foregoing or for the purpose of acquiring,
holding, voting or disposing of any securities of the Corporation. The times at
which and the terms upon which such rights are to be issued will be determined
by the Board of Directors and set forth in the contracts or instruments
<PAGE>
16
that evidence such rights. The authority of the Board of Directors with respect
to such rights shall include, but not be limited to, determination of the
following:
(A) The initial purchase price per share or other unit of the stock
or other securities or property to be purchased upon exercise of such
rights.
(B) Provisions relating to the times at which and the circumstances
under which such rights may be exercised or sold or otherwise transferred,
either together with or separately from, any other stock or other
securities of the Corporation.
(C) Provisions which adjust the number or exercise price of such
rights or amount or nature of the stock or other securities or property
receivable upon exercise of such rights in the event of a combination,
split or recapitalization of any stock of the Corporation, a change in
ownership of the Corporation's stock or other securities or a
reorganization, merger, consolidation, sale of assets or other occurrence
relating to the Corporation or any stock of the Corporation, and provisions
restricting the ability of the Corporation to enter into any such
transaction absent an assumption by the other party or parties thereto of
the obligations of the Corporation under such rights.
(D) Provisions which deny the holder of the specified percentage of
the outstanding stock or other securities of the Corporation the right to
exercise such rights and/or cause the rights held by such holder to become
void.
(E) Provisions which permit the Corporation to redeem or exchange
such rights, which redemption or exchange may be within the sole discretion
of the Board of Directors, if the Board of Directors reserves such right to
itself.
(F) The appointment of the rights agent with respect to such rights.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, in addition to any other vote required by
applicable law, the affirmative vote of at least 80 percent of the voting power
of the then outstanding Voting Stock, voting together as a single class, shall
be required to amend, repeal or adopt any provision inconsistent with this
Article X.
<PAGE>
17
ARTICLE XI
Other Agreements
----------------
Notwithstanding any other provision of this Restated Certificate of
Incorporation, to the extent any provision of the Stockholders Agreement
(attached as Exhibit B) or the Governance Agreement (attached as Exhibit A),
conflict with, modify or alter any provision of this Restated Certificate of
Incorporation, such provision of the Stockholders Agreement or of the Governance
Agreement shall control and be deemed incorporated as part of this Restated
Certificate of Incorporation.
ARTICLE XII
Amendments
----------
Except as may be expressly provided in this Restated Certificate of
Incorporation, the Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation or a Preferred Stock Designation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed herein or by
applicable law, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, Directors or any other persons whomsoever by and
pursuant to this Restated Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article XII;
provided, however, that any amendment or repeal of Article VIII or Article IX of
- -------- -------
this Restated Certificate of Incorporation shall not adversely affect any right
or protection existing thereunder in respect of any act or omission occurring
prior to such amendment, alteration, change or repeal, and provided further that
no Preferred Stock Designation shall be amended after the issuance of any shares
of the series of Preferred Stock created thereby, except in accordance with the
terms of such Preferred Stock Designation and the requirements of applicable
law.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, and in addition to approval by the Board of
Directors and any other vote of stockholders required by applicable law, the
affirmative vote of the holders of at least 80% of the voting power of the then
outstanding Voting Stock, voting
<PAGE>
18
together as a single class, shall be required to amend, repeal or adopt any
provision inconsistent with paragraph (1) of Article V, Article VI, Article VII,
Article X, Article XI or this second paragraph of this Article XII; provided,
--------
however, that, in addition to approval by the Board of Directors and any other
- -------
vote of stockholders required by applicable law, any such amendment to Article
XI or the provisions of this second paragraph of this Article XII with respect
to such Article XI shall, in addition, require the approval of a majority of the
holders the Class A Common Stock then outstanding, voting as a separate class.
For the purposes of this Restated Certificate of Incorporation, "Voting Stock"
shall mean the outstanding shares of capital stock of the Corporation entitled
to vote in a general vote of stockholders of the Corporation as a single class
with shares of Common Stock of the Corporation, which shares of capital stock
shall be deemed to include the Class A Common Stock. Notwithstanding the
foregoing, no amendment to this Restated Certificate of Incorporation which
adversely affects the rights of the holders of the Class A Common Stock may be
effected without the approval of the holders of a majority of the Class A Common
Stock then outstanding.
IN WITNESS WHEREOF, the undersigned has executed this Restated
Certificate of Incorporation on this 21st day of August, 1998.
CROWN CASTLE INTERNATIONAL CORP.
By:/s/ Kathy Broussard
-----------------------------
Name: Kathy Broussard
Office: Vice President
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
CROWN CASTLE INTERNATIONAL CORP.
(HEREINAFTER CALLED THE "CORPORATION")
-----------
August 21, 1998
ARTICLE I
Offices and Records
-------------------
SECTION 1.01. Delaware Office. The principal office of the
----------------
Corporation in the State of Delaware shall be located in the City of Wilmington,
County of New Castle.
SECTION 1.02. Other Offices. The Corporation may have such other
--------------
offices, within or without the State of Delaware, as the Board of Directors of
the Corporation (the "Board") may designate or as the business of the
-----
Corporation may from time to time require.
ARTICLE II
Stockholders
------------
SECTION 2.01. Annual Meeting. The annual meeting of the stockholders
---------------
(the "Stockholders") of the Corporation shall be held at such date, place and
------------
time as may be fixed by resolution of the Board.
SECTION 2.02. Special Meeting. Subject to Section 2.07(b)(ii) hereof
----------------
and subject to the rights of the holders of any series of preferred stock of the
Corporation (the "Preferred Stock") with respect to special meetings of the
---------------
holders thereof, special meetings of the Stockholders may be called at any time
only by the Secretary of the Corporation (the "Secretary") at the direction of
---------
the Board pursuant to a resolution adopted by the Board.
SECTION 2.03. Place of Meeting. The Board may designate the place of
-----------------
meeting for any meeting of the Stockholders. If no designation is made by the
Board, the place of meeting shall be 510 Bering Street, Suite 500, Houston,
Texas 77057.
<PAGE>
2
SECTION 2.04. Notice of Meeting. Unless otherwise provided by
------------------
applicable law, written or printed notice, stating the place, day and hour of
the meeting and, in the case of special meetings, the purpose or purposes for
which such special meeting is called, shall be prepared and delivered by the
Corporation not less than 10 days nor more than 60 days before the date of the
meeting, either personally, or by mail, to each Stockholder of record entitled
to vote at such meeting. Such further notice shall be given as may be required
by law. Only such business shall be conducted at a special meeting of
Stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Any previously scheduled meeting of the
Stockholders may be postponed, and (unless the Restated Certificate of
Incorporation, as amended from time to time (the "Charter") otherwise provides)
any special meeting of the Stockholders may be canceled, by resolution of the
Board upon public notice given prior to the time previously scheduled for such
meeting of Stockholders.
SECTION 2.05. Quorum and Adjournment. Except as otherwise provided
-----------------------
by law or by the Charter, the holders of a majority of the voting power of the
outstanding shares of the Corporation entitled to vote generally in a general
vote of Stockholders of the Corporation as a single class with shares of Common
Stock of the Corporation (the "Voting Stock"), represented in person or by
------------
proxy, shall constitute a quorum at a meeting of Stockholders; provided,
--------
however, that (i) in the election of Directors, the holders of a majority of the
- -------
voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of Directors, represented in person or by proxy, shall
constitute a quorum at a meeting of Stockholders and (ii) when specified
business is to be voted on by a class or series voting as a class, the holders
of a majority of the voting power of the shares of such class or series shall
constitute a quorum for the transaction of such business. The Chairman of the
Board (the "Chairman") or the holders of a majority of the voting power of the
--------
shares of Voting Stock so represented may adjourn the meeting from time to time,
whether or not there is such a quorum (or, in the case of specified business to
be voted on by a class or series, the Chairman of the Board or the holders of a
majority of the voting power of the shares of such class or series so
represented may adjourn the meeting with respect to such specified business).
No notice of the time and place of adjourned meetings need be given except as
required by law. The Stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough Stockholders to leave less than a quorum.
SECTION 2.06. Proxies. At all meetings of Stockholders, a
--------
Stockholder may vote by proxy as may be permitted
<PAGE>
3
by law; provided that no proxy shall be voted after three years from its date,
--------
unless the proxy provides for a longer period. Any proxy to be used at a meeting
of Stockholders must be filed with the Secretary or his representative at or
before the time of the meeting.
SECTION 2.07. Notice of Stockholder Business and Nominations.
-----------------------------------------------
(a) Annual Meetings of Stockholders. (i) Nominations of persons for
--------------------------------
election to the Board and the proposal of business to be considered by the
Stockholders may be made at an annual meeting of Stockholders (A) pursuant to
the Corporation's notice of meeting delivered pursuant to Section 2.04 of these
Amended and Restated By-laws, as amended from time to time (the "By-laws"), (B)
-------
by or at the direction of the Chairman or (C) by any Stockholder who is entitled
to vote at the meeting, who complied with the notice procedures set forth in
clauses (ii) and (iii) of this Section 2.07(a) and who was a Stockholder of
record at the time such notice is delivered to the Secretary.
(ii) For nominations or other business to be properly brought before
an annual meeting by a Stockholder pursuant to clause (i)(C) of this Section
2.07(a), the Stockholder must have given timely notice thereof in writing to the
Secretary and, in the case of business other than nominations, such other
business must otherwise be a proper matter for Stockholder action. To be
timely, a Stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 90 days nor more
than 120 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that with respect to the annual meeting to be held
-------- -------
in 1999, the anniversary date shall be deemed to be April 1, 1999; provided
--------
further that in the event that the date of the annual meeting is advanced by
- -------
more than 30 days, or delayed by more than 90 days, from such anniversary date,
notice by the Stockholder to be timely must be so delivered not earlier than the
120th day prior to such annual meeting and not later than the close of business
on the later of the 90th day prior to such annual meeting or the 10th day
following the day on which Public Announcement of the date of such meeting is
first made. In no event shall the Public Announcement of an adjournment or
postponement of an annual meeting commence a new time period for the giving of a
Stockholder's notice as described in this Section 2.07(a). 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 all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under
<PAGE>
4
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
------------
14a-11 thereunder, including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Director if elected; (B) as to
any other business that the Stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such Stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (C) as to the Stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(1) the name and address of such Stockholder, as they appear on the
Corporation's books, and of such beneficial owner, (2) the class and number of
shares of the Corporation which are owned beneficially and of record by such
Stockholder and such beneficial owner and (3) whether the Stockholder or
beneficial owner intends or is part of a group which intends to solicit proxies
from other Stockholders in support of such nomination or proposal.
(iii) Notwithstanding anything in the second sentence of clause (ii)
of this Section 2.07(a) to the contrary, in the event that the number of
Directors to be elected to the Board is increased and there is no Public
Announcement naming all of the nominees for Director or specifying the size of
the increased Board made by the Corporation at least 100 days prior to the first
anniversary of the preceding year's annual meeting, a Stockholder's notice
required by this Section 2.07(a) shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such Public Announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. (i) Only such business shall
---------------------------------
be conducted at a special meeting of Stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting pursuant to
Section 2.04 of these By-laws. Nominations of persons for election to the Board
may be made at a special meeting of Stockholders at which Directors are to be
elected pursuant to the Corporation's notice of meeting (A) by or at the
direction of the Board or (B) by any Stockholder of the Corporation who is
entitled to vote at the meeting, who complies with the notice procedures set
forth in this Section 2.07(b) and who is a Stockholder of record at the time
such notice is delivered to the Secretary. In the event the Corporation calls a
special meeting of Stockholders for the purpose of electing one or more
Directors to the Board, any such Stockholder may nominate such number of persons
for election to
<PAGE>
5
such position(s) as are specified in the Corporation's Notice of Meeting, if the
Stockholder's notice as required by clause (ii) of Section 2.07(a) shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the 120th day prior to such special meeting and not later than
the close of business on the later of the 90th day prior to such special meeting
or the 10th day following the day on which Public Announcement is first made of
the date of the special meeting and of the nominees proposed by the Board to be
elected at such meeting. In no event shall the public announcement of an
adjournment or postponement of a special meeting commence a new time period for
the giving of a Stockholder's notice as described above.
(ii) Notwithstanding the foregoing clause (i), a special meeting of
the holders of shares of Class A Common Stock may be called with respect to
action upon which the holders of Class A Common Stock are entitled to vote as a
separate class (A) by or at the direction of the Board or (B) by any holder of
record of shares of Class A Common Stock upon reasonable notice to the
Secretary, and any action to be taken at such meeting may be effected by written
ballot.
(c) General. (i) Only persons who are nominated in accordance with
--------
the procedures set forth in paragraphs (a) or (b) of this By-law shall be
eligible to be elected as Directors at a meeting of Stockholders and only such
business shall be conducted at a meeting of Stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 2.07. Except as otherwise provided by law, the Charter or these By-
laws, the Chairman shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 2.07 and, if any
proposed nomination or business is not in compliance with these By-laws, to
declare that such defective proposal or nomination shall be disregarded.
(ii) For purposes of these By-laws, "Public Announcement" shall mean
-------------------
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act or any document delivered to all Stockholders
(including without limitation any quarterly income statement).
(iii) Notwithstanding the foregoing provisions of these By-laws, a
Stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations
<PAGE>
6
thereunder with respect to the matters set forth in this Section 2.07. Nothing
in these By-laws shall be deemed to affect any rights of Stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
SECTION 2.08. Procedure for Election of Directors; Voting. The
--------------------------------------------
election of Directors submitted to Stockholders at any meeting shall be decided
by a plurality of the votes cast thereon. Except as otherwise provided by
applicable law, rule or regulation, the Charter or these By-laws, all matters
other than the election of Directors submitted to the Stockholders at any
meeting shall be decided by the affirmative vote of a majority of the voting
power of the shares present in person or represented by proxy at the meeting and
entitled to vote thereon, and where a separate vote by class is required, a
majority of the voting power of the shares of that class present in person or
represented by proxy at the meeting and entitled to vote thereon.
The vote on any matter, including the election of Directors, shall be
by written ballot. Each ballot shall be signed by the Stockholder voting, or by
such Stockholder's proxy, and shall state the number of shares voted.
SECTION 2.09. Inspectors of Elections; Opening and Closing the Polls.
------------------------------------------------------
(a) To the extent required by applicable law, the Board by resolution shall
appoint one or more inspectors, which inspector or inspectors may not be
Directors, officers or employees of the Corporation, to act at the meeting and
make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. To the extent
required by applicable law, if no inspector or alternate has been appointed to
act, or if all inspectors or alternates who have been appointed are unable to
act, at a meeting of Stockholders, the Chairman shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by the General
Corporation Law of the State of Delaware.
(b) The Chairman shall fix and announce at the meeting the date and
time of the opening and the closing of the polls for each matter upon which the
Stockholders will vote at the meeting.
ARTICLE III
Board
-----
<PAGE>
7
SECTION 3.01. General Powers. The business and affairs of the
---------------
Corporation shall be managed by or under the direction of the Board. In
addition to the powers and authorities by these By-laws expressly conferred upon
them, the Board may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Charter or by these By-laws
required to be exercised or done by the Stockholders.
SECTION 3.02. Number, Tenure and Qualifications. Subject to Article
----------------------------------
VI of these By-laws and to the rights of the holders of any series of Preferred
Stock, the number of Directors shall be fixed from time to time exclusively
pursuant to a resolution adopted by the Board (provided that such resolution
shall be deemed to be an amendment for proposes of the Governance Agreement),
and shall initially consist of twelve Directors, two of which Directors shall,
for so long as provided pursuant to the terms of such Class A Common Stock set
forth in the Charter, be elected by the holders of shares of Class A Common
Stock outstanding, voting together as a single class, in accordance with the
terms of the Charter. However, no decrease in the number of Directors
constituting the Board shall shorten the term of any incumbent Director.
SECTION 3.03. Regular Meetings. A regular meeting of the Board shall
-----------------
be held without other notice than this Section 3.03 immediately after, and at
the same place as, each annual meeting of Stockholders. The Board may, by
resolution, provide the time and place for the holding of additional regular
meetings without notice other than such resolution. Unless otherwise determined
by the Board, the Secretary shall act as secretary at all regular meetings of
the Board and in the Secretary's absence a temporary secretary shall be
appointed by the chairman of the meeting.
SECTION 3.04. Special Meetings. Special meetings of the Board shall
-----------------
be called at the request of the Chairman and the President, acting together, or
a majority of the Board. The person or persons authorized to call special
meetings of the Board may fix the place and time of the meetings. Unless
otherwise determined by the Board, the Secretary shall act as secretary at all
special meetings of the Board and in the Secretary's absence a temporary
secretary shall be appointed by the chairman of the meeting.
SECTION 3.05. Notice. Notice of any special meeting shall be mailed
-------
to each Director at his business or residence not later than five days before
the day on which such meeting is to be held or shall be sent to either of such
places by telegraph or facsimile or other electronic transmission, or be
communicated to
<PAGE>
8
each Director personally or by telephone, not later than two days before such
day of meeting. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board need be specified in the notice of
such meeting, except for amendments to these By-laws as provided pursuant to
Section 9.01 hereof. A meeting may be held at any time without notice if all the
Directors are present (except as otherwise provided by law) or if those present
waive notice of the meeting in accordance with Section 7.04 hereof, either
before or after such meeting.
SECTION 3.06. Action Without Meeting. Any action required or
-----------------------
permitted to be taken at any meeting of the Board or any committee thereof may
be taken without a meeting if a written consent thereto is signed by all members
of the Board or of such committee, as the case may be, and such written consent
is filed with the records of the proceedings of the Board or such committee.
SECTION 3.07. Conference Telephone Meetings. Members of the Board,
------------------------------
or any committee thereof, may participate in a meeting of the Board or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at such
meeting.
SECTION 3.08. Quorum. At all meetings of the Board or any committee,
-------
a majority of the Entire Board (as defined in Section 3.09(a)) or the entire
committee (assuming no vacancies or unfilled newly-created committee
memberships), as the case may be, shall constitute a quorum for the transaction
of business and the act of a majority of the Directors or members, as the case
may be, present at any meeting at which there is a quorum shall be the act of
the Board or such committee, as the case may be, except as otherwise provided in
the General Corporation Law of the State of Delaware, the Charter or these By-
laws. If a quorum shall not be present at any meeting of the Board or any
committee, a majority of the Directors or members, as the case may be, present
thereat may adjourn the meeting from time to time without further notice other
than announcement at the meeting.
SECTION 3.09. Committees. (a) The Corporation shall have four
-----------
standing committees: the executive committee, the nominating committee, the
audit committee and the compensation committee. The executive committee shall
have those powers and authority as are delegated to it from time to time
pursuant to a resolution passed by a two-thirds vote of the total number of
Directors which the Corporation would have if there were no vacancies or
unfilled newly-created directorships (the "Entire
------
<PAGE>
9
Board").
- -----
(b) The nominating committee shall have the following powers and
authority: (i) evaluating and recommending Director candidates to the Board
(other than Directors to be elected by the holders of the Class A Common Stock),
(ii) assessing Board performance not less frequently than every three years,
(iii) recommending Director compensation and benefits philosophy for the
Corporation, (iv) reviewing individual Director performance as issues arise and
(v) periodically reviewing the Corporation's corporate governance profile.
(c) The audit committee shall have the following powers and
authority: (i) employing independent public accountants to audit the books of
account, accounting procedures, and financial statements of the Corporation and
to perform such other duties from time to time as the audit committee may
prescribe, (ii) receiving the reports and comments of the Corporation's internal
auditors, if any, and of the independent public accountants of the Corporation
and to take such action with respect thereto as the audit committee may deem
appropriate, (iii) requesting the Corporation's consolidated subsidiaries and
affiliated companies to employ independent public accountants to audit their
respective books of account, accounting procedures, and financial statements,
(iv) requesting the independent public accountants to furnish to the
compensation committee the certifications required under any present or future
stock option, incentive compensation or employee benefit plan of the
Corporation, (v) reviewing the adequacy of internal financial controls, and (vi)
reviewing the accounting principles employed in financial reporting. None of the
members of the audit committee shall be an officer or full-time employee of the
Corporation or of any Subsidiary (as hereinafter defined) of the Corporation.
(d) The compensation committee shall have the following powers and
authority: (i) determining and fixing the compensation for all senior officers
of the Corporation and those of its Subsidiaries that the compensation committee
shall from time to time consider appropriate, as well as all employees of the
Corporation and its Subsidiaries compensated at a rate in excess of such amount
per annum as may be fixed or determined from time to time by the Board, (ii)
performing the duties of the committees of the Board provided for in any present
or future stock option, incentive compensation or employee benefit plan of the
Corporation and (iii) reviewing the operations of and policies pertaining to any
present or future stock option, incentive compensation or employee benefit plan
of the Corporation or any Subsidiary that the compensation committee shall from
time to time consider appropriate.
<PAGE>
10
(e) In addition, the Board may, by resolution passed by a two-thirds
vote of the Entire Board, designate one or more additional committees, with each
such committee consisting of one or more Directors of the Corporation and having
such powers and authority as the Board shall designate by such resolutions.
(f) Any modification to the powers and authority of any committee
shall require the adoption of a resolution by a two-thirds vote of the Entire
Board.
(g) All acts done by any committee within the scope of its powers and
authority pursuant to these By-laws and the resolutions adopted by the Board in
accordance with the terms hereof shall be deemed to be, and may be certified as
being, done or conferred under authority of the Board. The Secretary or any
Assistant Secretary is empowered to certify that any resolution duly adopted by
any such committee is binding upon the Corporation and to execute and deliver
such certifications from time to time as may be necessary or proper to the
conduct of the business of the Corporation.
(h) Regular meetings of committees shall be held at such times as
such is determined by resolution of the Board or the committee in question and
no notice shall be required for any regular meeting other than such resolution.
A special meeting of any committee shall be called by resolution of the Board,
or by the Secretary or an Assistant Secretary upon the request of the chairman
or a majority of the members of any committee. Notice of special meetings shall
be given to each member of the committee in the same manner as that provided for
in Section 3.05 of these By-laws.
SECTION 3.10. Committee Members. (a) Each member of any committee
------------------
of the Board shall hold office until such member's successor is elected and has
qualified, unless such member sooner dies, resigns or is removed. The number of
Directors which shall constitute any committee shall be determined by resolution
adopted by a two-thirds vote of the Entire Board.
(b) The Board may remove a Director from a committee or change the
chairmanship of a committee only by resolution adopted by a two-thirds vote of
the Entire Board.
(c) The Board may designate one or more Directors as alternate
members of any committee to fill any vacancy on a committee and to fill a vacant
chairmanship of a committee, occurring as a result of a member or chairman
leaving the committee, whether through death, resignation, removal or otherwise;
provided that any such designation may only be amended by a two-thirds vote of
- --------
the Entire Board.
<PAGE>
11
SECTION 3.11. Committee Secretary. The Board may elect a secretary
--------------------
of any such committee. If the Board does not elect such a secretary, the
committee shall do so. The secretary of any committee need not be a member of
the committee, but shall be selected from a member of the staff of the office of
the Secretary, unless otherwise provided by the Board or the committee, as
applicable.
SECTION 3.12. Compensation. The Directors may be paid their
-------------
expenses, if any, of attendance at each meeting of the Board and may be paid
compensation as Director or chairman of any committee and for attendance at each
meeting of the Board. Members of special or standing committees may be allowed
like compensation and payment of expenses for attending committee meetings.
ARTICLE IV
Officers
--------
SECTION 4.01. General. The officers of the Corporation shall be
--------
elected by the Board and shall consist of: a Chairman of the Board; a Chief
Executive Officer; a President; a Chief Financial Officer; one or more Executive
Vice Presidents; one or more Vice Presidents; a Secretary; one or more Assistant
Secretaries; a Treasurer; a Controller; and such other officers as in the
judgment of the Board may be necessary or desirable. All officers chosen by the
Board shall have such powers and duties as generally pertain to their respective
offices, subject to the specific provisions of this Article IV. Such officers
shall also have powers and duties as from time to time may be conferred by the
Board or any committee thereof. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Charter or these By-laws. The
officers of the Corporation need not be Stockholders or Directors of the
Corporation.
SECTION 4.02. Election and Term of Office. The elected officers of
----------------------------
the Corporation shall be elected annually by the Board at the regular meeting of
the Board held after each annual meeting of the Stockholders. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as convenient. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or be removed.
SECTION 4.03. Chairman of the Board. The Chairman shall be a member
----------------------
of the Board and shall be an officer of the
<PAGE>
12
Corporation. The Chairman, if present, shall preside at all meetings of the
Board and at all meetings of Stockholders.
SECTION 4.04. Chief Executive Officer. The Chief Executive Officer
------------------------
shall supervise, coordinate and manage the Corporation's business and activities
and supervise, coordinate and manage its operating expenses and capital
allocation, shall have general authority to exercise all the powers necessary
for the Chief Executive Officer of the Corporation and shall perform such other
duties and have such other powers as may be prescribed by the Board or these By-
laws, all in accordance with basic policies as established by and subject to the
oversight of the Board.
SECTION 4.05. President. The President shall be an officer of the
----------
Corporation. The President shall supervise, coordinate and manage the
Corporation's business and activities and supervise, coordinate and manage its
operating expenses and capital allocation, shall have general authority to
exercise all the powers necessary for the President of the Corporation and shall
perform such other duties and have such other powers as may be prescribed by the
Board or these By-laws, all in accordance with basic policies as established by
and subject to the oversight of the Board and the Chairman and Chief Executive
Officer.
SECTION 4.06. Chief Financial Officer. The Chief Financial Officer
------------------------
shall have responsibility for the financial affairs of the Corporation. The
Chief Financial Officer shall perform such other duties and have such other
powers as may be prescribed by the Board or these By-laws, all in accordance
with basic policies as established by and subject to the oversight of the Board,
the Chairman, the Chief Executive Officer and the President.
Section 4.07. Vice President. The Vice President, or Vice
---------------
Presidents, if any shall be appointed, shall have such duties as the Board of
Directors, the President or the By-Laws may from time to time prescribe.
Section 4.08. Treasurer. The Treasurer shall have the custody of the
----------
Corporation's funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositaries as may be designated by the Board. He shall
disburse the funds of the Corporation as may be ordered by the Board, or the
President, taking proper vouchers for such disbursements.
<PAGE>
13
Section 4.09. Secretary. The Secretary shall give, or cause to be
----------
given, notice of all meetings of Stockholders and Directors and all other
notices required by law or by these By-laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, the Directors or Stockholders, upon whose
request the meeting is called as provided in these By-laws. He shall record all
the proceedings of the meetings of the Board, any committees thereof and the
Stockholders of the Corporation in a book to be kept for that purpose, and shall
perform such other duties as may be assigned to him by the Board or the
President. He shall have the custody of the seal of the Corporation and shall
affix the same to all instruments requiring it, when authorized by the Board or
the President, and attest the same.
Section 4.10. Assistant Treasurers and Assistant Secretaries.
-----------------------------------------------
Assistant Treasurers and Assistant Secretaries, if any shall be appointed, shall
have such powers and shall perform such duties as shall be assigned to them,
respectively, by the Board or the President.
SECTION 4.11. Vacancies. A newly created office and a vacancy in any
----------
office because of death, resignation, or removal may be filled only by the Board
for the unexpired portion of the term of any such office.
ARTICLE V
Stock Certificates and Transfers
--------------------------------
SECTION 5.01. Stock Certificates and Transfers. (a) The interest of
---------------------------------
each Stockholder shall be evidenced by certificates for shares of stock in such
form as the appropriate officers of the Corporation may from time to time
prescribe; provided that the Board may provide by resolution or resolutions that
--------
all or some of all classes or series of the stock of the Corporation shall be
represented by uncertificated shares. Notwithstanding the adoption of such a
resolution by the Board, every holder of stock represented by certificates and
upon request every holder of uncertificated shares, if any, shall be entitled to
have a certificate signed by, or in the name of the Corporation by the Chairman,
or the President or any other authorized officer and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Except as otherwise expressly provided by law, the rights and obligations of the
holders of uncertificated stock, if any, and the rights and obligations of the
holders of certificates representing stock of the same class and series
<PAGE>
14
shall be identical.
(b) The certificates of stock shall be signed, countersigned and
registered in such manner as the Board may by resolution prescribe, which
resolution may permit all or any of the signatures on such certificates to be in
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has 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 he were such
officer, transfer agent or registrar at the date of issue.
(c) The shares of the stock of the Corporation represented by
certificates shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancelation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require. Upon receipt of proper transfer instructions from the
registered owner of uncertificated shares such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. Within a reasonable time after the
issuance or transfer of uncertificated stock, the Corporation shall send to the
registered owner thereof a written notice containing the information required to
be set forth or stated on certificates pursuant to the General Corporation Law
of the State of Delaware or, unless otherwise provided by the General
Corporation Law of the State of Delaware, a statement that the Corporation will
furnish without charge to each Stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 5.02. Lost, Stolen or Destroyed Certificates. No certificate
---------------------------------------
for shares or uncertificated shares of stock in the Corporation shall be issued
in place of any certificate alleged to have been lost, destroyed or stolen,
except on production of such evidence of such loss, destruction or theft and on
delivery to the Corporation of a bond of indemnity in such amount, upon such
terms and secured by such surety, as the Board or its designee may in its or his
discretion require.
ARTICLE VI
<PAGE>
15
Other Agreements
----------------
Notwithstanding any other provision of these By-laws, to the extent
any provision of (a) the Stockholders Agreement (the "Stockholders Agreement"),
dated [ ], 1998, among the Corporation and certain Stockholders of the
Corporation (attached hereto as Appendix A) or (b) the Governance Agreement (the
"Governance Agreement"), dated [ ], 1998, among the Corporation, TeleDiffusion
de France International S.A. and Digital Future Investments B.V. (attached
hereto as Appendix B), conflict with, modify or alter any provision of these By-
laws, such provision of the Stockholders Agreement or of the Governance
Agreement shall control and be deemed incorporated as part of these By-laws.
ARTICLE VII
Miscellaneous Provisions
------------------------
SECTION 7.01. Fiscal Year. The fiscal year of the Corporation shall
------------
be as specified by the Board.
SECTION 7.02. Dividends. The Board may from time to time declare,
----------
and the Corporation may pay, dividends on its outstanding shares in the manner
and upon the terms and conditions provided by law and its Charter.
SECTION 7.03. Seal. The corporate seal shall have thereon the name
-----
of the Corporation and shall be in such form as may be approved from time to
time by the Board.
SECTION 7.04. Waiver of Notice. Whenever any notice is required to
-----------------
be given to any Stockholder or Director of the Corporation under the provisions
of the General Corporation Law of the State of Delaware, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at, nor the purpose of, any
annual or special meeting of the Stockholders or any meeting of the Board or
committee thereof need be specified in any waiver of notice of such meeting.
SECTION 7.05. Audits. The accounts, books and records of the
-------
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the audit committee, and it
shall be the duty of the audit committee to cause such audit to be made
annually.
SECTION 7.06. Resignations. Any Director or any
-------------
<PAGE>
16
officer, whether elected or appointed, may resign at any time upon notice of
such resignation to the Corporation.
SECTION 7.07. Indemnification and Insurance. (a) Each person who was
------------------------------
or is made a party or is threatened to be made a party to or is involved in any
manner in any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"Proceeding"), by reason of the fact that he or she or a person of whom he or
----------
she is the legal representative is or was a Director or officer of the
Corporation or, while a Director or officer of the Corporation, a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall be indemnified and held harmless by the
Corporation to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended or any
other applicable laws as presently or hereafter in effect, and such
indemnification shall continue as to a person who has ceased to be a Director or
officer and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that the Corporation shall indemnify any such
-------- -------
person seeking indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if such Proceeding (or part thereof) was
authorized by the Board or is a Proceeding to enforce such person's claim to
indemnification pursuant to the rights granted by this Section 7.07. The
Corporation shall pay the expenses incurred by any person described in the first
sentence of this Section 7.07(a) in defending any such Proceeding in advance of
its final disposition upon, to the extent such an undertaking is required by
applicable law, receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation as authorized in this Section 7.07
or otherwise.
(b) The indemnification and the advancement of expenses incurred in
defending a Proceeding prior to its final disposition provided by, or granted
pursuant to, this Section 7.07 shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of the
Charter, other provision of these By-laws, vote of Stockholders or Disinterested
Directors or otherwise. No repeal, modification or amendment of, or adoption of
any provision inconsistent with, this Section 7.07, nor to the fullest extent
permitted by applicable law, any modification of law, shall adversely affect any
right or protection of any person granted pursuant hereto existing at, or with
respect to any events that occurred prior to, the time of such repeal,
amendment, adoption or modification.
<PAGE>
17
(c) The Corporation may maintain insurance, at its expense, to
protect itself and any person who is or was a Director, officer, partner,
member, employee or agent of the Corporation or a Subsidiary or of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
(d) The Corporation may, to the extent authorized from time to time
by the Board, grant rights to indemnification, and rights to be paid by the
Corporation the expenses incurred in defending any Proceeding in advance of its
final disposition, to any person who is or was an employee or agent (other than
a Director or officer) of the Corporation or a Subsidiary and to any person who
is or was serving at the request of the Corporation or a Subsidiary as a
Director, officer, partner, member, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by the Corporation or a Subsidiary, to the fullest extent of the
provisions of this Section 7.07 with respect to the indemnification and
advancement of expenses of Directors and officers of the Corporation.
(e) If any provision or provisions of this Section 7.07 shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, the legality and enforceability of the remaining provisions of this
Section 7.07 (including, without limitation, each portion of any paragraph or
clause of this Section 7.07 containing any such provision held to be invalid,
illegal or unenforceable, that is not itself held to be invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (2) to
the fullest extent possible, the provisions of this Section 7.07 (including,
without limitation, each such portion of any paragraph of this Section 7.07
containing any such provision held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
(f) For purposes of these By-laws (including this Section 6.07):
(1) "Disinterested Director" means a Director of the Corporation who
----------------------
is not and was not a party to the proceeding or matter in respect of which
indemnification is sought by the claimant.
<PAGE>
18
(2) "Subsidiary" means a corporation, a majority of the capital stock
----------
of which is owned directly or indirectly by the Corporation, other than
Directors' qualifying shares, if any.
(g) Any notice, request, or other communication required or permitted
to be given to the Corporation under this Section 7.07 shall be in writing and
either delivered in person or sent by telecopy, telex, telegram, overnight mail
or courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
ARTICLE VIII
Contracts, Proxies, Etc.
------------------------
SECTION 8.01. Contracts. Except as otherwise required by law, the
----------
Charter or these By-laws, any contracts or other instruments may be executed and
delivered in the name and on the behalf of the Corporation by such officer or
officers of the Corporation as the Board may from time to time direct. Such
authority may be general or confined to specific instances as the Board may
determine. Subject to the control and direction of the Board, the Chairman, the
Chief Executive Officer, the President, the Chief Financial Officer, Treasurer,
Vice-President and any Assistant Treasurer or Assistant Secretary may enter
into, execute, deliver and amend bonds, promissory notes, contracts, agreements,
deeds, leases, guarantees, loans, commitments, obligations, liabilities and
other instruments to be made or executed for or on behalf of the Corporation.
Subject to any restrictions imposed by the Board, such officers of the
Corporation may delegate such powers to others under his or her jurisdiction, it
being understood, however, that any such delegation of power shall not relieve
such officer of responsibility with respect to the exercise of such delegated
power.
SECTION 8.02. Proxies. Unless otherwise provided by resolution
--------
adopted by the Board, the Chairman of the Board or the President may from time
to time appoint an attorney or attorneys or agent or agents of the Corporation,
in the name and behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation or entity, any of whose stock or other securities may
be held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation or entity, or to consent in writing, in the
name of the Corporation as such holder, to any action by such other
<PAGE>
19
corporation or entity, and may instruct the person or persons so appointed as to
the manner of casting such vote or giving such consent, and may execute or cause
to be executed in the name and on behalf of the Corporation and under its
corporate seal or otherwise, all such written proxies or other instruments as he
may deem necessary or proper in the premises.
ARTICLE IX
Amendments
----------
SECTION 9.01. Amendments. These By-laws may be altered, amended or
-----------
repealed, in whole or in part, or new Amended and Restated By-laws may be
adopted by the Stockholders or by the Board at any meeting thereof; provided,
--------
however, that notice of such alteration, amendment, repeal or adoption of new
- -------
Amended and Restated By-laws is contained in the notice of such meeting of
Stockholders or in the notice of such meeting of the Board and, in the latter
case, such notice is given not less than 24 hours prior to the meeting. Unless
a higher percentage is required by the Charter as to any matter which is the
subject of these By-laws, all such amendments must be approved by either the
holders of 80% of the voting power of the then outstanding Voting Stock or by
the Board; provided that, notwithstanding the foregoing, the Board may alter,
-------------
amend or repeal, or adopt new By-laws in conflict with, (i) any provision of
these By-laws which requires a two-thirds vote of the Entire Board for action to
be taken thereunder, (ii) Article VI of these By-laws and (iii) this proviso to
this Section 9.01 of these By-laws only by a resolution adopted by a two-thirds
vote of the Entire Board; provided, further, that any such amendment to Article
-------- -------
VI hereof pursuant to the foregoing clause (ii) shall require the approval of a
majority of the holders of the Class A Common Stock then outstanding.
Notwithstanding the foregoing, no amendment to these By-laws which adversely
affects the rights of the holders of the Class A Common Stock may be effected
without the approval of the holders of a majority of the Class A Common Stock.
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
12 3/4% SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2010
AND
12 3/4% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2010
OF
CROWN CASTLE INTERNATIONAL CORP.
_________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________
Crown Castle International Corp. (the "Company"), a corporation organized
-------
and existing under the General Corporation Law of the State of Delaware,
certifies that pursuant to the authority contained in Article IV of its Amended
and Restated Certificate of Incorporation (the "Certificate of Incorporation")
----------------------------
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, the Board of Directors of the Company (the "Board
-----
of Directors") has authorized a committee of the Board of Directors to adopt the
- ------------
resolution set forth below and such committee, on December 18, 1998, duly
approved and adopted the following resolution (this "Certificate of
--------------
Designations"), which resolution remains in full force and effect on the date
- ------------
hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
by the Certificate of Incorporation and the authority vested by such Board of
Directors in a committee of the Board (the "Placement Committee"), all the
-------------------
members of which are members of such Board, the Placement Committee does hereby
designate, create, authorize and provide for the issue of 500,000 shares of 12
3/4% Senior Exchangeable Preferred Stock due 2010 (the "Preferred Stock") and
---------------
new 12 3/4% Series B Senior Exchangeable Preferred Stock due 2010 (the "New
---
Preferred Stock" and, together with the Preferred Stock, the "Senior
- --------------- ------
Exchangeable Preferred Stock"), par value $0.01 per share, with a liquidation
- ----------------------------
preference of $1,000 per share, provided that no shares of the New Preferred
Stock may be issued except upon the surrender and cancellation of such number of
shares of the Preferred Stock having an aggregate Liquidation Preference equal
to the aggregate Liquidation Preference of the shares of the New Preferred Stock
so issued. The Senior Exchangeable Preferred Stock shall have the following
powers, preferences and relative, participating, optional and other special
rights, and qualifications, limitations and restrictions thereof as follows:
SECTION 1 CERTAIN DEFINITIONS
Unless the context otherwise requires, the terms defined in this Section 1
shall have, for all purposes of this resolution, the meanings herein specified
(with terms defined in the singular having comparable meanings when used in the
plural).
"Acquired Debt" means, with respect to any specified Person:
-------------
1
<PAGE>
(1) Indebtedness or Disqualified Stock of any other Person existing at
the time such other Person is merged with or into or became a Subsidiary of
such specified Person, including, without limitation, Indebtedness incurred
in connection with, or in contemplation of, such other Person merging with
or into or becoming a Subsidiary of such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Adjusted Consolidated Cash Flow" has the meaning given to such term in the
-------------------------------
definition of "Debt to Adjusted Consolidated Cash Flow Ratio".
"Affiliate" of any specified Person means any other Person directly or
---------
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Applicable Procedures" means, with respect to any transfer or exchange of
---------------------
or for beneficial interests in any Global Certificate, the rules and procedures
of the Depositary that apply to such transfer or exchange.
"Asset Sale" means:
----------
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback)
provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken
as a whole shall be governed by Section 8.1 and/or Section 9.4 hereof and
not by Section 8.2 hereof; and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Subsidiaries
(other than directors' qualifying shares or shares required by applicable
law to be held by a Person other than the Company or a Restricted
Subsidiary), in the case of either clause (1) or (2), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million.
Notwithstanding the foregoing, the following items shall not be deemed to be
Asset Sales:
(1) a transfer of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary;
(2) an issuance of Equity Interests by a Subsidiary to the Company or
to another Restricted Subsidiary;
(3) a Restricted Payment that is permitted by Section 9.1 hereof;
(4) grants of leases or licenses in the ordinary course of business;
and
2
<PAGE>
(5) disposals of Cash Equivalents.
"BAM" means Cellco Partnership, a Delaware general partnership doing
---
business as Bell Atlantic Mobile.
"Berkshire Group" means Berkshire Fund III, A Limited Partnership,
---------------
Berkshire Fund IV, Limited Partnership, Berkshire Investors LLC and Berkshire
Partners LLC.
"Broker-Dealer" means any broker or dealer registered under the Exchange
-------------
Act.
"Capital Lease Obligation" means, at the time any determination thereof is
------------------------
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
-------------
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
----------------
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any lender party to the Senior Credit Facility
or with any domestic commercial bank having capital and surplus in excess
of $500.0 million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group and in each case
maturing within six months after the date of acquisition; and
3
<PAGE>
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1)-(5) of this
definition.
"CCAIC" means CCA Investment Corp., which is an indirect wholly owned
-----
Subsidiary of the Company and was formed to hold the Company's Equity Interests
in Crown Atlantic Holding Company LLC.
"Centennial Group" means Centennial Fund IV, L.P., Centennial Fund V, L.P.
----------------
and Centennial Entrepreneurs Fund V, L.P.
"Change of Control" means the occurrence of any of the following:
-----------------
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries, taken as a whole, to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person
has the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly
or indirectly, of more than 50% of the Voting Stock of the Company
(measured by voting power rather than number of shares); provided that
transfers of Equity Interests in the Company between or among the
beneficial owners of the Company's Equity Interests and/or Equity Interests
in CTSH, in each case as of November 20, 1997, shall not be deemed to cause
a Change of Control under this clause (3) so long as no single Person
together with its Affiliates acquires a beneficial interest in more of the
Voting Stock of the Company than is at the time collectively beneficially
owned by the Principals and their Related Parties;
(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(5) the Company consolidates with, or merges with or into, any Person,
or any Person consolidates with, or merges with or into, the Company, in
any such event pursuant to a transaction in which any of the outstanding
Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where (x) the
Voting Stock of the Company outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving
or transferee Person (immediately after giving effect to such issuance) or
(y) the Principals and their Related Parties own a majority of such
outstanding shares after such transaction.
"Consolidated Cash Flow" means, with respect to any Person for any period,
----------------------
the Consolidated Net Income of such Person for such period plus:
4
<PAGE>
(1) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net Income,
plus
(2) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus
(3) depreciation, amortization (including amortization of goodwill and
other intangibles and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, minus
(4) non-cash items increasing such Consolidated Net Income for such
period (excluding any items that were accrued in the ordinary course of
business), in each case on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Indebtedness" means, with respect to any Person as of any
-------------------------
date of determination, the sum, without duplication, of:
(1) the total amount of Indebtedness of such Person and its Restricted
Subsidiaries, plus
(2) the total amount of Indebtedness of any other Person, to the
extent that such Indebtedness has been Guaranteed by the referent Person or
one or more of its Restricted Subsidiaries, plus
(3) the aggregate liquidation value of all Disqualified Stock of such
Person and all preferred stock of Restricted Subsidiaries of such Person,
in each case, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
-----------------------
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
provided that:
(1) the Net Income (but not loss) of any Person other than the Company
that is not a Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary thereof;
(2) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(3) the cumulative effect of a change in accounting principles shall
be excluded; and
5
<PAGE>
(4) the Net Income (but not loss) of any Unrestricted Subsidiary shall
be excluded whether or not distributed to the Company or one of its
Restricted Subsidiaries.
"Consolidated Tangible Assets" means, with respect to the Company, the
----------------------------
total consolidated assets of the Company and its Restricted Subsidiaries, less
the total intangible assets of the Company and its Restricted Subsidiaries, as
shown on the most recent internal consolidated balance sheet of the Company and
such Restricted Subsidiaries calculated on a consolidated basis in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any member
--------------------
of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the Issue Date;
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election; or
(3) is a designee of a Principal or was nominated by a Principal.
"Credit Facilities" means one or more debt facilities (including, without
-----------------
limitation, the Senior Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Crown Transition Agreements" means collectively (i) the Crown Memorandum
---------------------------
of Understanding among the Company, Robert A. Crown and Barbara A. Crown, dated
as of July 2, 1998, (ii) the Crown Services Agreement between the Company and
Robert A. Crown, dated as of July 2, 1998 and (iii) the Registration Rights
Crown Side Letter Agreement, among the Company, Robert A. Crown and Barbara A.
Crown, dated as of August 18, 1998.
"CTI" means Castle Transmission International Limited.
---
"CTI Operating Agreement" means the memorandum of understanding among the
-----------------------
Company, CTSH, CTI and TdF, dated as of August 21, 1998, relating to the
development of certain business opportunities outside of the United States and
the provision of certain business support and technical services in connection
therewith.
"CTI Services Agreement" means the amended and restated services agreement
----------------------
between CTI and TdF, dated as of August 21, 1998, relating to the provisions of
certain services to CTI.
"CTSH" means Castle Transmission Services (Holdings) Ltd and its
----
successors.
"CTSH Shareholders' Agreement" means the agreement entered into by the
----------------------------
Company, CTSH and TdF, dated as of August 21, 1998, to govern the relationship
between the Company and TdF as shareholders of CTSH.
"Debt to Adjusted Consolidated Cash Flow Ratio" means, as of any date of
---------------------------------------------
determination, the ratio of:
6
<PAGE>
(1) the Consolidated Indebtedness of the Company as of such date to
(2) the sum of (a) the Consolidated Cash Flow of the Company for the
four most recent full fiscal quarters ending immediately prior to such date
for which internal financial statements are available, less the Company's
Tower Cash Flow for such four-quarter period, plus (b) the product of four
times the Company's Tower Cash Flow for the most recent quarterly period
(such sum being referred to as "Adjusted Consolidated Cash Flow"),
-------------------------------
in each case determined on a pro forma basis after giving effect to all
acquisitions or dispositions of assets made by the Company and its Subsidiaries
from the beginning of such four-quarter period through and including such date
of determination (including any related financing transactions) as if such
acquisitions and dispositions had occurred at the beginning of such four-quarter
period. For purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the reference period or subsequent to
such reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the reference period and Consolidated Cash
Flow for such reference period shall be calculated without giving effect to
clause (ii) of the proviso set forth in definition of Consolidated Net Income,
and (ii) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to Calculation Date, shall be excluded.
"Default" means any event that is, or with the passage of time or the
-------
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
------------------
terms of any security into which it is convertible or for which it is
exchangeable, in each case, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Senior Exchangeable Preferred Stock or Senior Subordinated
Exchange Debentures mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 9.1 hereof.
"Eligible Indebtedness" means any Indebtedness other than (i) Indebtedness
---------------------
in the form of, or represented by, bonds or other securities or any guarantee
thereof and (ii) Indebtedness that is, or may be, quoted, listed or purchased
and sold on any stock exchange, automated trading system or over-the-counter or
other securities market (including, without prejudice to the generality of the
foregoing, the market for securities eligible for resale pursuant to Rule 144A
under the Securities Act).
"Eligible Receivables" means the accounts receivable (net of any reserves
--------------------
and allowances for doubtful accounts in accordance with GAAP) of the Company and
its Restricted Subsidiaries that are not more than 60 days past their due date
and that were entered into in the ordinary course of business on normal payment
terms as shown on the most recent internal consolidated balance sheet of the
Company and such Restricted Subsidiaries, all calculated on a consolidated basis
in accordance with GAAP.
7
<PAGE>
"Equity Interests" means Capital Stock and all warrants, options or other
----------------
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Date" means the date on which the Company exchanges all but not
-------------
less than all of the Senior Exchangeable Preferred Stock for Senior Subordinated
Exchange Debentures.
"Exchange Offer" means exchange and issuance by the Company of New
--------------
Preferred Stock or New Exchange Debentures, as the case may be, which shall be
registered pursuant to a Registration Statement, in an amount equal to (i) the
aggregate Liquidation Preference of all shares of Senior Exchangeable Preferred
Stock that are tendered by the Holders thereof or (ii) the aggregate principal
amount of all Senior Subordinated Exchange Debentures that are tendered by the
Holders thereof, as the case may be, in connection with such exchange and
issuance.
"Exchange Offer Registration Statement" means the Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
"Exchange Trustee" means the trustee under the indenture governing the
----------------
Senior Subordinated Exchange Debentures.
"Existing Indebtedness" means Indebtedness of the Company and its
---------------------
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the Issue Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"Governance Agreement" means the agreement among the Company, TdF and its
--------------------
affiliates, dated as of August 21, 1998, to provide for certain rights and
obligations of the Company, TdF and its affiliates with respect to the
management of the Company.
"Guarantee" means a guarantee (other than by endorsement of negotiable
---------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
-------------------
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
------------
Person, whether or not contingent, in respect of:
8
<PAGE>
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property; or
(6) representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person whether or not such
Indebtedness is assumed by such Person (the amount of such Indebtedness as of
any date being deemed to be the lesser of the value of such property or assets
as of such date or the principal amount of such Indebtedness of such other
Person so secured) and, to the extent not otherwise included, the Guarantee by
such Person of any Indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
-----------
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company or a Restricted Subsidiary of the Company issues any of its Equity
Interests such that, in each case, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Subsidiary not sold or disposed of in an amount determined as provided in
the final paragraph of Section 9.1 hereof.
"Issue Date" means the closing date for the sale and original issuance of
----------
the Senior Exchangeable Preferred Stock.
"Joint Venture Operating Agreement" means the Crown Atlantic Holding
---------------------------------
Company LLC Operating Agreement to be entered into by the Company and BAM,
substantially in the form of Exhibit 3.5 to the Formation Agreement, dated as of
December 8, 1998, by and among BAM, the Transferring Partnerships (as defined
therein), the Company and CCA Investment Corp.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the
9
<PAGE>
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Nassau Group" means Nassau Capital Partners II, L.P. and NAS Partners I,
------------
L.L.C.
"Net Income" means, with respect to any Person, the net income (loss) of
----------
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or
any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
------------
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of:
(1) the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof;
(2) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements);
(3) amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under a Credit Facility) secured by a Lien on the
asset or assets that were the subject of such Asset Sale;
(4) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such
Asset Sale;
(5) the deduction of appropriate amounts provided by the seller as a
reserve in accordance with GAAP against any liabilities associated with the
assets disposed of in such Asset Sale and retained by the Company or any
Restricted Subsidiary after such Asset Sale; and
(6) without duplication, any reserves that the Company's Board of
Directors determines in good faith should be made in respect of the sale
price of such asset or assets for post closing adjustments; provided that
in the case of any reversal of any reserve referred to in clause (5) or (6)
above, the amount so reserved shall be deemed to be Net Proceeds from an
Asset Sale as of the date of such reversal.
"New Exchange Debentures" means the Company's 12 3/4% Senior Subordinated
-----------------------
Exchange Debentures due 2010 issued pursuant to the Exchange Indenture (i) in
the Exchange Offer or (ii) in
10
<PAGE>
connection with a resale of Senior Subordinated Exchange Debentures in reliance
on a Shelf Registration Statement.
"New Preferred Stock" means the Company's 12 3/4% Senior Exchangeable
-------------------
Preferred Stock due 2010 issued pursuant to this Certificate of Designations (i)
in the Exchange Offer or (ii) in connection with a resale of Senior Exchangeable
Preferred Stock in reliance on a Shelf Registration Statement.
"Non-Recourse Debt" means Indebtedness:
-----------------
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise) or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries (except that this clause (3) shall not apply to
any Indebtedness incurred by CTSH and its Subsidiaries prior to August 21,
1998).
"Obligations" means any principal, interest, penalties, fees,
-----------
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Participating Broker-Dealer" means a Broker-Dealer that participates in
---------------------------
the Exchange Offer in accordance with Section 3(c) of the Registration Rights
Agreement.
"Permitted Business" means any business conducted by the Company, its
------------------
Restricted Subsidiaries or CTSH and its Subsidiaries on the Issue Date and any
other business related, ancillary or complementary to any such business.
"Permitted Investments" means:
---------------------
(1) Liens securing Senior Debt;
(2) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(3) any Investment in Cash Equivalents;
(4) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company;
11
<PAGE>
(5) any Restricted Investment made as a result of the receipt of non-
cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 8.2 hereof;
(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;
(7) receivables created in the ordinary course of business;
(8) loans or advances to employees made in the ordinary course of
business not to exceed $1.0 million at any one time outstanding;
(9) securities and other assets received in settlement of trade debts
or other claims arising in the ordinary course of business;
(10) purchases of additional Equity Interests in CTSH for cash
pursuant to the Governance Agreement as the same is in effect on the Issue
Date for aggregate cash consideration not to exceed $20.0 million since the
Issue Date;
(11) the Investment of up to an aggregate of $100.0 million of the net
proceeds from the sale of the Senior Exchangeable Preferred Stock (i) to be
used to consummate the formation of the Crown Atlantic Holding Company LLC
joint venture with BAM or (ii) if the Company does not consummate the
formation of the Crown Atlantic Holding Company LLC joint venture with BAM,
in one or more other Subsidiaries of the Company (which may be Unrestricted
Subsidiaries of the Company), each of which derives or expects to derive a
majority of its revenues from one or more Permitted Businesses (each such
Investment being measured as of the date made and without giving effect to
subsequent changes in value);
(12) Additional Investments with the net proceeds from the sale of the
Senior Exchangeable Preferred Stock in an aggregate amount equal to (x) the
gross proceeds from the sale of the Senior Exchangeable Preferred Stock,
minus (y) the aggregate amount of Investments made or permitted to be made
pursuant to clause (11) of this paragraph, minus (z) the aggregate amount
of Indebtedness incurred and/or Disqualified Stock issued pursuant to
clause (11) of the second paragraph of Section 9.2 hereof (each such
Investment being measured as of the date made and without giving effect to
subsequent changes in value); and
(13) other Investments in Permitted Businesses not to exceed an amount
equal to $10.0 million plus 10% of the Company's Consolidated Tangible
Assets at any one time outstanding (each such Investment being measured as
of the date made and without giving effect to subsequent changes in value).
"Permitted Junior Securities" means Equity Interests in the Company or debt
---------------------------
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Senior Subordinated Exchange Debentures are
subordinated to Senior Debt pursuant to the Exchange Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
----------------------------------
or any of its Restricted Subsidiaries or Disqualified Stock of the Company
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries (other than intercompany Indebtedness) or
Disqualified Stock of the Company; provided that:
12
<PAGE>
(1) the principal amount, initial accreted value or liquidation
preference, as applicable, of such Permitted Refinancing Indebtedness does
not exceed the principal amount, accreted value or liquidation preference,
as applicable, of, plus accrued interest or accumulated dividends on, the
Indebtedness or Disqualified Stock so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of expenses and prepayment
premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Senior
Subordinated Exchange Debentures, such Permitted Refinancing Indebtedness
is subordinated in right of payment to, the Senior Subordinated Exchange
Debentures on terms at least as favorable to the Holders of Senior
Subordinated Exchange Debentures as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded or such
Disqualified Stock is issued by the Company.
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Berkshire Group, Centennial Group, Nassau Group, TdF and
----------
any Related Party of the foregoing.
"Prospectus" means the prospectus included in a Registration Statement at
----------
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
"Public Equity Offering" means an underwritten primary public offering of
----------------------
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Registration Rights Agreement" means the registration rights agreement to
-----------------------------
be entered into by the Company on or before the Issue relating to the
registration of the Senior Exchangeable Preferred Stock and the Senior
Subordinated Exchange Debentures with the Commission.
"Registration Statement" means any registration statement of the Company
----------------------
relating to an offering of New Preferred Stock or New Exchange Debentures, as
the case may be, that is filed pursuant to the provisions of the Registration
Rights Agreement, and includes the Prospectus included therein, all amendments
and supplements thereto (including post-effective amendments) and all exhibits
and material incorporated by reference therein.
"Related Party" with respect to any Principal means:
-------------
13
<PAGE>
(1) any controlling stockholder, 80% (or more) owned Subsidiary of such
Principal; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, members, partners, owners or Persons beneficially holding an 80%
or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (1).
"Restricted Definitive Certificate" means a definitive certificate
---------------------------------
evidencing Senior Exchangeable Preferred Stock, registered in the name of the
holder thereof, in the form of Exhibit A hereto and bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
---------------------
Investment.
"Restricted Global Certificate" means a global certificate in the form of
-----------------------------
Exhibit A hereto bearing the Global Certificate Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding aggregate liquidation preference of the Senior Exchangeable
Preferred Stock sold in reliance on Rule 144A.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
---------------------
Person that is not an Unrestricted Subsidiary.
"Rights Agreement" means the agreement between the Company and ChaseMellon
----------------
Shareholders Services, L.L.C., as rights agent, dated as of August 21, 1998,
relating to the dividend declared by the Company consisting of the right to
purchase 1/1000th of a share of the Company's Series A Participating Cumulative
Preferred Stock, par value $.01 per share.
"Senior Credit Facility" means that certain Amended and Restated Loan
----------------------
Agreement, dated as of July 10, 1998, by and among Key Corporate Capital Inc.
and PNC Bank, National Association, as arrangers and agents for the financial
institutions listed therein, and Crown Communication Inc. and Crown Castle
International Corp. de Puerto Rico, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time.
"Senior Debt" means:
-----------
(1) all Indebtedness outstanding under the Senior Credit Facility and
all Hedging Obligations (including guarantees thereof) with respect thereto
of the Company, whether outstanding on the Issue Date or thereafter
incurred;
(2) all Indebtedness outstanding under the Senior Discount Notes or
any Guarantees thereof, as the case may be;
(3) any other Indebtedness permitted to be incurred by the Company or
any of its Restricted Subsidiaries under the terms of this Certificate of
Designations unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Senior Subordinated Exchange Debentures; and
(4) all Obligations with respect to the preceding clauses (1), (2) and
(3) (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in
14
<PAGE>
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law).
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include:
(1) any liability for federal, state, local or other taxes owed or
owing by the Company or the Restricted Subsidiaries;
(2) any Indebtedness of the Company or any Restricted Subsidiary to
any of its Subsidiaries;
(3) any trade payables;
(4) any Indebtedness that is incurred in violation of this Certificate
of Designations (but only to the extent so incurred); or
(5) any Capitalized Lease Obligations.
"Senior Discount Notes Indenture" means that certain Indenture, dated as of
-------------------------------
November 20, 1997, governing the Company's 10 5/8% Senior Discount Notes due
2007.
"Senior Exchangeable Preferred Stock" means (i) the 12 3/4% Senior
-----------------------------------
Exchangeable Preferred Stock due 2010 of the Company issued on the Issue Date,
(ii) any and all additional fully-paid and non-assessable shares of 12 3/4%
Senior Exchangeable Preferred Stock due 2010 of the Company issued after the
Issue Date as payment of dividends in accordance with the provisions of Section
3 hereof and (iii) any and all shares of New Preferred Stock.
"Senior Subordinated Exchange Debentures" means (i) the 12 3/4% Senior
---------------------------------------
Subordinated Exchange Debentures due 2010 of the Company issued on the Exchange
Date, (ii) any and all additional 12 3/4% Senior Subordinated Exchange
Debentures due 2010 of the Company issued after the Exchange Date as payment of
interest in accordance with the provisions of the Exchange Indenture and (iii)
any and all New Exchange Debentures.
"Shelf Registration Statement" means the Shelf Registration Statement as
----------------------------
defined in the Registration Rights Agreement.
"Significant Subsidiary" means, with respect to any Person, any Restricted
----------------------
Subsidiary of such Person that would be a "significant subsidiary" of such
Person as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof, except that all references to "10 percent" in Rule 1-02(w)(1), (2) and
(3) shall mean "5 percent" and that all Unrestricted Subsidiaries of the Company
shall be excluded from all calculations under Rule 1-02(w).
"Stated Maturity" means, with respect to any installment of interest or
---------------
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
15
<PAGE>
"Stockholders' Agreement" means the agreement among the Company and certain
-----------------------
stockholders of the Company, dated as of August 21, 1998, to provide for certain
rights and obligations of the Company and such stockholders with respect to the
governance of the Company and such stockholders' shares of Common Stock and/or
Class A Common Stock of the Company.
"Strategic Equity Investment" means a cash contribution to the common
---------------------------
equity capital of the Company or a purchase from the Company of common Equity
Interests (other than Disqualified Stock), in either case by or from a Strategic
Equity Investor and for aggregate cash consideration of at least $50.0 million.
"Strategic Equity Investor" means a Person engaged in a Permitted Business
-------------------------
whose Total Equity Market Capitalization exceeds $1.0 billion.
"Subsidiary" means, with respect to any Person:
----------
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TdF" means TeleDiffusion de France International S.A.
---
"Total Equity Market Capitalization" of any Person means, as of any day of
----------------------------------
determination, the sum of:
(1) the product of (A) the aggregate number of outstanding primary
shares of common stock of such Person on such day (which shall not include
any options or warrants on, or securities convertible or exchangeable into,
shares of common stock of such person) multiplied by (B) the average
closing price of such common stock listed on a national securities exchange
or the Nasdaq National Market System over the 20 consecutive business days
immediately preceding such day; plus
(2) the liquidation value of any outstanding shares of preferred stock
of such Person on such day.
"Tower Asset Exchange" means any transaction in which the Company or one of
--------------------
its Restricted Subsidiaries exchanges assets for Tower Assets and/or cash or
Cash Equivalents where the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Transfer Agent and/or the Exchange Trustee, as appropriate) of the Tower Assets
and cash or Cash Equivalents received by the Company and its Restricted
Subsidiaries in such exchange is at least equal to the fair market value of the
assets disposed of in such exchange.
"Tower Assets" means wireless transmission towers and related assets that
------------
are located on the site of a transmission tower.
16
<PAGE>
"Tower Cash Flow" means, for any period, the Consolidated Cash Flow of the
---------------
Company and its Restricted Subsidiaries for such period that is directly
attributable to site rental revenue or license fees paid to lease or sublease
space on communication sites owned or leased by the Company, all determined on a
consolidated basis and in accordance with GAAP. Tower Cash Flow shall not
include revenue or expenses attributable to non-site rental services provided by
the Company or any of its Restricted Subsidiaries to lessees of communication
sites or revenues derived from the sale of assets.
"Unrestricted Definitive Certificate" means a definitive certificate
-----------------------------------
evidencing Senior Exchangeable Preferred Stock, registered in the name of the
holder thereof, in the form of Exhibit A hereto, representing a series of Senior
Exchangeable Preferred Stock that do not bear the Private Placement Legend.
"Unrestricted Global Certificate" means a permanent global certificate in
-------------------------------
the form of Exhibit A attached hereto that bears the Global Certificate Legend
and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Senior Exchangeable
Preferred Stock that do not bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is
-----------------------
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors shall be evidenced to the
Transfer Agent and the Exchange Trustee by filing with the Transfer Agent and
the Exchange Trustee a certified copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 9.1 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Certificate of Designations and the
Exchange Indenture and any Indebtedness of such Subsidiary shall be deemed to be
17
<PAGE>
incurred by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under Section 9.2
hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 9.2 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default would occur or be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
------------
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
---------------------------------
or series or class of preferred stock at any date, the number of years obtained
by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal or liquidation preference, including payment
at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment, by
(2) the then outstanding principal amount of such Indebtedness or the
aggregate liquidation preference of the then outstanding preferred stock,
as the case may be.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
----------------------------------
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
SECTION 2 RANKING
The Senior Exchangeable Preferred Stock shall rank senior in right of
payment to all classes or series of the Company's capital stock as to dividends
and upon liquidation, dissolution or winding up of the Company.
Without the consent of the Holders of at least two-thirds of the then
outstanding Senior Exchangeable Preferred Stock, the Company may not authorize,
create (by way of reclassification or otherwise) or issue:
(1) any class or series of capital stock of the Company ranking senior
to the Senior Exchangeable Preferred Stock ("Senior Securities") or
-----------------
(2) any obligation or security convertible or exchangeable into, or
evidencing a right to purchase, shares of any class or series of Senior
Securities.
Notwithstanding the foregoing, the Company may, without the consent of the
Holders of the Senior Exchangeable Preferred Stock, authorize, create (by way of
reclassification or otherwise) or issue:
18
<PAGE>
(1) any class or series of capital stock of the Company ranking on a
parity with the Senior Exchangeable Preferred Stock ("Parity Securities")
-----------------
or
(2) any obligation or security convertible or exchangeable into, or
evidencing a right to purchase, shares of any class or series of Parity
Securities.
SECTION 3 DIVIDENDS
When the Board of Directors declares dividends out of legally available
Company funds, the Holders of the Senior Exchangeable Preferred Stock, who are
Holders of record as of the preceding March 1, June 1, September 1 and December
1 (each, a "Record Date"), shall be entitled to receive cumulative preferential
-----------
dividends at the rate per share of 12 3/4% per annum. Dividends on the Senior
Exchangeable Preferred Stock shall be payable quarterly in arrears on March 15,
June 15, September 15 and December 15 of each year (each, a "Dividend Payment
----------------
Date"), commencing on March 15, 1999.
- ----
On or prior to December 15, 2003, the Company may, at its option, pay
dividends:
(1) in cash or
(2) in additional fully-paid and non-assessable shares of Senior
Exchangeable Preferred Stock (including fractional stock) having an
aggregate Liquidation Preference equal to the amount of such dividends.
After December 15, 2003, the Company shall pay dividends in cash only. The
Company does not expect to pay any dividends in cash before December 15, 2003.
Dividends payable on the Senior Exchangeable Preferred Stock shall be:
(1) computed on the basis of a 360-day year comprised of twelve 30-day
months; and
(2) accrue on a daily basis.
Dividends on the Senior Exchangeable Preferred Stock shall accrue whether
or not:
(1) the Company has earnings or profits;
(2) there are funds legally available for the payment of such
dividends or
(3) dividends are declared.
Dividends shall accumulate to the extent they are not paid on the Dividend
Payment Date for the quarterly period to which they relate. Accumulated unpaid
dividends shall accrue dividends at the rate of 12 3/4% per annum. The Company
must take all actions required or permitted under Delaware law to permit the
payment of dividends on the Senior Exchangeable Preferred Stock.
For any dividend period, the Company shall not declare or pay upon, or set
any sum apart for the payment of dividends upon any outstanding Senior
Exchangeable Preferred Stock unless it has declared and paid upon, or declared
and set apart a sufficient sum for the payment of dividends upon, all
outstanding Senior Exchangeable Preferred Stock for all preceding dividend
periods.
19
<PAGE>
Unless the Company has declared and paid upon, or declared and set apart a
sufficient sum for the payment of, full cumulative dividends on all outstanding
Senior Exchangeable Preferred Stock due for all past dividend periods, then:
(1) no dividend (other than a dividend payable solely in stock of any
class of stock ranking junior to the Senior Exchangeable Preferred Stock as
to the payment of dividends and as to rights in liquidation, dissolution or
winding up of the affairs of the Company (any such stock, "Junior
------
Securities")) shall be declared or paid upon, or any sum set apart for the
----------
payment of dividends upon, any Junior Securities;
(2) no other distribution shall be declared or made upon, or any sum
set apart for the payment of any distribution upon, any Junior Securities;
(3) no Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for other Junior
Securities) by the Company or any of its Restricted Subsidiaries;
(4) no warrants, rights, calls or options to purchase any Junior
Securities shall be directly or indirectly issued by the Company or any of
its Restricted Subsidiaries; and
(5) no monies shall be paid into or set apart or made available for a
sinking or other like fund for the purchase, redemption or other
acquisition or retirement for value of any Junior Securities by the Company
or any of its Restricted Subsidiaries.
Holders of the Senior Exchangeable Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the full
cumulative dividends as herein described.
SECTION 4 VOTING RIGHTS; AMENDMENT
Holders of record of the Senior Exchangeable Preferred Stock shall have no
voting rights, except as required by law and as provided in this Certificate of
Designations. Under this Certificate of Designations, the number of members of
the Company's Board of Directors shall immediately and automatically increase by
two, and the Holders of a majority of the outstanding Senior Exchangeable
Preferred Stock, voting separately as a class together with holders of all other
Parity Securities having similar voting rights, may elect two members to the
Board of Directors of the Company, upon the occurrence of any of the following
events (each, a "Voting Rights Triggering Event"):
------------------------------
(1) the accumulation of accrued and unpaid dividends on the
outstanding Senior Exchangeable Preferred Stock (or after December 15,
2003, such dividends are not paid in cash) in an amount equal to six full
quarterly dividends (whether or not consecutive);
(2) failure by the Company or any of its Restricted Subsidiaries to
comply with any mandatory redemption obligation with respect to the Senior
Exchangeable Preferred Stock, the failure to make an Asset Sale Offer or
Change of Control Offer in accordance with the provisions of this
Certificate of Designations and/or the failure to repurchase Senior
Exchangeable Preferred Stock pursuant to such offers;
(3) failure by the Company to make a Change of Control Offer or to
repurchase any Senior Exchangeable Preferred Stock pursuant to a Change of
Control Offer in reliance on the
20
<PAGE>
last paragraph of Section 8.1 hereof or failure by the Company to make an
Asset Sale Offer or to repurchase any Senior Exchangeable Preferred Stock
pursuant to an Asset Sale Offer in reliance on the last paragraph under
Section 8.2 hereof;
(4) failure by the Company or any of its Restricted Subsidiaries to
comply with any of the other covenants or agreements set forth in this
Certificate of Designations and the continuance of such failure for 30
consecutive days after notice to the Company by Holders of record of the
Senior Exchangeable Preferred Stock representing 25% of the outstanding
shares of the Senior Exchangeable Preferred Stock;
(5) defaults under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Significant Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the Closing Date, which default (i) is caused
by a failure to pay the principal amount of such Indebtedness at final
maturity after giving effect to any applicable grace period (a "Payment
-------
Default") or (ii) results in the acceleration of such Indebtedness prior to
-------
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $20.0 million or more;
(6) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of the
Company or any Significant Subsidiary; or
(iii) orders the liquidation of the Company or any Significant
Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
The term of office of the directors elected as a result of a Voting Rights
Triggering Event shall continue until all dividends in arrears on the Senior
Exchangeable Preferred Stock are paid in full and all
21
<PAGE>
other Voting Rights Triggering Events have been cured or waived, at which time
the term of office of any such directors shall terminate.
SECTION 5 EXCHANGE
On any Dividend Payment Date, the Company may exchange all and not less
than all of the shares of then outstanding Senior Exchangeable Preferred Stock
for the Company's Senior Subordinated Exchange Debentures if:
(1) on the date of the exchange, there are no accumulated and unpaid
dividends on the Senior Exchangeable Preferred Stock (including the
dividend payable on that date) or other contractual impediments to the
exchange;
(2) there are sufficient legally available funds;
(3) the exchange does not immediately cause:
(a) a Default (as defined in the Exchange Indenture); and
(b) a default or event of default under any material instrument
governing Indebtedness of the Company, including without limitation
the Senior Discount Notes, outstanding at the time;
(4) the Exchange Indenture has been qualified under the Trust
Indenture Act, if qualification is required at the time of exchange; and
(5) the Company has delivered a written opinion to the Exchange
Trustee stating that all conditions to the exchange have been satisfied.
Upon any exchange pursuant to the preceding paragraph, and subject to the
second succeeding sentence of this paragraph, holders of outstanding Senior
Exchangeable Preferred Stock shall be entitled to receive:
(1) $1.00 principal amount of Senior Subordinated Exchange Debentures
for each $1.00 of the aggregate Liquidation Preference, plus
(2) without duplication, any accrued and unpaid dividends and
Liquidated Damages, if any.
The Senior Subordinated Exchange Debentures shall be:
(1) issued in registered form, without coupons;
(2) issued in principal amounts of $1,000 and integral multiples
thereof to the extent possible; and
(3) issuable in principal amounts less than $1,000 so that each holder
of Senior Exchangeable Preferred Stock will receive interests representing
the entire amount of Senior Subordinated Exchange Debentures to which such
holder's share of Senior Exchangeable
22
<PAGE>
Preferred Stock entitle such holder, provided that the Company may pay cash
in lieu of issuing a Senior Subordinated Exchange Debenture having a
principal amount less than $1,000.
The Company or a Company representative shall send notice of the intention
to exchange by first class mail, postage prepaid, to each Holder of record of
Senior Exchangeable Preferred Stock at its registered address not more than 60
days nor less than 30 days prior to the Exchange Date. In addition to any
information required by law or by the applicable rules of any exchange upon
which Senior Exchangeable Preferred Stock may be listed or admitted to trading,
the notice shall state:
(1) the Exchange Date;
(2) the place or places where certificates for such stock are to be
surrendered for exchange, including any procedures applicable to exchanges
to be accomplished through book-entry transfers; and
(3) that dividends on the Senior Exchangeable Preferred Stock to be
exchanged will cease to accrue on the Exchange Date.
If notice of any exchange has been properly given, and if on or before the
Exchange Date the Senior Subordinated Exchange Debentures have been duly
executed and authenticated and an amount in cash or additional Senior
Exchangeable Preferred Stock (as applicable) equal to all accrued and unpaid
dividends and Liquidated Damages, if any, thereon to the Exchange Date has been
deposited with the Transfer Agent, then on and after the close of business on
the Exchange Date:
(1) the Senior Exchangeable Preferred Stock to be exchanged shall no
longer be considered outstanding and may subsequently be issued in the same
manner as the other authorized but unissued preferred stock, including as
Parity Securities, but not as the same class as the Senior Exchangeable
Preferred Stock; and
(2) all rights of the Holders as stockholders of the Company shall
cease, except their right to receive upon surrender of their certificates
the Senior Subordinated Exchange Debentures and all accrued and unpaid
dividends and Liquidated Damages, if any, thereon to the Exchange Date.
SECTION 6 REDEMPTION
Section 6.1 Mandatory Redemption
On December 15, 2010 (the "Mandatory Redemption Date"), the Company shall
be required to redeem (subject to it having sufficient legally available funds)
all outstanding Senior Exchangeable Preferred Stock at a price in cash equal to
the Liquidation Preference, plus accrued and unpaid dividends and Liquidated
Damages, if any, to the date of redemption. The Company shall not be required
to make sinking fund payments with respect to the Senior Exchangeable Preferred
Stock. The Company must take all actions required or permitted under Delaware
law to permit such redemption.
Section 6.2 Optional Redemption
During the first 36 months after the Issue Date, the Company may on any one
or more occasions redeem up to 35% of the aggregate Liquidation Preference of
the Senior Exchangeable Preferred Stock then outstanding at a redemption price
of 112.750% of the Liquidation Preference thereof, plus accrued
23
<PAGE>
and unpaid dividends and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings or
Strategic Equity Investments; provided that:
(1) at least $130.0 million aggregate Liquidation Preference of Senior
Exchangeable Preferred Stock remains outstanding immediately after the
occurrence of such redemption (excluding Senior Exchangeable Preferred
Stock held by the Company and its Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the
closing of the Public Equity Offering or Strategic Equity Investment.
Except pursuant to the preceding paragraph, the Senior Exchangeable
Preferred Stock shall not be redeemable at the Company's option prior to
December 15, 2003.
On or after December 15, 2003, the Company may redeem all or any part of
the Senior Exchangeable Preferred Stock upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of the
Liquidation Preference) set forth below plus accrued and unpaid dividends and
Liquidated Damages thereon, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on December 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR Percentage
---- ----------
<S> <C>
2003.................................................................. 106.375%
2004.................................................................. 104.781%
2005.................................................................. 103.188%
2006.................................................................. 101.594%
2007 and thereafter................................................... 100.000%
</TABLE>
Section 6.3 Selection and Notice
If less than all of the Senior Exchangeable Preferred Stock is to be
redeemed at any time, the Transfer Agent will select Senior Exchangeable
Preferred Stock for redemption as follows:
(1) if the Senior Exchangeable Preferred Stock is listed, in
compliance with the requirements of the principal national securities
exchange on which the Senior Exchangeable Preferred Stock is listed; or
(2) if the Senior Exchangeable Preferred Stock is not so listed, on a
pro rata basis, by lot or by such method as the Transfer Agent shall deem
fair and appropriate.
No Senior Exchangeable Preferred Stock with a Liquidation Preference of
$1,000 or less shall be redeemed in part. Notices of redemption shall be mailed
by first class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Senior Exchangeable Preferred Stock to be redeemed at its
registered address. Notices of redemption may not be conditional.
If any Senior Exchangeable Preferred Stock is to be redeemed in part only,
the notice of redemption that relates to that Senior Exchangeable Preferred
Stock shall state the portion of the Liquidation Preference thereof to be
redeemed. A new certificate with an aggregate Liquidation Preference equal to
the unredeemed portion of the original certificate evidencing Senior
Exchangeable Preferred Stock presented for redemption shall be issued in the
name of the Holder thereof upon cancellation of the original certificate.
Senior Exchangeable Preferred Stock called for redemption
24
<PAGE>
becomes due on the date fixed for redemption. On and after the redemption date,
dividends cease to accrue on Senior Exchangeable Preferred Stock or portions
thereof called for redemption.
SECTION 7 LIQUIDATION RIGHTS
Each Holder of the Senior Exchangeable Preferred Stock shall be entitled to
payment, out of the assets of the Company available for distribution, of an
amount equal to the aggregate Liquidation Preference of the Senior Exchangeable
Preferred Stock held by such Holder, plus accrued and unpaid dividends and
Liquidated Damages, if any, to the date fixed for liquidation, dissolution,
winding up or reduction or decrease in capital stock, before any distribution is
made on any Junior Securities, including, without limitation, common stock of
the Company, upon any:
(1) voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company; or
(2) reduction or decrease in the Company's capital stock resulting in
a distribution of assets to the holders of any class or series of the
Company's capital stock (a "reduction or decrease in capital stock").
After payment in full of the Liquidation Preference and all accrued
dividends, if any, to which Holders of Senior Exchangeable Preferred Stock are
entitled, such Holders may not further participate in any distribution of assets
of the Company. However, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
shall be a voluntary or involuntary liquidation, dissolution or winding up of
the Company or reduction or decrease in capital stock, unless such sale,
conveyance, exchange or transfer is in connection with a liquidation,
dissolution or winding up of the business of the Company or reduction or
decrease in capital stock.
SECTION 8 REPURCHASE AT THE OPTION OF HOLDERS
Section 8.1 Change of Control
If a Change of Control occurs, each Holder of Senior Exchangeable Preferred
Stock shall have the right to require the Company to repurchase all or any part
(but not any fractional shares) of such Holder's Senior Exchangeable Preferred
Stock pursuant to the offer described below (the "Change of Control Offer"). In
-----------------------
the Change of Control Offer, the Company shall offer a payment in cash equal to
101% of the aggregate Liquidation Preference of Senior Exchangeable Preferred
Stock repurchased plus accrued and unpaid dividends and Liquidated Damages
thereon, if any (subject to the right of Holders of record on the relevant
record date to receive dividends and Liquidated Damages, if any, due on the
relevant dividend payment date), to the date of purchase (the "Change of Control
-----------------
Payment"). Within 30 days following any Change of Control, the Company shall
- -------
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Senior Exchangeable
Preferred Stock on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
------------------------------
required by this Certificate of Designations and described in such notice.
On the Change of Control Payment Date, the Company shall, to the extent
lawful:
25
<PAGE>
(1) accept for payment all Senior Exchangeable Preferred Stock or
portions thereof properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent (as defined in Section 13 hereof) an
amount equal to the Change of Control Payment in respect of all Senior
Exchangeable Preferred Stock or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Transfer Agent the Senior
Exchangeable Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate Liquidation Preference of Senior
Exchangeable Preferred Stock or portions thereof being purchased by the
Company.
The Company shall promptly mail to each Holder of Senior Exchangeable
Preferred Stock so tendered the Change of Control Payment for such Senior
Exchangeable Preferred Stock, and the Transfer Agent shall promptly authenticate
and mail (or cause to be transferred by book entry) to each Holder a new
certificate representing the Senior Exchangeable Preferred Stock equal in
Liquidation Preference to any unpurchased portion of the Senior Exchangeable
Preferred Stock surrendered, if any.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Certificate of Designations are
applicable. The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations applicable to any Change of Control Offer. To the extent that
the provisions of any such securities laws or securities regulations conflict
with this Section 8.1, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 8.1 by virtue thereof.
The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Certificate of Designations applicable to a Change of Control Offer made
by the Company and purchases all Senior Exchangeable Preferred Stock validly
tendered and not withdrawn under such Change of Control Offer.
Notwithstanding the foregoing, the Company may not repurchase any Senior
Exchangeable Preferred Stock pursuant to this provision unless such repurchase
complies with the restricted payments covenant contained in the Senior Discount
Notes Indenture; provided that if the Company does not make a Change of Control
Offer or does not repurchase any Senior Exchangeable Preferred Stock pursuant to
a Change of Control Offer, then such failure shall constitute a Voting Rights
Triggering Event.
Section 8.2 Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Transfer Agent) of the
assets or Equity Interests issued or sold or otherwise disposed of; and
26
<PAGE>
(2) except in the case of a Tower Asset Exchange, at least 75% of the
consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents.
For purposes of this provision, each of the following shall be deemed to be
cash:
(1) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Senior Exchangeable Preferred Stock or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability; and
(2) any securities, notes or other obligations received by the Company
or any such Restricted Subsidiary from such transferee that are converted
by the Company or such Restricted Subsidiary into cash within 20 days of
the applicable Asset Sale (to the extent of the cash received).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Restricted Subsidiary may apply such Net Proceeds
to:
(1) reduce any Indebtedness of the Company;
(2) reduce any Indebtedness of any of the Company's Restricted
Subsidiaries;
(3) the acquisition of all or substantially all the assets of a
Permitted Business;
(4) the acquisition of Voting Stock of a Permitted Business from a
Person that is not a Subsidiary of the Company; provided, that, after
giving effect thereto, the Company or its Restricted Subsidiary owns a
majority of such Voting Stock and designates such Permitted Business as a
Restricted Subsidiary or
(5) the making of a capital expenditure or the acquisition of other
long-term assets that are used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Certificate of
Designations.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph shall be deemed to constitute
"Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall be required to make an offer to all holders of Senior
Discount Notes and may be required to make such offer to holders of other
Indebtedness of the Company then outstanding (a "Senior Asset Sale Offer") to
-----------------------
purchase the maximum principal amount of the Senior Discount Notes and such
other Indebtedness, if applicable, that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount or accreted value thereof, as the case may be, plus accrued and unpaid
interest to the date of purchase, in accordance with the procedures set forth in
the Senior Discount Notes Indenture and in the instruments governing such other
Indebtedness. To the extent that the aggregate amount of Senior Discount Notes
and such other Indebtedness tendered pursuant to a Senior Asset Sale Offer is
less than the remaining
27
<PAGE>
Excess Proceeds ("Remaining Excess Proceeds") and the sum of (A) such amount of
-------------------------
Remaining Excess Proceeds and (B) the Remaining Excess Proceeds from any
subsequent Senior Asset Sale Offers exceeds $3.0 million, the Company shall be
required to make an offer to all Holders of Senior Exchangeable Preferred Stock
and all holders of Parity Securities containing provisions similar to those set
forth in this Certificate of Designations with respect to offers to purchase
with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the
----------------
maximum Liquidation Preference of Senior Exchangeable Preferred Stock and such
Parity Securities that may be purchased out of such Remaining Excess Proceeds,
at an offer price in cash in an amount equal to 100% of the Liquidation
Preference thereof plus accrued and unpaid dividends and Liquidated Damages
thereon, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive dividends and Liquidated Damages,
if any, due on the relevant Dividend Payment Date), in accordance with the
procedures set forth in this Certificate of Designations and such Parity
Securities. To the extent that any Remaining Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Certificate of Designations. If
the aggregate Liquidation Preference of Senior Exchangeable Preferred Stock and
such Parity Securities tendered into such Asset Sale Offer surrendered by
Holders thereof exceeds the amount of Remaining Excess Proceeds, the Transfer
Agent shall select the Senior Exchangeable Preferred Stock and such Parity
Securities to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
The Asset Sale provisions described above shall be applicable whether or
not any other provisions of this Certificate of Designations are applicable.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
applicable to any Asset Sale Offer. To the extent that the provisions of any
such securities laws or securities regulations conflict with the provisions of
this Section 8.2, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 8.2 by virtue thereof.
Notwithstanding the foregoing, the Company may not repurchase any Senior
Exchangeable Preferred Stock pursuant to this provision unless such repurchase
complies with the restricted payments covenant contained in the Senior Discount
Notes Indenture; provided that if the Company does not make an Asset Sale Offer
or does not repurchase any Senior Exchangeable Preferred Stock pursuant to an
Asset Sale Offer, then such failure shall constitute a Voting Rights Triggering
Event.
SECTION 9 CERTAIN COVENANTS
Section 9.1 Restricted Payments
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's Junior Securities or any warrants,
options or other rights to acquire Junior Securities (other than any debt
security that is convertible into, or exchangeable for, Junior Securities)
or any of the Company's Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger
or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's Junior
Securities or any warrants, options or other rights to acquire Junior
Securities (other than any debt security that is convertible into, or
exchangeable for, Junior Securities) or any of the
28
<PAGE>
Company's Restricted Subsidiaries' Equity Interests in their capacity as
such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or to the Company or a
Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or
consolidation involving the Company) any Junior Securities of the Company
or any warrants, options or other rights to acquire Junior Securities
(other than any debt security that is convertible into, or exchangeable
for, Junior Securities) or any Equity Interests of any direct or indirect
parent of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company and other than the
Senior Exchangeable Preferred Stock); or
(3) make any Restricted Investment, (all such payments and other
actions set forth in clauses (1) through (3) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would have been permitted to incur at least $1.00 of
additional indebtedness pursuant to the Debt to Adjusted Consolidated Cash
Flow Ratio test set forth in the first paragraph of Section 9.2 hereof;
provided that the Company and its Restricted Subsidiaries shall not be
required to comply with this clause (2) in order to make any Restricted
Investment; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (2) and (3) of the next succeeding paragraph), is less than the
sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit); plus
(b) 100% of the aggregate net cash proceeds received by the
Company since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock and except to the extent such net cash
proceeds are used to incur new Indebtedness outstanding pursuant to
clause (10) of the second paragraph of Section 9.2 hereof) or from the
issue or sale of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock); plus
29
<PAGE>
(c) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment; plus
(d) to the extent that any Unrestricted Subsidiary of the Company
and all of its Subsidiaries are designated as Restricted Subsidiaries
after the Issue Date, the lesser of (A) the fair market value of the
Company's Investments in such Subsidiaries as of the date of such
designation, or (B) the sum of (x) the fair market value of the
Company's Investments in such Subsidiaries as of the date on which
such Subsidiaries were originally designated as Unrestricted
Subsidiaries and (y) the amount of any Investments made in such
Subsidiaries subsequent to such designation (and treated as Restricted
Payments) by the Company or any Restricted Subsidiary; provided that:
(i) in the event the Unrestricted Subsidiaries designated
as Restricted Subsidiaries are CTSH and its Subsidiaries, the
references in clauses (A) and (B) of this clause (d) to fair
market value of the Company's Investments in such Subsidiaries
shall mean the amount by which the fair market value of all such
Investments exceeds 34.3% of the fair market value of CTSH and
its Subsidiaries as a whole; and
(ii) in the event the Unrestricted Subsidiaries designated
as Restricted Subsidiaries are CCAIC and its Subsidiaries, the
references in clauses (A) and (B) of this clause (d) to fair
market value of the Company's Investments in such Subsidiaries
shall mean the amount by which the fair market value of all such
Investments exceeds $250.0 million; plus
(e) 50% of any dividends received by the Company or a Restricted
Subsidiary after the Issue Date from an Unrestricted Subsidiary of the
Company, to the extent that such dividends were not otherwise included
in Consolidated Net Income of the Company for such period.
The foregoing provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Certificate of Designations;
(2) the making of any Investment or the redemption, repurchase,
retirement, defeasance or other acquisition of any Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the sale after
the Issue Date (other than to a Subsidiary of the Company) of, any Equity
Interests of the Company (other than any Disqualified Stock), provided that
such net cash proceeds are not used to incur new Indebtedness pursuant to
clause (10) of the second paragraph of Section 9.2 hereof); and provided
further that, in each such case, the amount of any such net cash proceeds
that are so utilized shall be excluded from clause (3) (b) of the preceding
paragraph;
(3) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its Equity Interests on a pro rata basis; or
30
<PAGE>
(4) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the Issue
Date; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed (a)
$500,000 in any twelve-month period and (b) $5.0 million in the aggregate.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Voting Rights
Triggering Event; provided that in no event shall the businesses operated by the
Company's Restricted Subsidiaries as of November 20, 1997 be transferred to or
held by an Unrestricted Subsidiary. For purposes of making such determination,
all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid in cash) in the Subsidiary so designated shall be
deemed to be Restricted Payments at the time of such designation and shall
reduce the amount available for Restricted Payments under the first paragraph of
this Section 9.1. All such outstanding Investments shall be deemed to
constitute Investments in an amount equal to the fair market value of such
Investments at the time of such designation. Such designation shall only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary if such designation would not cause a Voting Rights
Triggering Event.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or the applicable Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any property, assets or Investments required by this Section 9.1
to be determined shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the Transfer Agent.
Section 9.2 Incurrence of Indebtedness and Issuance of Preferred Stock
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and the Company's Restricted
Subsidiaries may incur Indebtedness if, in each case, the Company's Debt to
Adjusted Consolidated Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock, after giving pro forma
effect to such incurrence or issuance as of such date and to the use of proceeds
therefrom as if the same had occurred at the beginning of the most recently
ended four full fiscal quarter period of the Company for which internal
financial statements are available, would have been no greater than 7.5 to 1.
The provisions of the first paragraph of this Section 9.2 shall not apply
to the incurrence of any of the following items of Indebtedness or to the
issuance of any of the following items of Disqualified Stock or preferred stock
(collectively, "Permitted Debt"):
31
<PAGE>
(1) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (including Indebtedness under Credit
Facilities) in an aggregate principal amount (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Restricted Subsidiaries thereunder) at any one time
outstanding not to exceed the greater of (x) $200.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied to repay
Indebtedness under a Credit Facility pursuant to Section 8.2 hereof, and
(y) 70% of the Eligible Receivables that are outstanding as of such date of
incurrence;
(2) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(3) the issuance by the Company of preferred stock represented by the
Senior Exchangeable Preferred Stock and the incurrence by the Company of
Indebtedness represented by the Senior Subordinated Exchange Debentures;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (4), not to exceed $10.0 million at any one time outstanding;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund Indebtedness of the Company or any of its Restricted
Subsidiaries or Disqualified Stock of the Company (other than intercompany
Indebtedness) that was permitted by this Certificate of Designations to be
incurred under the first paragraph hereof or clauses (2) or (3) or this
clause (5) of this paragraph;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, that (A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(7) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Certificate of
Designations to be outstanding or currency exchange risk;
(8) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this Certificate
of Designations;
32
<PAGE>
(9) the incurrence by the Company or any of its Restricted
Subsidiaries of Acquired Debt in connection with the acquisition of assets
or a new Subsidiary and the incurrence by the Company's Restricted
Subsidiaries of Indebtedness as a result of the designation of an
Unrestricted Subsidiary as a Restricted Subsidiary; provided that, in the
case of any such incurrence of Acquired Debt, such Acquired Debt was
incurred by the prior owner of such assets or such Restricted Subsidiary
prior to such acquisition by the Company or one of its Restricted
Subsidiaries and was not incurred in connection with, or in contemplation
of, such acquisition by the Company or one of its Restricted Subsidiaries;
and provided further that, in the case of any incurrence pursuant to this
clause (9), as a result of such acquisition by the Company or one of its
Restricted Subsidiaries, the Company's Debt to Adjusted Consolidated Cash
Flow Ratio at the time of incurrence of such Acquired Debt, after giving
pro forma effect to such incurrence as if the same had occurred at the
beginning of the most recently ended four full fiscal quarter period of the
Company for which internal financial statements are available, would have
been less than the Company's Debt to Adjusted Consolidated Cash Flow Ratio
for the same period without giving pro forma effect to such incurrence;
(10) the incurrence by the Company of Indebtedness not to exceed, at
any one time outstanding, the sum of (i) 2.0 times the aggregate net cash
proceeds plus (ii) 1.0 times the fair market value of non-cash proceeds
(evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Transfer Agent), in each case, from
the issuance and sale, other than to a Subsidiary, of Equity Interests
(other than Disqualified Stock) of the Company since the Issue Date (less
the amount of such proceeds used to make Restricted Payments as provided in
clause (3)(b) of the first paragraph or clause (2) of the second paragraph
of Section 9.1 hereof); provided that such Indebtedness does not mature
prior to the Stated Maturity of the Senior Exchangeable Preferred Stock and
the Weighted Average Life to Maturity of such Indebtedness is longer than
that of the Senior Exchangeable Preferred Stock; and
(11) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness and/or the issuance by the Company
of Disqualified Stock in an aggregate principal amount, accreted value or
liquidation preference, as applicable, at any time outstanding, not to
exceed an amount equal to $100.0 million less the aggregate amount of all
Investments made pursuant to clause (12) of the definition of Permitted
Investments; provided that, notwithstanding the foregoing, the aggregate
principal amount, accreted value or liquidation preference, as applicable,
permitted to be incurred or issued pursuant to this clause (11) shall not
be reduced to less than $25.0 million.
For purposes of determining compliance with this Section 9.2, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (11) above or is
entitled to be incurred pursuant to the first paragraph of this Section 9.2, the
Company shall, in its sole discretion, classify (or later reclassify in whole or
in part) such item of Indebtedness in any manner that complies with this Section
9.2. Accrual of interest, accretion or amortization of original issue discount
and the payment of interest in the form of additional Indebtedness shall not be
deemed to be an incurrence of Indebtedness for purposes of this Section 9.2.
Section 9.3 Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to
33
<PAGE>
(1) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries on its Capital Stock or with respect to
any other interest or participation in, or measured by, its profits;
(2) pay any indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(3) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(4) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the foregoing restrictions shall not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness or Indebtedness under the Senior Credit
Facility, in each case as in effect on the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those
contained in the applicable series of Existing Indebtedness or in the
Senior Credit Facility, in each case as in effect on the Issue Date;
(2) encumbrances and restrictions applicable to any Unrestricted
Subsidiary, as the same are in effect as of the date on which such
Subsidiary becomes a Restricted Subsidiary, and as the same may be amended,
modified, restated, renewed, increased, supplemented, refunded, replaced or
refinanced; provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in the applicable
series of Indebtedness of such Subsidiary as in effect on the date on which
such Subsidiary becomes a Restricted Subsidiary;
(3) any Indebtedness (incurred in compliance with Section 9.2 hereof)
or any agreement pursuant to which such Indebtedness is issued if the
encumbrance or restriction applies only in the event of a payment default
or default with respect to a financial covenant contained in such
Indebtedness or agreement and such encumbrance or restriction is not
materially more disadvantageous to the holders of the Senior Exchangeable
Preferred Stock than is customary in comparable financings (as determined
by the Company) and the Company determines that any such encumbrance or
restriction will not materially affect the Company's ability to pay
dividends or the Liquidation Preference on the Senior Exchangeable
Preferred Stock;
(4) this Certificate of Designations;
(5) applicable law;
(6) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so
34
<PAGE>
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Certificate of Designations to be incurred;
(7) by reason of customary non-assignment provisions in leases or
licenses entered into in the ordinary course of business;
(8) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (4) in the prior paragraph on the property so acquired;
(9) the provisions of agreements governing Indebtedness incurred
pursuant to clause (4) of the second paragraph of Section 9.2 hereof;
(10) any agreement for the sale of a Restricted Subsidiary that
restricts that Restricted Subsidiary pending its sale;
(11) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(12) Liens that limit the right of the debtor to transfer the assets
subject to such Liens;
(13) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
and
(14) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Section 9.4 Merger, Consolidation or Sale of Assets
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless:
(1) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
(2) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Senior Exchangeable Preferred Stock and this Certificate of
Designations;
(3) immediately after such transaction no Voting Rights Triggering
Event exists; and
35
<PAGE>
(4) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company and except in the case of
a merger entered into solely for the purpose of reincorporating the Company
in another jurisdiction,
(a) in the case of a merger or consolidation in which the Company
is the surviving corporation, the Company's Debt to Adjusted
Consolidated Cash Flow Ratio, at the time of such transaction after
giving pro forma effect thereto as if such transaction had occurred at
the beginning of the most recently ended four full fiscal quarter
period of the Company for which internal financial statements are
available, would have been less than the Company's Debt to Adjusted
Consolidated Cash Flow Ratio for the same period without giving pro
forma effect to such transaction, or
(b) in the case of any other such transaction the Debt to
Adjusted Consolidated Cash Flow of the entity or Person formed by or
surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made, at the time of
such transaction after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the most recently ended
four full fiscal quarter period of such entity or Person for which
internal financial statements are available, would have been less than
the Company's Debt to Adjusted Consolidated Cash Flow Ratio for the
same period without giving pro forma effect to such transaction;
provided that for purposes of determining the Debt to Adjusted
Consolidated Cash Flow Ratio of any such entity or Person for purposes
of this clause (b) such entity or Person shall be substituted for the
Company in the definition of Debt to Adjusted Consolidated Cash Flow
Ratio and the defined terms included therein in Section 1 hereof.
Section 9.5 Transactions with Affiliates
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Transfer Agent:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as
36
<PAGE>
to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and
therefore shall not be subject to the provisions of the prior paragraph:
(1) any employment arrangements with any executive officer of the
Company or a Restricted Subsidiary that is entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business and
consistent with compensation arrangements of similarly situated executive
officers at comparable companies engaged in Permitted Businesses;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of directors fees in an aggregate annual amount not to
exceed $25,000 per Person;
(4) Restricted Payments that are permitted by the provisions of
this Certificate of Designations under Section 9.1 hereof;
(5) the issuance or sale of Equity Interests (other than
Disqualified Stock) of the Company; and
(6) transactions pursuant to the provisions of the Governance
Agreement, the Rights Agreement, the Stockholders' Agreement, the CTSH
Shareholders' Agreement, the CTI Services Agreement, the CTI Operating
Agreement and the Crown Transition Agreements, as the same are in effect on
the Issue Date.
Section 9.6 Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Restricted Subsidiaries
The Company:
(1) shall not, and shall not permit any Restricted Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company); and
(2) shall not permit any Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company,
unless, in each such case: (a) as a result of such transfer, conveyance, sale,
lease or other disposition or issuance such Restricted Subsidiary no longer
constitutes a Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition or issuance are applied in
accordance with Section 8.2 hereof.
37
<PAGE>
Section 9.7 Senior Subordinated Debt
So long as any Senior Exchangeable Preferred Stock is outstanding, the
Company shall not incur any Indebtedness, other than the Senior Subordinated
Exchange Debentures and New Exchange Debentures, that is expressly made
subordinated in right of payment to any Senior Debt unless such Indebtedness, by
its terms and by the terms of any agreement or instrument pursuant to which such
Indebtedness is outstanding, is expressly made pari passu with, or subordinate
in right of payment to, the Senior Subordinated Exchange Debentures pursuant to
provisions substantially similar to those contained in the Exchange Indenture;
provided that the foregoing limitations shall not apply to distinctions between
categories of Senior Debt that exist by reason of any Liens or Guarantees
arising or created in respect of some but not all Senior Debt.
Section 9.8 Business Activities
The Company shall not, and shall not permit any Subsidiary to, engage in
any business other than Permitted Businesses, except to such extent as would not
be material to the Company and its Subsidiaries taken as a whole.
Section 9.9 Reports
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Senior Exchangeable
Preferred Stock is outstanding, the Company shall furnish to the Holders of
Senior Exchangeable Preferred Stock:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, in the footnotes to the financial statements and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" (in each case to the extent not prohibited by the Commission's
rules and regulations), (a) the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted
Subsidiaries of the Company and (b) the Tower Cash Flow for the most
recently completed fiscal quarter and the Adjusted Consolidated Cash Flow
for the most recently completed four-quarter period) and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports,
in each case within the time periods specified in the Commission's rules
and regulations.
In addition, following the consummation of the exchange offer contemplated
by the Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company shall file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
38
<PAGE>
SECTION 10 AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, this Certificate
of Designations or the Senior Exchangeable Preferred Stock may be amended or
supplemented with the consent of the Holders of at least a majority in aggregate
Liquidation Preference of the Senior Exchangeable Preferred Stock then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Senior Exchangeable
Preferred Stock), and any existing default or compliance with any provision of
this Certificate of Designations or the Senior Exchangeable Preferred Stock may
be waived with the consent of the Holders of a majority in aggregate Liquidation
Preference of the then outstanding Senior Exchangeable Preferred Stock
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Senior Exchangeable Preferred Stock).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any shares of Senior Exchangeable Preferred Stock held by a
non-consenting Holder):
(1) alter the voting rights with respect to the Senior Exchangeable
Preferred Stock or reduce the number of shares of Senior Exchangeable
Preferred Stock whose Holders must consent to an amendment, supplement or
waiver;
(2) reduce the Liquidation Preference of or change the Mandatory
Redemption Date of any Senior Exchangeable Preferred Stock or alter the
provisions with respect to the redemption (but not any required repurchase
in connection with an Asset Sale Offer or Change of Control Offer) of the
Senior Exchangeable Preferred Stock;
(3) reduce the rate of or change the time for payment of dividends on
any Senior Exchangeable Preferred Stock;
(4) waive a default in the payment of dividends on the Senior
Exchangeable Preferred Stock;
(5) make any Senior Exchangeable Preferred Stock payable in any form
or money other than that stated in this Certificate of Designations;
(6) waive a redemption payment (but not any payment upon a required
repurchase in connection with an Asset Sale Offer or Change of Control
Offer) with respect to any Senior Exchangeable Preferred Stock, or
(7) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Exchangeable Preferred Stock, the Company may (to the extent permitted by
Delaware law) amend or supplement this Certificate of Designations:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Senior Exchangeable Preferred Stock
in addition to or in place of certificated Senior Exchangeable Preferred
Stock;
39
<PAGE>
(3) to provide for the assumption of the Company's obligations to
Holders of Senior Exchangeable Preferred Stock in the case of a merger or
consolidation or
(4) to make any change that would provide any additional rights or
benefits to the Holders of Senior Exchangeable Preferred Stock or that does
not adversely affect the legal rights under this Certificate of
Designations of any such Holder.
SECTION 11 REISSUANCE
Senior Exchangeable Preferred Stock redeemed or otherwise acquired by the
Company shall assume the status of authorized but unissued preferred stock and
may thereafter be reissued in the same manner as the other authorized but
unissued preferred stock, including as Parity Securities, but not as the same
class as the Senior Exchangeable Preferred Stock.
SECTION 12 OFFICERS' CERTIFICATE
Each Officers' Certificate provided for in this Certificate of Designations
shall include:
(1) a statement that the Officers making such certificate or opinion
have read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such Officer, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(4) a statement as to whether or not, in the opinion of each such
Officer, such condition or covenant has been satisfied.
SECTION 13 PAYMENT
All amounts payable in cash with respect to the Senior Exchangeable
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of dividends (if any) may be
made by check mailed to the Holders of the Senior Exchangeable Preferred Stock
at their respective addresses set forth in the register of Holders of Senior
Exchangeable Preferred Stock maintained by the Transfer Agent; provided that
all cash payments with respect to the Global Certificates (as defined below) and
shares of Senior Exchangeable Preferred Stock the Holders of which have given
wire transfer instructions to the Company shall be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
Any payment, redemption or exchange with respect to the Senior Exchangeable
Preferred Stock due on any day that is not a Business Day need not be made on
such day, but may be made on the next succeeding Business Day with the same
force and effect as if made on such due date.
The Company has initially appointed the Transfer Agent to act as the
"Paying Agent." The Company may at any time terminate the appointment of any
Paying Agent and appoint additional or other Paying Agents; provided that until
the Exchangeable Preferred Stock has been delivered to the
40
<PAGE>
Company for cancellation, or moneys sufficient to pay the Liquidation Preference
of the Exchangeable Preferred Stock plus, without duplication, accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend for
any partial Dividend Period) and Liquidated Damages, if any, on the Exchangeable
Preferred Stock shall have been made available for payment and either paid or
returned to the Company as provided in this Certificate of Designations, the
Company shall maintain an office or agency in the Borough of Manhattan, The City
of New York for surrender of Exchangeable Preferred Stock for payment and
exchange.
Dividends payable on the Exchangeable Preferred Stock on any redemption
date or repurchase date that is a Dividend Payment Date shall be paid to the
Holders of record as of the immediately preceding Record Date.
All moneys and shares of Exchangeable Preferred Stock deposited with any
Paying Agent or then held by the Company in trust for the payment of the
Liquidation Preference and accumulated and unpaid dividends and Liquidation
Damages, if any, on any shares of Exchangeable Preferred Stock which remain
unclaimed at the end of two years after such payment has become due and payable
shall be repaid to the Company, and the Holder of such shares of Exchangeable
Preferred Stock shall thereafter look only to Company for payment thereof.
SECTION 14 EXCLUSION OF OTHER RIGHTS
Except as may otherwise be required by law, the shares of Exchangeable
Preferred Stock shall not have any powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designations (as this Certificate of
Designations may be amended from time to time) and in the Certificate of
Incorporation. The shares of Exchangeable Preferred Stock shall have no
preemptive or subscription rights.
SECTION 15 SENIOR EXCHANGEABLE PREFERRED STOCK CERTIFICATES
Section 15.1 Form and Dating.
The Senior Exchangeable Preferred Stock and the Transfer Agent's
certificate of authentication shall be substantially in the form of Exhibit A
hereto. The Senior Exchangeable Preferred Stock may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Senior
Exchangeable Preferred Stock certificate shall be dated the date of its
authentication. The terms and provisions contained in the Senior Exchangeable
Preferred Stock shall constitute, and are hereby expressly made, a part of this
Certificate of Designations.
The Senior Exchangeable Preferred Stock sold in reliance on Rule 144A shall
be issued initially in the form of one or more fully registered global
certificates with the private placement legend in Section 15.3(g)(i) and the
global securities legend in Section 15.3(g)(ii) and set forth in Exhibit A
hereto (the "Global Certificates"), which shall be deposited on behalf of the
-------------------
purchasers represented thereby with the Transfer Agent, at its New York office,
as custodian for the Depository Trust Company ("DTC," and together with any and
----
all successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Certificate of Designations, the
"Depositary") or with such other custodian as DTC may direct, and registered in
----------
the name of DTC or a nominee of DTC, duly executed by the Company and
authenticated by the Transfer Agent as hereinafter provided. Subject to the
terms hereof and to the requirements of applicable law, the number of shares of
Senior Exchangeable Preferred Stock represented by Global Certificates may from
time to time be reduced or increased, as
41
<PAGE>
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Certificate to reflect the amount of any increase or decrease in the number of
shares of Senior Exchangeable Preferred Stock outstanding represented thereby
shall be made by the Transfer Agent as hereinafter provided. Members of, or
participants in, DTC ("Participants") shall have no rights under this
------------
Certificate of Designations with respect to any Global Certificates held on
their behalf by DTC or by the Transfer Agent as the custodian of DTC or under
such Global Certificate, and DTC may be treated by the Company, the Transfer
Agent and any agent of the Company or the Transfer Agent as the absolute owner
of such Global Certificate for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Transfer Agent or any
agent of the Company or the Transfer Agent from giving effect to any written
certification, proxy or other authorization furnished by DTC or impair, as
between DTC and its Participants, the operation of customary practices of DTC
governing the exercise of the rights of a holder of a beneficial interest in any
Global Certificate. Except as otherwise provided by applicable law or as
provided in Section 15.3 of this Certificate of Designations, owners of
beneficial interests in Global Certificates will not be entitled to receive
physical delivery of Senior Exchangeable Preferred Stock in definitive form
registered in the name of such owner ("Definitive Certificates").
-----------------------
Senior Exchangeable Preferred Stock initially sold in offshore transactions
pursuant to Regulation S under the Securities Act will be issued in the form of
one or more fully registered certificates with the restricted securities legend
and the hedging legend set forth in Exhibit A hereto (the "Regulation S
------------
Definitive Certificates").
- -----------------------
Section 15.2 Execution and Authentication.
Two Officers shall sign the certificates representing the Senior
Exchangeable Preferred Stock for the Company by manual or facsimile signature.
The Company's seal shall be reproduced on the Senior Exchangeable Preferred
Stock and may be in facsimile form.
If an Officer whose signature is on a certificate representing Senior
Exchangeable Preferred Stock no longer holds that office at the time the
Transfer Agent authenticates such certificate, the shares of Senior Exchangeable
Preferred Stock evidenced thereby shall nevertheless be valid.
A certificate representing Senior Exchangeable Preferred Stock shall not be
valid until authenticated by the manual signature of the Transfer Agent. The
signature shall be conclusive evidence that the certificate representing Senior
Exchangeable Preferred Stock has been authenticated under this Certificate of
Designations.
The Transfer Agent shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate certificates representing
--------------------
Senior Exchangeable Preferred Stock for original issue up to 200,000 shares of
Preferred Stock and up to 200,000 shares of New Preferred Stock for issue only
in a Registered Exchange Offer pursuant to the Registration Rights Agreement.
The Transfer Agent also shall, upon receipt of an Authentication Order,
authenticate certificates representing Senior Exchangeable Preferred Stock for
issue in payment of dividends in accordance with Section 3 hereof for such
number of shares as shall be set forth in such Authentication Order, but in no
event shall the number of such additional shares, plus the total number of
shares of Senior Exchangeable Preferred Stock then outstanding, exceed the total
number of shares of Senior Exchangeable Preferred Stock then authorized by the
Certificate of Incorporation.
The Transfer Agent may appoint an authenticating agent acceptable to the
Company to authenticate Senior
42
<PAGE>
Exchangeable Preferred Stock whenever the Transfer Agent may do so. Each
reference in this Certificate of Designations to authentication by the Transfer
Agent includes authentication by such agent. An authenticating agent has the
same rights as the Transfer Agent or agent for service of notices and demands.
Section 15.3 Transfer and Exchange
(a) Transfer and Exchange of Global Certificates. A Global Certificate may
--------------------------------------------
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Certificates
will be exchanged by the Company for Definitive Certificates if (i) the Company
delivers to the Transfer Agent notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Certificates (in whole but not in part) should be
exchanged for Definitive Certificates and delivers a written notice to such
effect to the Transfer Agent. Upon the occurrence of either of the preceding
events in (i) or (ii) above, Definitive Certificates shall be issued in such
names as the Depositary shall instruct the Transfer Agent. Global Certificates
also may be exchanged or replaced, in whole or in part, as provided in Sections
15.4 and 15.7 hereof. Every certificate evidencing Senior Exchangeable
Preferred Stock authenticated and delivered in exchange for, or in lieu of, a
Global Certificate or any portion thereof, pursuant to this Section 15.3 or
Section 15.4 or 15.7 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Certificate. A Global Certificate may not be
exchanged for another Global Certificate other than as provided in this Section
15.3(a), however, beneficial interests in a Global Certificate may be
transferred and exchanged as provided in Section 15.3(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
-----------------------------------------------------------
Certificates. (i) The transfer and exchange of beneficial interests in the
- ------------
Global Certificates shall be effected through the Depositary, in accordance with
the provisions of this Certificate of Designations and the Applicable
Procedures. Beneficial interests in the Restricted Global Certificates shall be
subject to restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Beneficial interests in any Restricted
Global Certificate may be transferred to Persons who take delivery thereof in
the form of a beneficial interest in the same Restricted Global Certificate in
accordance with the transfer restrictions set forth in the Private Placement
Legend. Beneficial interests in any Unrestricted Global Certificate may be
transferred to Persons who take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Certificate. No written orders or
instructions shall be required to be delivered to the Transfer Agent to effect
the transfers described in this Section 15.3(b).
(ii) A beneficial interest in any Restricted Global Certificate may be
exchanged by any holder thereof for a beneficial interest in an Unrestricted
Global Certificate representing the same number of shares of Senior Exchangeable
Preferred Stock or transferred to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Certificate representing
the same number of shares of Senior Exchangeable Preferred Stock only if the
transferor of such beneficial interest delivers to the Transfer Agent either (1)
a written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the Depositary
to credit or cause to be credited a beneficial interest in the other Global
Certificate in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase, and:
43
<PAGE>
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the New Preferred Stock or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Transfer Agent receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Certificate proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Certificate, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Certificate proposes to transfer such beneficial interest to a
Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Certificate, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Transfer Agent so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Transfer Agent to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Certificate has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order, the Transfer
Agent shall authenticate one or more Unrestricted Global Certificates
Certificate representing the number of shares of Senior Exchangeable Preferred
Stock equal to the number of shares of Senior Exchangeable Preferred Stock
represented by the beneficial interests transferred pursuant to subparagraph (B)
or (D) above.
Beneficial interests in an Unrestricted Global Certificate cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Certificate.
(c) Transfer and Exchange of Beneficial Interests in Global Certificates
--------------------------------------------------------------------
for Definitive Certificates.
- ---------------------------
(i) Beneficial Interests in Restricted Global Certificates to
Restricted Definitive Certificates. If any holder of a beneficial interest
in a Restricted Global Certificate proposes to exchange such beneficial
interest for a Restricted Definitive Certificate representing the same
44
<PAGE>
number of shares of Senior Exchangeable Preferred Stock or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Certificate representing the same number of shares of
Senior Exchangeable Preferred Stock, then, upon receipt by the Transfer
Agent of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Certificate proposes to exchange such beneficial interest for a
Restricted Definitive Certificate, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Transfer Agent shall cause the number of shares of Senior Exchangeable
Preferred Stock represented by the applicable Global Certificate to be
reduced accordingly, and the Company shall execute and the Transfer Agent
shall authenticate and deliver to the Person designated in the instructions
a Definitive Certificate representing such number of shares. Any
Definitive Certificate issued in exchange for a beneficial interest in a
Restricted Global Certificate shall be registered in such name or names and
in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Transfer Agent through instructions
from the Depositary and the Participant or Indirect Participant. The
Transfer Agent shall deliver such Definitive Certificates to the Persons in
whose names such Senior Exchangeable Preferred Stock are so registered.
Any Definitive Certificate issued in exchange for a beneficial interest in
a Restricted Global Certificate pursuant to this Section 15(c)(i) shall
bear the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Certificates to
Unrestricted Definitive Certificates. A holder of a beneficial interest in
a Restricted Global Certificate may exchange such beneficial interest for
an Unrestricted Definitive Certificate representing the same number of
shares of Senior Exchangeable Preferred Stock or may transfer such
beneficial interest to a
45
<PAGE>
Person who takes delivery thereof in the form of an Unrestricted Definitive
Certificate representing the same number of shares of Senior Exchangeable
Preferred Stock only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a broker-
dealer, (2) a Person participating in the distribution of the New
Preferred Stock or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Transfer Agent receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Certificate proposes to exchange such
beneficial interest for a Definitive Certificate that does not
bear the Private Placement Legend, a certificate from such holder
in the form of Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Certificate proposes to transfer such
beneficial interest to a Person who shall take delivery thereof
in the form of a Definitive Certificate that does not bear the
Private Placement Legend, a certificate from such holder in the
form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the Transfer
Agent so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Transfer Agent to the effect
that such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Certificates to
Unrestricted Definitive Certificates. If any holder of a beneficial
interest in an Unrestricted Global Certificate proposes to exchange such
beneficial interest for a Definitive Certificate representing the same
number of shares of Senior Exchangeable Preferred Stock or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of a
Definitive Certificate representing the same number of shares of Senior
Exchangeable Preferred Stock, then, upon the delivery by the transferor of
such beneficial interest to the Transfer Agent of either (1) a written
order from a Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the Depositary to
debit or cause to be debited a beneficial interest in the Global
Certificate in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
debited, the Transfer Agent shall cause the number of
46
<PAGE>
shares of Senior Exchangeable Preferred Stock represented by the applicable
Global Certificate to be reduced accordingly pursuant to Section 15.3(h)
hereof, and the Company shall execute and the Transfer Agent shall
authenticate and deliver to the Person designated in the instructions a
Definitive Certificate representing such number of shares. Any Definitive
Certificate issued in exchange for a beneficial interest pursuant to this
Section 15.3(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Transfer Agent through instructions from the
Depositary and the Participant or Indirect Participant. The Transfer Agent
shall deliver such Definitive Certificates to the Persons in whose names
such Senior Exchangeable Preferred Stock are so registered. Any Definitive
Certificate issued in exchange for a beneficial interest pursuant to this
Section 15.3(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Certificates for Beneficial
---------------------------------------------------------------
Interests.
- ---------
(i) Restricted Definitive Certificates to Beneficial Interests in
Restricted Global Certificates. If any Holder of a Restricted Definitive
Certificate proposes to exchange such Senior Exchangeable Preferred Stock
for a beneficial interest in a Restricted Global Certificate representing
the same number of shares of Senior Exchangeable Preferred Stock or to
transfer such Restricted Definitive Certificates to a Person who takes
delivery thereof in the form of a beneficial interest in a Restricted
Global Certificate representing the same number of shares of Senior
Exchangeable Preferred Stock, then, upon receipt by the Transfer Agent of
the following documentation:
(A) if the Holder of such Restricted Definitive Certificate
proposes to exchange such Senior Exchangeable Preferred Stock for a
beneficial interest in a Restricted Global Certificate, a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Certificate is being
transferred to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (1) thereof;
(C) if such Restricted Definitive Certificate is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144 under
the Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(a) thereof;
(D) if such Restricted Definitive Certificate is being
transferred to the Company or any of its Subsidiaries, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(E) if such Restricted Definitive Certificate is being
transferred pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
the Transfer Agent shall cancel the Restricted Definitive Certificate,
increase or cause to be increased number of shares of Senior Exchangeable
Preferred Stock represented by the Global Certificate. At no time shall
holders of Definitive Certificates be able to transfer or exchange
47
<PAGE>
their Senior Exchangeable Preferred Stock for a beneficial interest in a
Global Certificate in reliance on Regulation S under the Securities Act.
(ii) Restricted Definitive Certificates to Beneficial Interests in
Unrestricted Global Certificates. A Holder of a Restricted Definitive
Certificate may exchange such Senior Exchangeable Preferred Stock for a
beneficial interest in an Unrestricted Global Certificate representing the
same number of shares of Senior Exchangeable Preferred Stock or transfer
such Restricted Definitive Certificate to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Certificate representing the same number of shares of Senior Exchangeable
Preferred Stock only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the New Preferred Stock or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Transfer Agent receives the following:
(1) if the Holder of such Definitive Certificates proposes
to exchange such Senior Exchangeable Preferred Stock for a
beneficial interest in the Unrestricted Global Certificate, a
certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Certificates proposes
to transfer such Senior Exchangeable Preferred Stock to a Person
who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Certificate, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Transfer
Agent so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Transfer Agent to the effect
that such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 15.3(d)(ii), the Transfer Agent shall cancel the Definitive
Certificates and increase or cause to be increased the number of shares of
Senior Exchangeable Preferred Stock represented by the Unrestricted Global
Certificate.
48
<PAGE>
(iii) Unrestricted Definitive Certificates to Beneficial Interests in
Unrestricted Global Certificates. A Holder of an Unrestricted Definitive
Certificate may exchange such Senior Exchangeable Preferred Stock for a
beneficial interest in an Unrestricted Global Certificate representing the
same number of shares of Senior Exchangeable Preferred Stock or transfer
such Definitive Certificates to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Certificate
representing the same number of shares of Senior Exchangeable Preferred
Stock at any time. Upon receipt of a request for such an exchange or
transfer, the Transfer Agent shall cancel the applicable Unrestricted
Definitive Certificate and increase or cause to be increased the number of
shares of Senior Exchangeable Preferred Stock represented by one of the
Unrestricted Global Certificates.
If any such exchange or transfer from a Definitive Certificate to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Certificate has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 15.2 hereof, the Transfer Agent shall authenticate one
or more Unrestricted Global Certificate representing the number of shares of
Senior Exchangeable Preferred Stock equal to the number of shares of Senior
Exchangeable Preferred Stock represented by the Definitive Certificates so
transferred.
(e) Transfer and Exchange of Definitive Certificates for Definitive
---------------------------------------------------------------
Certificates. Upon request by a Holder of Definitive Certificates and such
- ------------
Holder's compliance with the provisions of this Section 15.3(e), the Transfer
Agent shall register the transfer or exchange of Definitive Certificates. Prior
to such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Transfer Agent the Definitive Certificates duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Transfer Agent duly executed by such Holder or by his
attorney, duly authorized in writing. In addition, the requesting Holder shall
provide any additional certifications, documents and information, as applicable,
required pursuant to the following provisions of this Section 15.3(e).
(i) Restricted Definitive Certificates to Restricted Definitive
Certificates. Any Restricted Definitive Certificate may be transferred to
and registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Certificate if the Transfer Agent receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Certificates to Unrestricted Definitive
Certificates. Any Restricted Definitive Certificate may be exchanged by
the Holder thereof for an Unrestricted
49
<PAGE>
Definitive Certificate or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Certificate if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the New Preferred Stock or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Transfer Agent receives the following:
(1) if the Holder of such Restricted Definitive Certificates
proposes to exchange such Senior Exchangeable Preferred Stock for
an Unrestricted Definitive Certificate, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Certificates
proposes to transfer such Senior Exchangeable Preferred Stock to
a Person who shall take delivery thereof in the form of an
Unrestricted Definitive Certificate, a certificate from such
Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Transfer
Agent so requests, an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Certificates to Unrestricted Definitive
Certificates. A Holder of Unrestricted Definitive Certificates may
transfer such Senior Exchangeable Preferred Stock to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Certificate.
Upon receipt of a request to register such a transfer, the Transfer Agent
shall register the Unrestricted Definitive Certificates pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
--------------
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 15.1, the
Transfer Agent shall authenticate (i) one or more Unrestricted Global
Certificates representing the number of shares of Senior Exchangeable Preferred
Stock equal to the number of shares of Senior Exchangeable Preferred Stock
represented by the beneficial interests in the Restricted Global Certificates
tendered for acceptance by Persons that certify in the applicable Letters of
Transmittal that (x) they are not broker-dealers, (y) they are not participating
in a distribution of the New
50
<PAGE>
Preferred Stock and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Certificates representing the number of shares of Senior Exchangeable Preferred
Stock equal to the number of shares of Senior Exchangeable Preferred Stock
represented by the Restricted Definitive Certificates accepted for exchange in
the Exchange Offer. Concurrently with the issuance of such Senior Exchangeable
Preferred Stock, the Transfer Agent shall cause the number of shares of Senior
Exchangeable Preferred Stock represented by the applicable Restricted Global
Certificates to be reduced accordingly, and the Company shall execute and the
Transfer Agent shall authenticate and deliver to the Persons designated by the
Holders of Definitive Certificates so accepted Definitive Certificates
representing the appropriate number of shares.
(g) Legends. The following legends shall appear on the face of all Global
-------
Certificates and Definitive Certificates issued under this Certificate of
Designations unless specifically stated otherwise in the applicable provisions
of this Certificate of Designations.
(i) Private Placement Legend
(A) Except as permitted by subparagraph (B) below, each Global
Certificate and each Definitive Certificate (and all Senior
Exchangeable Preferred Stock issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form.
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE
DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE CERTIFICATE OF
DESIGNATIONS PURSUANT TO WHICH THIS SECURITY IS ISSUED) AND IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR
REGULATION S THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF CROWN
CASTLE INTERNATIONAL CORP. THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), (2) TO CROWN CASTLE INTERNATIONAL CORP. OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER
51
<PAGE>
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Certificate or
Definitive Certificate issued pursuant to subparagraphs (b)(ii),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 15.3 (and all Senior Exchangeable Preferred Stock issued in
exchange therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Certificate Legend. Each Global Certificate shall bear a
legend in substantially the following form:
"THIS GLOBAL CERTIFICATE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS
CERTIFICATE OF DESIGNATIONS GOVERNING THIS SECURITY) OR ITS NOMINEE IN
CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
TRANSFER AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT
TO SECTION 15.3 OF THE CERTIFICATE OF DESIGNATIONS, (II) THIS GLOBAL
CERTIFICATE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
15.3(a) OF THE CERTIFICATE OF DESIGNATIONS, (III) THIS GLOBAL CERTIFICATE
MAY BE DELIVERED TO THE TRANSFER AGENT FOR CANCELLATION PURSUANT TO SECTION
15.8 OF THE CERTIFICATE OF DESIGNATIONS AND (IV) THIS GLOBAL CERTIFICATE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY."
(iii) Regulation S Hedging Legend. Each Regulation S Definitive
Certificate shall bear a legend in substantially the following form:
"HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT."
(h) Cancellation and/or Adjustment of Global Certificates. At such time as
-----------------------------------------------------
all beneficial interests in a particular Global Certificate have been exchanged
for Definitive Certificates or a particular Global Certificate has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Certificate shall be returned to or retained and canceled by the Transfer Agent
in accordance with Section 15.8 hereof. At any time prior to such cancellation,
if any beneficial interest in a Global Certificate is exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Certificate or for Definitive
Certificates, the number of shares of Senior Exchangeable Preferred Stock
represented by such Global Certificate shall be reduced accordingly and an
endorsement shall be made on such Global Certificate by the Transfer Agent or by
the Depositary at the direction of the Transfer Agent to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Certificate, such other Global Certificate shall be increased accordingly
and an endorsement shall be made on such Global Certificate by the Transfer
Agent or by the Depositary at the direction of the Transfer Agent to reflect
such increase.
52
<PAGE>
(i) General Provisions Relating to Transfers and Exchanges.
------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Transfer Agent shall authenticate Global Certificates
and Definitive Certificates upon the Company's order or at the Transfer
Agent's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Certificate or to a Holder of a Definitive Certificate
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 6.2, 6.3, 8.1, 8.2 and 15.7 hereof).
(iii) The Transfer Agent shall not be required to register the
transfer of or exchange any Senior Exchangeable Preferred Stock selected
for redemption in whole or in part, except the unredeemed portion of any
certificate evidencing Senior Exchangeable Preferred Stock being redeemed
in part.
(iv) All Global Certificates and Definitive Certificates issued upon
any registration of transfer or exchange of Global Certificates or
Definitive Certificates shall be the valid obligations of the Company,
entitled to the same benefits under this Certificate of Designations, as
the Global Certificates or Definitive Certificates surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Senior Exchangeable Preferred Stock during a
period beginning at the opening of business 15 days before the day of any
selection of Senior Exchangeable Preferred Stock for redemption under
Section 6.3 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Senior
Exchangeable Preferred Stock so selected for redemption in whole or in
part, except the unredeemed portion of any certificate evidencing Senior
Exchangeable Preferred Stock being redeemed in part or (c) to register the
transfer of or to exchange Senior Exchangeable Preferred Stock between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Senior Exchangeable Preferred Stock, the Transfer Agent, any Agent and
the Company may deem and treat the Person in whose name any Senior
Exchangeable Preferred Stock is registered as the absolute owner of such
Senior Exchangeable Preferred Stock, and none of the Transfer Agent, any
Agent or the Company shall be affected by notice to the contrary.
(vii) The Transfer Agent shall authenticate Global Certificates and
Definitive Certificates in accordance with the provisions of Section 15.2
hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Transfer Agent pursuant to this Section
15.3 to effect a registration of transfer or exchange may be submitted by
facsimile.
53
<PAGE>
Section 15.4 Replacement Senior Exchangeable Preferred Stock
If any mutilated Senior Exchangeable Preferred Stock certificate is
surrendered to the Transfer Agent or the Company and the Transfer Agent receives
evidence to its satisfaction of the destruction, loss or theft of any Senior
Exchangeable Preferred Stock certificate, the Company shall issue and the
Transfer Agent, upon receipt of an Authentication Order, shall authenticate a
replacement certificate evidencing Senior Exchangeable Preferred Stock if the
Transfer Agent's requirements are met. If required by the Transfer Agent or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Transfer Agent and the Company to protect the Company, the
Transfer Agent, any Agent and any authenticating agent from any loss that any of
them may suffer if a Senior Exchangeable Preferred Stock certificate is
replaced. The Company may charge for its expenses in replacing a Senior
Exchangeable Preferred Stock certificate.
Every replacement certificate evidencing Senior Exchangeable Preferred
Stock is an additional obligation of the Company and shall be entitled to all of
the benefits of this Certificate of Designations equally and proportionately
with all other Senior Exchangeable Preferred Stock duly issued hereunder.
Section 15.5 Outstanding Senior Exchangeable Preferred Stock
The Senior Exchangeable Preferred Stock outstanding at any time is all the
Senior Exchangeable Preferred Stock authenticated by the Transfer Agent except
for those canceled by it, those delivered to it for cancellation, those
reductions in the interest in a Global Certificate effected by the Transfer
Agent in accordance with the provisions hereof, and those described in this
Section as not outstanding.
If a certificate evidencing Senior Exchangeable Preferred Stock is replaced
pursuant to Section 15.4 hereof, it ceases to be outstanding unless the Transfer
Agent receives proof satisfactory to it that the replaced Senior Exchangeable
Preferred Stock is held by a bona fide purchaser.
If the liquidation preference of any Senior Exchangeable Preferred Stock is
considered paid under Section 13 hereof, it ceases to be outstanding and
interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Senior Exchangeable Preferred Stock payable on that date, then on and
after that date such Senior Exchangeable Preferred Stock shall be deemed to be
no longer outstanding and shall cease to accrue interest.
Section 15.6 Temporary Senior Exchangeable Preferred Stock
Until certificates representing Senior Exchangeable Preferred Stock are
ready for delivery, the Company may prepare and the Transfer Agent, upon receipt
of an Authentication Order, shall authenticate temporary Senior Exchangeable
Preferred Stock. Temporary Senior Exchangeable Preferred Stock shall be
substantially in the form of certificated Senior Exchangeable Preferred Stock
but may have variations that the Company considers appropriate for temporary
Senior Exchangeable Preferred Stock and as shall be reasonably acceptable to the
Transfer Agent. Without unreasonable delay, the Company shall prepare and the
Transfer Agent shall authenticate Definitive Certificates in exchange for
temporary Senior Exchangeable Preferred Stock.
Holders of temporary Senior Exchangeable Preferred Stock shall be entitled
to all of the benefits of this Certificate of Designations.
54
<PAGE>
Section 15.7 Cancellation
The Company at any time may deliver Senior Exchangeable Preferred Stock to
the Transfer Agent for cancellation. The Transfer Agent and Paying Agent shall
forward to the Transfer Agent any Senior Exchangeable Preferred Stock
surrendered to them for registration of transfer, exchange or payment. The
Transfer Agent and no one else shall cancel all Senior Exchangeable Preferred
Stock surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall destroy canceled Senior Exchangeable Preferred Stock
(subject to the record retention requirement of the Exchange Act).
Certification of the destruction of all canceled Senior Exchangeable Preferred
Stock shall be delivered to the Company. The Company may not issue new Senior
Exchangeable Preferred Stock to replace Senior Exchangeable Preferred Stock that
it has paid or that have been delivered to the Transfer Agent for cancellation.
SECTION 16 HEADINGS OF SUBDIVISIONS
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
SECTION 17 SEVERABILITY OF PROVISIONS
If any powers, preferences and relative, participating, optional and other
special rights of the Exchangeable Preferred Stock and the qualifications,
limitations and restrictions thereof set forth in this Certificate of
Designations (as it may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, all
other powers, preferences and relative, participating, optional and other
special rights of the Exchangeable Preferred Stock and the qualifications,
limitations and restrictions thereof set forth in this Certificate of
Designations (as so amended) which can be given effect without the invalid,
unlawful or unenforceable powers, preferences and relative, participating,
optional and other special rights of the Exchangeable Preferred Stock and the
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no powers, preferences and relative,
participating, optional or other special rights of the Exchangeable Preferred
Stock and the qualifications, limitations and restrictions thereof herein set
forth shall be deemed dependent upon any other such powers, preferences and
relative, participating, optional or other special rights of Exchangeable
Preferred Stock and qualifications, limitations and restrictions thereof unless
so expressed herein.
55
<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed by Kathy Broussard, Vice President of the Company this 18th day of
December, 1998.
Crown Castle International Corp.
/s/ Kathy Broussard
By:_____________________________________
Name: Kathy Broussard
Title: Vice President
56
<PAGE>
EXHIBIT A
FORM OF
SENIOR EXCHANGEABLE PREFERRED STOCK
CERTIFICATE
[FACE OF SECURITY]
[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF
ANY, REQUIRED UNDER THE CERTIFICATE OF DESIGNATIONS PURSUANT TO WHICH THIS
SECURITY IS ISSUED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A OR REGULATION S THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES
ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
CROWN CASTLE INTERNATIONAL CORP. THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO CROWN
CASTLE INTERNATIONAL CORP. OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.]/1/
[THIS GLOBAL CERTIFICATE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS
CERTIFICATE OF DESIGNATIONS GOVERNING THIS SECURITY) OR ITS NOMINEE IN CUSTODY
FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRANSFER AGENT MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED
_________________________
/1/ This legend is subject to removal upon registration under the Securities
Act or otherwise when a Global Certificate or Definitive Certificate
shall no longer require this legend pursuant to Section 15.3 of the
Certificate of Designations.
A-1
<PAGE>
PURSUANT TO SECTION 15.3 OF THE CERTIFICATE OF DESIGNATIONS, (II) THIS GLOBAL
CERTIFICATE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
15.3(a) OF THE CERTIFICATE OF DESIGNATIONS, (III) THIS GLOBAL CERTIFICATE MAY BE
DELIVERED TO THE TRANSFER AGENT FOR CANCELLATION PURSUANT TO SECTION 15.8 OF THE
CERTIFICATE OF DESIGNATIONS AND (IV) THIS GLOBAL CERTIFICATE MAY BE TRANSFERRED
TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.]/2/
[HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.]/3/
Certificate Number: _________ CUSIP No.: _________
Number of Shares of Senior Exchangeable Preferred Stock: ______________
12 3/4% [Series B] Senior Exchangeable Preferred Stock due 2010
(par value $0.01 per share) (liquidation preference $1,000 per share)
of
Crown Castle International Corp.
Crown Castle International Corp., a Delaware corporation (the "Company"),
-------
hereby certifies that __________________________________________________ (the "
Holder") is the registered owner of fully paid and non-assessable preferred
- ------
securities of the Company designated the 12 3/4% [Series B] Senior Exchangeable
Preferred Stock due 2010 (par value $0.01 per share) (liquidation preference
$1,000 per share) (the "Senior Exchangeable Preferred Stock"). The shares of
Senior Exchangeable Preferred Stock are transferable on the books and records of
the Registrar, in person or by a duly authorized attorney, upon surrender of
this certificate duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Senior Exchangeable Preferred Stock represented hereby are issued and shall
in all respects be subject to the provisions of the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof, dated
December __, 1998, as the same may be amended from time to time (the
"Certificate of Designations"). Capitalized terms used herein but not defined
---------------------------
shall have the meaning given them in the Certificate of Designations. The
Company will provide a copy of the Certificate of Designations to a Holder
without charge upon written request to the Company at its principal place of
business.
Reference is hereby made to select provisions of the Senior Exchangeable
Preferred Stock set forth on the reverse hereof, and to the Certificate of
Designations, which select provisions and the Certificate of Designations shall
for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of
Designations and is entitled to the benefits thereunder.
______________________
/2/ This legend is to be included only on each Global Certificate.
/3/ This legend is to be included only on each Regulation S Definitive
Certificate.
A-2
<PAGE>
Unless the Transfer Agent's Certificate of Authentication hereon has been
properly executed, these shares of Senior Exchangeable Preferred Stock shall not
be entitled to any benefit under the Certificate of Designations or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate this
__________ day of __________________, ________.
Crown Castle International Corp.
By: ________________________________
Name:
Title:
[SEAL]
By: ________________________________
Name:
Title:
A-3
<PAGE>
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This certificate evidences the number of shares of the Senior Exchangeable
Preferred Stock set forth on the face hereof, which Senior Exchangeable
Preferred Stock is referred to in the within-mentioned Certificate of
Designations.
Dated: ________________, _______
ChaseMellon Shareholder Services, L.L.C.,
as Transfer Agent,
By: _____________________________________
Authorized Signatory
A-4
<PAGE>
[REVERSE OF SECURITY]
Dividends on each share of Senior Exchangeable Preferred Stock shall be
payable at a rate per annum set forth in the face hereof or as provided in the
Certificate of Designations.
The shares of Senior Exchangeable Preferred Stock shall be redeemable as
provided in the Certificate of Designations. The shares of Exchangeable
Preferred Stock shall be exchangeable at the Company's option into the Company's
12 3/4% Senior Subordinated Exchange Debentures due 2010 in the manner and
according to the terms set forth in the Certificate of Designations.
As required under Delaware law, the Company shall furnish to any Holder
upon request and without charge, a full summary statement of the designations,
voting rights preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the class and series of shares of the Company.
A-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Senior Exchangeable Preferred Stock evidenced hereby to:
___________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
________________________________________________________________________________
________________________________________________________________________________
agent to transfer the shares of Senior Exchangeable Preferred Stock evidenced
hereby on the books of the Transfer Agent and Registrar. The agent may
substitute another to act for him or her.
Date: _________________________
Signature: __________________________
(Sign exactly as your name appears on the other side of this Exchangeable
Preferred Stock Certificate)
Signature Guarantee:* ______________________
_____________________
*(Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, amended.)
A-6
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, TX 77057
[Registrar address block]
Re: 12 3/4% Senior Exchangeable Preferred Stock due 2010
----------------------------------------------------
Reference is hereby made to the Certificate of Designations, dated as of
December __, 1998 (the "Certificate of Designations"), of Crown Castle
---------------------------
International Corp., (the "Company") with respect to the above referenced
-------
security. Capitalized terms used but not defined herein shall have the meanings
given to them in the Certificate of Designations.
______________, (the "Transferor") owns and proposes to transfer the
----------
Certificate[s] or interest in such Certificate[s] specified in Annex A hereto,
which Certificate[s] or interests represent ________________ shares of Senior
Exchangeable Preferred Stock (the "Transfer"), to
--------
_____________________________________ (the "Transferee"), as further specified
----------
in Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
144A GLOBAL CERTIFICATE OR A DEFINITIVE CERTIFICATE PURSUANT TO RULE 144A. The
- -------------------------------------------------------------------------
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
---------- ---
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Certificate is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Certificate for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Certificate of
Designations, the transferred beneficial interest or Definitive Certificate will
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Certificate and/or the Definitive Certificate
and in the Certificate of Designations and the Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
TEMPORARY REGULATION S GLOBAL CERTIFICATE, THE REGULATION S GLOBAL CERTIFICATE
- ------------------------------------------------------------------------------
OR A DEFINITIVE CERTIFICATE PURSUANT TO REGULATION S. The Transfer is being
- ----------------------------------------------------
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and
B-1
<PAGE>
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Certificate of Designations, the transferred beneficial
interest or Definitive Certificate will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Certificate, the Temporary Regulation S Global Certificate and/or the
Definitive Certificate and in the Certificate of Designations and the Securities
Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
-------------------------------------------------------------------
INTEREST IN A 144A GLOBAL CERTIFICATE OR A DEFINITIVE CERTIFICATE PURSUANT TO
- -----------------------------------------------------------------------------
ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
- ------------------------------------------------------------------------
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Certificates and
Restricted Definitive Certificates and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
(a) [_] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest
in an Unrestricted Global Certificate or of an Unrestricted Definitive
Certificate.
B-2
<PAGE>
(a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the
Certificate of Designations and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Certificate of Designations and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Certificate of Designations, the transferred beneficial interest or Definitive
Certificate will no longer be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Certificates,
on Restricted Definitive Certificates and in the Certificate of Designations.
(b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Certificate of Designations and any applicable blue sky securities laws of
any state of the United States and (ii) the restrictions on transfer contained
in the Certificate of Designations and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Certificate of Designations, the transferred beneficial interest or Definitive
Certificate will no longer be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Certificates,
on Restricted Definitive Certificates and in the Certificate of Designations.
(c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Certificate of Designations and any applicable blue sky securities laws of
any State of the United States and (ii) the restrictions on transfer contained
in the Certificate of Designations and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Certificate of Designations, the transferred beneficial interest or Definitive
Certificate will not be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Global Certificates or
Restricted Definitive Certificates and in the Certificate of Designations.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
[Insert Name of Transferor]
By:__________________________________
Name:
Title:
Dated:____________________,________
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the Restricted Global Certificate
(CUSIP _________), or
(b) [_] a Restricted Definitive Certificate.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Certificate (CUSIP ________), or
(ii) [_] Unrestricted Global Certificate (CUSIP ________);
or
(b)[_] a Restricted Definitive Certificate; or
(c)[_] an Unrestricted Definitive Certificate,
in accordance with the terms of the Certificate of Designations.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, TX 77057
[Registrar address block]
Re: 12 3/4% Senior Exchangeable Preferred Stock due 2010
----------------------------------------------------
(CUSIP ______________)
Reference is hereby made to the Certificate of Designations, dated as of
December __, 1998 (the "Certificate of Designations"), of Crown Castle
---------------------------
International Corp. (the "Company") with respect to the above referenced
-------
security. Capitalized terms used but not defined herein shall have the meanings
given to them in the Certificate of Designations.
_________________, (the "Owner") owns and proposes to exchange the
-----
Certificate[s] or interest in such Certificate[s] specified herein, which
Certificate[s] or interests represent _________ shares of Senior Exchangeable
Preferred Stock (the "Exchange"). In connection with the Exchange, the Owner
--------
hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE CERTIFICATES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL CERTIFICATE FOR UNRESTRICTED DEFINITIVE CERTIFICATES OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL CERTIFICATE
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL CERTIFICATE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL CERTIFICATE.
- -------------------------------------------------------------------------------
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Certificate for a beneficial interest in an Unrestricted
Global Certificate in an equal liquidation preference, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Global Certificates and
pursuant to and in accordance with the United States Securities Act of 1933, as
amended (the "Securities Act"), (iii) the restrictions on transfer contained in
--------------
the Certificate of Designations and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Certificate is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL CERTIFICATE TO UNRESTRICTED DEFINITIVE CERTIFICATE. In connection with
- ---------------------------------------------------------
the Exchange of the Owner's beneficial interest in a Restricted Global
Certificate for an Unrestricted Definitive Certificate, the Owner hereby
certifies (i) the Definitive Certificate is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Certificates
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Certificate of Designations and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Certificate is
C-1
<PAGE>
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE CERTIFICATE TO
--------------------------------------------------------------
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL CERTIFICATE. In connection with
- ---------------------------------------------------------
the Owner's Exchange of a Restricted Definitive Certificate for a beneficial
interest in an Unrestricted Global Certificate, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Certificates and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Certificate of Designations and the Private Placement Legend
are not required in order to maintain compliance with the Securities Act and
(iv) the beneficial interest is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE CERTIFICATE TO
--------------------------------------------------------------
UNRESTRICTED DEFINITIVE CERTIFICATE. In connection with the Owner's Exchange of
- -----------------------------------
a Restricted Definitive Certificate for an Unrestricted Definitive Certificate,
the Owner hereby certifies (i) the Unrestricted Definitive Certificate is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Certificates and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Certificate
of Designations and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted Definitive
Certificate is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE CERTIFICATES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL CERTIFICATES FOR RESTRICTED DEFINITIVE CERTIFICATES OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL CERTIFICATES
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL CERTIFICATE TO RESTRICTED DEFINITIVE CERTIFICATE. In connection with the
- -------------------------------------------------------
Exchange of the Owner's beneficial interest in a Restricted Global Certificate
for a Restricted Definitive Certificate with an equal liquidation preference,
the Owner hereby certifies that the Restricted Definitive Certificate is being
acquired for the Owner's own account without transfer. Upon consummation of the
proposed Exchange in accordance with the terms of the Certificate of
Designations, the Restricted Definitive Certificate issued will continue to be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Definitive Certificate and in the Certificate
of Designations and the Securities Act.
(b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE CERTIFICATE TO
--------------------------------------------------------------
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL CERTIFICATE. In connection with the
- ------------------------------------------------------
Exchange of the Owner's Restricted Definitive Certificate for a beneficial
interest in the Restricted Global Certificate, with an equal aggregate
liquidation preference, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Certificates and pursuant to and in
accordance with the Securities Act, and in compliance with any applicable blue
sky securities laws of any state of the United States. Upon consummation of the
proposed Exchange in accordance with the terms of the Certificate of
Designations, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Certificate and in the Certificate of Designations and the
Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
__________________________________
[Insert Name of Owner]
By: ______________________________
Name:
Title:
Dated: ________________, ____
C-3
<PAGE>
EXHIBIT 10.26
EXECUTION COPY
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of the
---------
21st day of August, 1998, among CROWN CASTLE INTERNATIONAL CORP.
(formerly named Castle Tower Holding Corp.), a Delaware
corporation (the "Company"), and each of the STOCKHOLDERS of the
-------
Company listed in Schedule I hereto (collectively, the
"Stockholders" and each individually, a "Stockholder").
------------ -----------
W I T N E S S E T H :
WHEREAS the Company, Castle Transmission Services (Holdings) Ltd.
("CTSH"), TeleDiffusion de France International S.A., a company incorporated in
- ------
France ("TDF"), Digital Future Investments B.V. ("DFI (BV)") and certain
---
shareholders of CTSH are parties to a Share Exchange Agreement (the "Exchange
--------
Agreement") pursuant to which DFI (BV) and such shareholders of CTSH have
- ---------
agreed, subject to the terms and conditions of the Exchange Agreement, to
exchange (the "Exchange") their shares of capital stock of CTSH for Shares (as
--------
defined) of the Company; and
WHEREAS, as an inducement to TDF, DFI (BV) and such shareholders of
CTSH to enter into the Exchange Agreement, the Company and each of the
Stockholders desire to enter into this Agreement, upon and subject to the
Closing of the Exchange, to provide for certain rights and obligations of the
Company and the Stockholders with respect to the governance of the Company and
the Stockholders' shares of Common Stock or, in the case of DFI (BV), DFI (BV)'s
shares of Class A Stock, following the consummation of the Exchange.
NOW THEREFORE, the Company and each of the Stockholders, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
----------------------
capitalized terms shall have the meanings assigned to such terms as set forth
below:
<PAGE>
2
"Affiliate" and "Associate", when used with reference to any person,
--------- ---------
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
Exchange Act, as in effect on the date of this Agreement. In addition, (i) each
of the Centennial Parties shall be deemed an Affiliate of the other, (ii) each
of Nassau Parties shall be deemed an Affiliate of the other, (iii) each of the
Berkshire Parties and shall be deemed an Affiliate of the other, and (iv) each
of the Candover Parties shall be deemed an Affiliate of the other.
"Amended and Restated Stockholders Agreement" shall mean the Amended
-------------------------------------------
and Restated Stockholders Agreement, dated August 15, 1997, as amended, among
the Company, certain stockholders of the Company and certain investors.
"Applicable Law" shall have the meaning given to such term in the
--------------
Exchange Agreement.
"BBC" shall mean The British Broadcasting Corporation.
---
"BBC Contracts" shall mean the BBC Analogue Transmission Contract
-------------
among the BBC and Castle Transmission International Ltd. ("CTI"), dated as of
---
February 28, 1997, and the BBC Digital Transmission Contract among the BBC and
CTI, dated as of February 10, 1998.
A person shall be deemed the "beneficial owner" of, and shall be
----------------
deemed to "beneficially own", and shall be deemed to have "beneficial ownership"
---------------- --------------------
of:
(i) any securities that such person or any of such person's Affiliates
or Associates is deemed to "beneficially own" within the meaning of Rule
13d-3 under the Exchange Act, as in effect on the date of this Agreement;
and
(ii) any securities (the "underlying securities") that such person or
---------------------
any of such person's Affiliates or Associates has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (written or
oral), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise (it being understood that such person
shall also be deemed to be the beneficial owner of the securities
convertible into or exchangeable for the underlying securities).
<PAGE>
3
"Berkshire Group" shall mean the Berkshire Parties, their Affiliates
---------------
and their respective partners and members, collectively.
"Berkshire Parties" shall mean Berkshire Fund III, A Limited
-----------------
Partnership, Berkshire Investors LLC and Berkshire Fund IV, Limited Partnership.
"Board" shall mean the Board of Directors of the Company.
-----
"Business Combination" shall have the meaning given to it in the
--------------------
Governance Agreement.
"Business Day" shall mean any day that is not a Saturday, a Sunday, a
------------
bank holiday or any other day on which commercial banking institutions in New
York, New York, Paris, France or London, England are not generally open for
business.
"By-laws" shall mean the By-laws of the Company to be adopted with
-------
immediate effect upon the Closing, as amended from time to time in accordance
with the terms of the Governance Agreement and applicable law.
"Candover Group" shall mean the Candover Parties, their Affiliates and
--------------
the limited partners of the Candover Parties, collectively.
"Candover Group Interest" shall mean the percentage of Voting Power
-----------------------
that is controlled, directly or indirectly, by the Candover Group.
"Candover Parties" shall mean Candover Investments plc, Candover
----------------
(Trustees) Limited, Candover Partners Limited (a company incorporated in England
and Wales as general partner of the Candover 1994 UK Limited Partnership),
Candover Partners Limited (a company incorporated in England and Wales as
general partner of the Candover 1994 UK No. 2 Limited Partnership), Candover
Partners Limited (a company incorporated in England and Wales as general partner
of the Candover 1994 US No. 1 Limited Partnership) and Candover Partners Limited
(a company incorporated in England and Wales as general partner of the Candover
1994 US No. 2 Limited Partnership).
"Centennial Group" shall mean the Centennial Parties, their Affiliates
----------------
and their respective partners, collectively.
<PAGE>
4
"Centennial Parties" shall mean Centennial Fund IV, L.P., Centennial
------------------
Fund V, L.P. and Centennial Entrepreneurs Fund V, L.P.
"Charter" shall mean the certificate of incorporation of the Company
-------
to be adopted with immediate effect upon the Closing, as amended from time to
time in accordance with the terms of the Governance Agreement and applicable
law.
"Class A Stock" shall mean the Company's Class A Common Stock, $.01
-------------
par value per share, as designated in the Charter.
"Closing" shall have the meaning given to such term in the Exchange
-------
Agreement.
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act and the
Exchange Act.
"Common Stock" shall mean the shares of the Company's common stock,
------------
par value $.01 per share, as designated in the Charter.
"Company Call Right" shall have the meaning set forth in Section 6.02
------------------
of the Governance Agreement.
"Crown Group" shall mean the Crown Parties and their permitted
-----------
transferees.
"Crown Parties" shall mean Robert A. Crown, Barbara Crown, the Grantor
-------------
Retained Annuity Trust on behalf of Mr. Crown and the Grantor Retained Annuity
Trust on behalf of Ms. Crown.
"CTSH Option" shall have the meaning set forth in the Governance
-----------
Agreement.
"CTSH Ordinary Shares" shall mean the ordinary shares of 1p each of
--------------------
CTSH.
"CTSH Preference Shares" shall mean the redeemable preference shares
----------------------
of 1p each of CTSH.
"CTSH Warrants" shall mean the warrants dated February 28, 1997,
-------------
entitling TDF to subscribe for 257,000 CTSH Ordinary Shares and 257,242,500 CTSH
Preference Shares and the Company to subscribe for 515,000 CTSH Ordinary Shares
and 514,485,000 CTSH Preference Shares.
<PAGE>
5
"Director" shall mean a Director of the Company.
--------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar Federal securities statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Exchange Agreement" shall mean the Share Exchange Agreement dated as
------------------
of April 24, 1998, among the Company, CTSH, DFI (BV), TDF and certain
shareholders of CTSH.
"Governance Agreement" shall mean the Governance Agreement, dated as
--------------------
of August 21, 1998, between TDF, DFI (BV) and the Company.
"group" shall have the meaning given to such term in Section 13(d)(3)
-----
of the Exchange Act.
"Group" or "Groups" shall mean any and all of the TDF Group, the
----- ------
Candover Group, the Crown Group, the Initial Stockholder Group, the Centennial
Group, the Berkshire Group, the Nassau Group and the Management Group.
"Independent Director" shall mean a Director who is none of (i) an
--------------------
officer, employee, Affiliate or Associate of the Company or an officer, employee
or Director of any Affiliate or Associate of the Company or (ii) an officer,
employee, Director, Affiliate or Associate of any Stockholder.
"Initial Stockholder" shall mean Ted B. Miller, Jr.
-------------------
"Initial Stockholder Group" shall mean the Initial Stockholder and its
-------------------------
permitted transferees, collectively.
"IPO" shall have the meaning given to such term in the Exchange
---
Agreement.
"Nassau Group" shall mean the Nassau Parties, their Affiliates and
------------
their respective partners, collectively.
"Nassau Parties" shall mean Nassau Capital Partners II, L.P. and NAS
--------------
Partners I, L.L.C.
"Newco" shall mean any person which becomes a holding company of the
-----
Company all the shares in which (other than shares not exceeding the Relevant
Percentage (as defined in the Governance Agreement)) are held by the same
<PAGE>
6
persons as were stockholders in the Company prior to such person becoming a
holding company of the Company.
"Original Stockholders Agreement" shall mean the Amended and Restated
-------------------------------
Stockholders Agreement, dated as of August 15, 1997, as amended, by and among
the Company and certain Stockholders.
"Ownership Interest" shall mean, with respect to any person, the
------------------
percentage of Total Voting Power determined on the basis of the number of shares
of Voting Securities actually outstanding that is controlled, directly or
indirectly, by such person.
"permitted transferee" of any person shall mean (a) if the transferor
--------------------
is a natural person, (i) in the case of the death of such person, such person's
executors, administrators, testamentary trustees, heirs, devisees and legatees,
(ii) such person's current or future spouse, parents, siblings or descendants or
such parents', siblings' or descendants' spouses (each a "Family Member"), (iii)
any trust for the benefit of any Family Member and (iv) any charitable
organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code") and any charitable income or lead trust for which,
under the Code and regulations thereunder and Internal Revenue Service
interpretations thereof, an income, gift or estate tax charitable deduction is
available to the grantor of the trust, (b) whether or not the transferor is a
natural person, a corporation or corporations and a partnership or partnerships
(or other entity for collective investment, such as a fund or a limited
liability company) which at the date of transfer are directly or indirectly
controlled by, controlling or under common control with such person and the
officers, employees, general partners and limited partners of such person, and
(c) if the transferor, whether or not a natural person, itself received the
transferred interest as a permitted transferee as to the original transferor, a
permitted transferee of such person is any person, whether or not a natural
person, who would be a permitted transferee under subparagraph (a) or (b) above,
as to the original transferor; provided that any such transferee shall agree in
-------- ----
writing with the Company and the other parties to this Agreement to be bound by
all of the provisions of this Agreement to the same extent as if such transferee
were the individual.
"person" shall mean an individual, corporation, limited liability
------
company, partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof and shall include
<PAGE>
7
any "group" (which shall have the meaning given to such term in Section 13(d)(3)
of the Exchange Act).
"Qualified" shall have the meaning given to such term in the
---------
Governance Agreement.
"Restricted Shares" shall mean the shares of Common Stock and Class A
-----------------
Stock of the Company which are (i) issued or issuable to any of the Stockholders
of the Company and (ii) "restricted securities" as defined in Rule 144(a)(3)
under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar Federal securities statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shares" shall mean all shares of Common Stock (and Class A Stock, in
------
the case of TDF and DFI (BV)).
"Subsidiary" or "Subsidiaries" when used with respect to any person
---------- ------------
shall mean (i) any other person, whether incorporated or unincorporated, which
is either required to be consolidated with such person under U.S. generally
accepted accounting principles or (ii) is an affiliate controlled by such
person, directly or indirectly through one or more intermediaries within the
meaning of Rule 1.02(x) of Regulation S-X under the Exchange Act.
"TDF CCIC Warrants" shall mean the warrants issued to TDF upon the
-----------------
exercise of the TDF Put Right in exchange for, and on substantially the same
terms as, the TDF CTSH Warrants.
"TDF Change of Control" shall have the meaning given to such term in
---------------------
the Governance Agreement.
"TDF Consolidated Group Interest" shall mean the percentage of Voting
--------------------------------
Power that is controlled directly or indirectly by the TDF Group or would be
controlled directly or indirectly by the TDF Group on the exercise of the TDF
Put Right (assuming the exercise of the TDF CTSH Warrants).
"TDF CTSH Warrants" shall mean the CTSH Warrants beneficially owned by
-----------------
the TDF Group.
"TDF Group" shall mean TDF and its Affiliates (other than the Company
---------
and its Subsidiaries).
"TDF Group Interest" shall mean the percentage of Voting Power that is
------------------
controlled, directly or indirectly, by
<PAGE>
8
the TDF Group or would be controlled, directly or indirectly, by the TDF Group
(assuming the exercise of the TDF CCIC Warrants).
"TDF Put Right" shall have the meaning set forth in Section 6.01(a) of
-------------
the Governance Agreement.
"TDF Rollup" shall have the meaning set forth in the Governance
----------
Agreement.
"Total Voting Power" means the aggregate number of votes entitled to
------------------
be voted in an election of Directors by all the outstanding Voting Securities.
"Transaction Documents" shall have the meaning set forth in the
---------------------
Exchange Agreement.
"Voting Power", when used with reference to any class or series of
------------
securities of the Company, or any classes or series of securities of the Company
entitled to vote together as a single class or series, shall mean the power of
such class or series (or such classes or series) to vote for the election of
directors. For purposes of determining the percentage of Voting Power of any
class or series (or classes or series) beneficially owned by any person, any
securities not outstanding which are subject to conversion rights, exchange
rights, rights, warrants, options or similar securities held by such person
shall be deemed to be outstanding for the purpose of computing the percentage of
outstanding securities of the class or series (or classes or series)
beneficially owned by such person, but shall not be deemed to be outstanding for
the purpose of computing the percentage of the class or series (or classes or
series) beneficially owned by any other person.
"Voting Securities", when used with reference to any person, shall
-----------------
mean any securities of such person having Voting Power or any securities
convertible into or exchangeable for any securities having Voting Power.
SECTION 1.02. Securities Outstanding. In determining the number or
-----------------------
other amount outstanding of any securities of the Company or the percentage of
Voting Power of any class or series beneficially owned by such person,
securities owned by the Company or any of its Subsidiaries shall be deemed to be
not outstanding.
<PAGE>
9
ARTICLE II
Securities Act; Legends
-----------------------
SECTION 2.01. General Restriction. Any of the Stockholders may sell
--------------------
or otherwise transfer any Shares or any interest therein; provided, that such
--------
sale or other transfer is in compliance with this Agreement, the other
Transaction Documents and the Securities Act.
SECTION 2.02. Legends on Certificates. (a) Each Stockholder shall
------------------------
hold in certificate form all Shares owned by such Stockholder. Each certificate
evidencing Shares issued to or beneficially owned by a person that is subject to
the provisions of this Agreement shall bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCKHOLDERS AGREEMENT, DATED AS
OF AUGUST 21, 1998, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF
THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED
WITH. IN ADDITION, THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF
THE ISSUER UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT."
(b) In the event that a Stockholder requests that the legend in
Section 2.02(a) be removed, the Company shall, upon the written request of the
holder thereof, issue to such holder a new certificate evidencing such Shares
without the legend required by Section 2.02(a) endorsed thereon; provided;
--------
however, that such holder shall furnish the Company or its transfer agent such
- -------
certificates, legal opinions or other information as the Company or its transfer
agent may reasonably require to confirm that the legend is not required on such
certificate.
(c) In the event that any Shares shall cease to be subject to the
restrictions on transfer set forth in this Agreement, the Company shall, upon
the written request of the holder thereof, issue to such holder a new
certificate evidencing such Shares without the legend required by Section
2.02(a).
<PAGE>
10
SECTION 2.03. Notice of Proposed Transfer. Prior to any proposed
----------------------------
transfer of any Shares (other than under the circumstances described in Sections
4.01, 4.02 or 4.03), the holder thereof shall give written notice to the Company
of its intention to effect such transfer. Each such notice shall describe the
manner of the proposed transfer and, if requested by the Company, shall be
accompanied by an opinion of counsel satisfactory to the Company to the effect
that the proposed transfer may be effected without registration under the
Securities Act and any applicable state securities laws, whereupon the holder of
such stock shall be entitled to transfer such stock in accordance with the terms
of its notice; provided, however, that no such opinion of counsel shall be
-------- -------
required for a transfer, without receipt of consideration, to an Affiliate.
Each certificate for Shares transferred as above provided shall bear the legend
set forth in Section 2.02, except that such certificate shall not bear such
legend if (a) such transfer is in accordance with the provisions of Rule 144 (or
any other rule permitting public sale without registration under the Securities
Act) or (b) the opinion of counsel referred to above is to the further effect
that the transferee and any subsequent transferee (other than an Affiliate of
the Company) would be entitled to transfer such securities in a public sale
without registration under the Securities Act. The restrictions provided for in
this Section 2.03 shall not apply to securities which are not required to bear
the legend prescribed by Section 2.02 in accordance with the provisions of that
Section.
SECTION 2.04. Stop Transfer. (a) The Company shall not register the
--------------
sale or other transfer of any Shares, unless the transferee and the transferor
of such shares have furnished such certificates, legal opinions or other
information as the Company or its transfer agent may reasonably require to
confirm that such proposed sale or transfer is permitted by Section 2.01.
(b) The Company and each Stockholder hereby agree that any purported
sale or transfer of Shares not permitted by Section 2.01 shall be deemed null
and void and shall not be given effect or recognition by the Company.
SECTION 2.05. Certain Transferees to Execute Agreement. Each
-----------------------------------------
Stockholder agrees that it will not, directly or indirectly, sell or otherwise
transfer any Shares held by such Stockholder to any of its Affiliates or
permitted transferees, unless, prior to the consummation of any such sale or
transfer, the Affiliate or permitted transferee to whom such sale or transfer is
proposed to be made (a "Prospective Transferee") (i) executes and delivers
----------------------
<PAGE>
11
to the Company and each other party to this Agreement a counterpart hereof and
(ii) represents and warrants in writing to the Company that such counterpart has
been duly authorized, executed and delivered by such Prospective Transferee and
is a legal, valid and binding obligation of such Prospective Transferee
enforceable against it in accordance with its terms, subject to insolvency,
bankruptcy and other laws affecting creditors generally. Upon the execution and
delivery by such Prospective Transferee of the documents referred to in the
preceding sentence, such Prospective Transferee shall be deemed a "Stockholder"
for the purposes of this Agreement, and shall have the rights and be subject to
the obligations of a Stockholder hereunder with respect to the Shares held by
such Prospective Transferee.
SECTION 2.06. Sale to a Third Party. If a sale or transfer of Shares
----------------------
is made by a Stockholder to a third party (except for transfers within the TDF
Group, the Berkshire Group, the Centennial Group, the Candover Group, the Nassau
Group or otherwise to an Affiliate or to any permitted transferee)(a "Third
-----
Party Transferee"), such Shares shall immediately cease to be subject to this
- ----------------
Agreement and such Third Party Transferee will not become a Stockholder for
purposes of this Agreement. If a sale or transfer of Shares results in the
selling Stockholder or a permitted transferee ceasing to own any Shares, such
selling Stockholder shall cease to be a Stockholder for purposes of this
Agreement.
ARTICLE III
Governance
----------
SECTION 3.01. Board of Directors. The Board shall consist of 12
-------------------
members.
SECTION 3.02. Board Representation. (a) At all times from and after
---------------------
the date hereof, the Directors shall be nominated as follows (it being
understood that such nomination shall include any nomination of any incumbent
Director for reelection to the Board):
(i) so long as TDF is Qualified, TDF shall have the right to appoint
two Directors pursuant to the terms of the Class A Stock set forth in the
Charter (the "TDF Designees") and the initial TDF Designees shall be Michel
-------------
Azibert and Bruno Chetaille; provided, however, that if TDF is not
-------- -------
Qualified, such members of the TDF Group shall, so long as the Ownership
Interest
<PAGE>
12
of the TDF Group is at least 5.0%, have the right to appoint a Director
pursuant to the terms of such Class A Stock (the "TDF Designee");
------------
(ii) so long as the Crown Group has beneficial ownership of at least
555,555 shares of Common Stock (as adjusted from time to time to take into
account any stock split, stock dividend, recapitalization or other similar
transaction) the members of the Crown Group holding in the aggregate a
majority of the aggregate number of Shares held of record by the Crown
Group shall have the right to designate one nominee for election as a
Director (the "Crown Designee");
--------------
(iii) so long as the Initial Stockholder Group maintains an Ownership
Interest, the members of the Initial Stockholder Group holding in the
aggregate a majority of the aggregate number of Shares held of record by
the Initial Stockholder Group shall have the right to designate one nominee
for election as a Director (the "Initial Stockholder Designee"), it being
----------------------------
understood that the Initial Stockholder may be such nominee;
(iv) the Chief Executive Officer of the Company shall have the right
to designate one nominee for election as a Director (the "CEO Designee");
------------
(v) so long as the Ownership Interest of the Centennial Group is at
least 5.0%, the members of the Centennial Group holding in the aggregate a
majority of the aggregate number of Shares held of record by the Centennial
Group shall have the right to designate one nominee for election as a
Director (the "Centennial Designee");
-------------------
(vi) so long as the Ownership Interest of the Berkshire Group is at
least 5.0%, the members of the Berkshire Group holding in the aggregate a
majority of the aggregate number of Shares held of record by the Berkshire
Group shall have the right to designate one nominee for election as a
Director (the "Berkshire Designee");
------------------
(vii) so long as the Ownership Interest of the Nassau Group is not
less than the Ownership Interest of the Nassau Group immediately following
the closing of the IPO, the members of the Nassau Group holding in the
aggregate a majority of the aggregate number of Shares held of record by
the Nassau Group shall have the right
<PAGE>
13
to designate one nominee for election as a Director (the "Nassau
------
Designee"); and
--------
(viii) all Directors other than the Designees ("General Directors")
-----------------
shall be nominated in accordance with the Charter and By-laws; provided,
--------
however, that immediately upon the effectiveness of this Agreement, the
-------
Company, through the Board, shall cause to be duly appointed to the Board
at least four Independent Directors (including for the avoidance of doubt,
the Independent Director designated for nomination by TDF as set forth
below); provided, however, that TDF shall have a one-time right,
-------- -------
exercisable upon the Closing, to designate one such Independent Director
for nomination as a Director, which designee shall be Mr. William A.
Murphy. For purposes of this Section 3.02(a)(viii), Mr. Robert F.
McKenzie, Mr. J. Landis Martin and Mr. Edward C. Hutcheson, Jr. shall be
deemed to be Independent Directors.
(b) Without limiting the generality of Section 3.02(a), in the
event that at any time after the date hereof the number of Directors designated
by a Group pursuant to Section 3.02(a) differs from the number that such Group
has the right (and desire) to designate, (i) if the number of such Directors
exceeds such number, such Group shall promptly take all appropriate action to
cause to resign that number of Directors designated by such Group as is required
to make the remaining number of such Directors conform to the provisions of this
Agreement or (ii) if the number of such Directors otherwise is less than such
number, the Board shall take all necessary action to create sufficient vacancies
on the Board to permit such Group to designate the full number of Directors
which it is entitled (and desires) to designate pursuant to the provisions of
this Agreement (such action may include but need not be limited to seeking the
resignation or removal of Directors or, at the request of such Group and/or
calling a special meeting of the stockholders of the Company for the purpose of
removing Directors to create such vacancies to the extent permitted by
applicable law). Upon the creation of any vacancy pursuant to the preceding
sentence, such Group shall designate a nominee to fill any such vacancy in
accordance with the provisions of this Agreement and the Board shall elect each
nominee so designated.
(c) Subject to TDF's right pursuant to Section 3.02(a)(viii), no
Group shall be entitled to designate any nominee for election as a Director
under more than one paragraph of this Section 3.02.
<PAGE>
14
SECTION 3.03. Removal of Directors. (a) At the request of a Group
---------------------
with respect to a Director designated by such Group pursuant to Section 3.02(a),
each other Stockholder hereby agrees to vote or act by written consent with
respect to (or cause to be voted or acted upon written consent) all Shares held
of record or beneficially owned by such Stockholder at the time of such vote or
action by written consent or as to which such Stockholder has voting control at
the time of such vote or action by written consent to remove or cause the
removal from office of such Director at any meeting or action by written consent
of the holders of Shares called or taken for the purpose of determining whether
or not such Director shall be removed from office (and otherwise shall not vote
or act by written consent to remove or cause the removal of any Director without
cause).
(b) If any Group entitled to designate any person for election as a
Director pursuant to Section 3.02(a) shall cease to have at least the requisite
Ownership Interest to entitle such Group to designate any person for election as
a Director pursuant to Section 3.02(a), such Group's right to designate a
nominee or nominees for election as a Director shall be lost for all time and
such Group shall cause each Designee designated by such Group and elected as a
Director to resign from the Board; provided that such Designee shall continue to
-------- ----
serve on the Board until a successor shall be duly elected and shall qualify in
accordance with the Charter and By-laws.
SECTION 3.04. Filling of Vacancies. (a) Except as provided in
--------------------
subparagraph (b) below, each Group shall have the right to designate a
replacement for any Designee designated by such Group and elected as a Director
upon the death, resignation, retirement, disqualification or removal from office
for other cause of such Designee, and those members of the Board who are
designated by the parties to this Agreement shall duly appoint as a Director
each person so designated.
(b) Any vacancies on the Board (i) resulting from the death,
resignation, retirement, disqualification or removal from office for other cause
of a General Director and (ii) created by a resignation pursuant to Section
3.03(b) shall be filled with a Director or Directors that are nominated by the
Nominating Committee; provided, however, that if the Nominating Committee shall
-------- -------
be unable to unanimously agree on the approval of a designee to be nominated to
fill any vacancy on the Board for a period of six months, the Nominating
Committee shall submit a slate of candidates to the Independent Directors of the
Board, who
<PAGE>
15
shall by a majority approve a designee from such slate to be nominated to fill
such vacancy; provided, further, that if the Independent Directors shall also be
-------- -------
unable to agree on the approval of such a designee by a majority for a period of
two months, then the Board shall approve a designee from such slate or upon its
own selection to fill such vacancy by a Special Majority Vote.
SECTION 3.05. Solicitation and Voting of Shares. (a) With respect to
---------------------------------
each meeting of stockholders of the Company at which Directors are to be
elected, the Company shall use its best efforts to solicit from the stockholders
of the Company eligible to vote in the election of Directors proxies in favor of
the nominees selected in accordance with Section 3.02(a) or 3.04(b) (including
without limitation the inclusion of each Director nominee in management's slate
of nominees and in the proxy statement prepared by management of the Company in
respect of each annual meeting, vote or action by written consent).
(b) Each Stockholder hereby agrees to vote or act by written consent
with respect to (or cause to be voted or acted upon by written consent) (i) all
Shares held of record or beneficially owned by such Stockholder at the time of
such vote or action by written consent and (ii) all Shares as to which such
Stockholder at the time of such vote or action by written consent has voting
control, in each case (A) in favor of the election of the persons nominated
pursuant to Section 3.02(a) to serve on the Board as Directors and (B) against
the election of any other person nominated to be a Director.
(c) Each Stockholder agrees that it will, and will use its best
efforts to cause its Affiliates (other than the Company and its Subsidiaries)
to, take all action as a stockholder of the Company or as is otherwise
reasonably within its control, as necessary to effect the provisions of this
Agreement.
(d) In the event that any Stockholder shall fail at any time to vote
or act by written consent with respect to any of such Stockholder's Shares as
agreed by such Stockholder in this Agreement, such Stockholder hereby
irrevocably grants to and appoints each other Stockholder (and any officer of
such Stockholder or each of them individually), such Stockholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Stockholder, to vote, act by written consent or grant a
consent, proxy or approval in respect of such Shares with respect to such vote
or action by written consent exclusively as agreed by such Stockholder in this
<PAGE>
16
Agreement. Each Stockholder hereby affirms that any such irrevocable proxy set
forth in this Section 3.05(d) is given in connection with the Closing of the
Exchange pursuant to the Exchange Agreement and that such irrevocable proxy is
given to secure the performance of the obligations of such Stockholder under
this Agreement. Each such Stockholder hereby further affirms that any such
proxy hereby granted shall be irrevocable and shall be deemed coupled with an
interest, in accordance with Section 212(e) of the Delaware General Corporation
Law.
SECTION 3.06. Committees of the Board. Subject to the general
-----------------------
oversight and authority of the full Board, the Board shall establish, empower,
maintain and elect the members of the following committees of the Board at all
times while this Agreement is in effect:
(a) an Audit Committee, comprised solely of Independent Directors;
(b) a Nominating Committee, which shall, subject to Section 3.02, be
responsible for recommending the nomination of Directors and which shall
initially consist of four Directors; provided, however, that the Nominating
-------- -------
Committee shall include the Chief Executive Officer of the Company, unless
he is unwilling or unable to serve pursuant to the terms and conditions of
this Agreement, and, so long as TDF is Qualified, at least one TDF
Designee;
(c) an Executive Committee, which shall initially consist of five
Directors and which, so long as TDF is Qualified, shall include at least
one TDF Designee who is elected to the Board;
(d) a Compensation Committee; and
(e) such other committees as the Board deems necessary or desirable
to establish, empower and maintain as required by applicable law or any
regulatory authority; provided that such committees are established in
--------
compliance with the terms of this Agreement.
SECTION 3.07. Certain Board Procedures. The Board shall follow the
-------------------------
following procedures:
(a) Meetings. The Board shall hold at least six regularly scheduled
--------
meetings per year at such times as may from time to time be fixed by resolution
of the Board, and no notice (other than the resolution) need be given as to a
<PAGE>
17
regularly scheduled meeting. Special meetings of the Board may be held at any
time upon the call of the Chairman of the Board or at least one-third of the
entire Board, by oral, telephonic, telegraphic or facsimile notice duly given or
sent at least three days, or by written notice sent by express mail at least
three days, before the meeting to each Director, provided that all such notices
to Directors located outside the United States shall be given or sent orally or
by telephone, telegraph or facsimile transmission. Reasonable efforts shall be
made to ensure that each Director actually receives timely notice of any such
special meeting. An annual meeting of the Board shall be held without notice
immediately following the annual meeting of stockholders of the Company.
(b) Agenda. A reasonably detailed agenda shall be supplied to each
------
Director reasonably in advance of each meeting of the Board, together with other
appropriate documentation with respect to agenda items calling for Board action,
to inform adequately Directors regarding matters to come before the Board. Any
Director wishing to place a matter on the agenda for any meeting of the Board
may do so by communicating with the Chairman of the Board sufficiently in
advance of the meeting of the Board so as to permit timely dissemination to all
Directors of information with respect to the agenda items.
(c) Powers of the Board. The Board shall reserve to itself the power
-------------------
to approve transactions that are of a type customarily subject to Board approval
as a matter of good corporate practice for public companies in the United
States, and shall not delegate to any committee of the Board or to any officers
of the Company the authority to conduct business in any manner that would
circumvent, or deprive any Stockholder of the protection of this Agreement or
TDF of the protection of the Governance Agreement. All committees of the Board
will report to and be accountable to the Board. The Board shall establish, in
cooperation with the Chief Executive Officer of the Company, a schedule for
Board review or action, as appropriate, with respect to matters which shall
typically come before the Board, including, but not limited to:
(i) annual business plans (including capital expenditures and
operating budgets); and
(ii) appointments of officers.
SECTION 3.08. Charter and By-laws. The Company and each Stockholder
-------------------
shall take or cause to be taken all lawful action necessary to ensure at all
times that the
<PAGE>
18
Charter and By-laws are not at any time inconsistent with the provisions of this
Agreement, it being understood that in the event of any conflict between this
Agreement and the Charter or By-laws, the Charter or By-laws, as applicable,
shall control.
SECTION 3.09. Negative Covenants. Notwithstanding any other
------------------
provision of the Transaction Documents, neither the Company nor any Stockholder
shall take or approve any action which would result in the BBC having the right
to terminate a BBC Contract in accordance with the terms of such BBC Contract.
SECTION 3.10. Company Name. So long as the Ownership Interest of the
------------
Crown Group is at least 1% or they otherwise consent in writing, the Company
covenants and agrees (subject to the limitations below) to use its best efforts
to (i) retain a name beginning with "Crown Castle", (ii) retain or cause the
name of its principal Affiliate owning communication towers in the United States
to be "Crown Communication Inc." ("CCI"), (iii) upon a merger, consolidation,
---
amalgamation, roll-up or any other transaction with a similar effect involving
the Company (including, without limitation, a merger or roll-up involving Castle
Transmission Services (Holdings) Ltd. or any of its Affiliates), cause the
successor or surviving entity to retain or have a name beginning with "Crown
Castle", (iv) cause all of the Company's operations in the United States to be
conducted by CCI, and cause any subsidiaries or affiliates of the Company or CCI
conducting such operations to include the name "Crown" first in their corporate
name or to otherwise be conducted under the name "Crown" consistent with the
provisions of the Memorandum of Understanding Regarding Management and
Governance of Castle Tower Holding Corp. and Crown Communications, Inc., dated
as of August 15, 1997 relating to CCI, and (v) cause CCI and all of its United
States Subsidiaries (as defined under clause (i) only of the definition of
Subsidiary set forth in Article I hereof) to retain the current "Crown" logo.
Notwithstanding the above, the above covenants and agreement shall not (a)
require the Company (including any successor entity), any stockholder of the
Company or member of the Board to incur any costs, expenses or losses of any
nature or amount including, without limitation, losses relating to potential
corporate opportunity or foregone stockholder value (price, content or any other
item), (b) prevent or delay the Company (including any successor entity) from
consummating or negotiating any proposed transaction or (c) require any member
of the Board to breach any duty and obligation to the Company or its
stockholders. Consent of the Crown Group shall be deemed given if written
consent is
<PAGE>
19
obtained from members of the Crown Group holding more than 50% of the
Common Stock held by such persons at the time of the determination.
ARTICLE IV
Registration Rights
-------------------
SECTION 4.01. "Piggy-Back" Registration. If the Company at any time
------------------------
proposes to register any of its securities under the Securities Act for sale to
the public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Forms S-4, S-
8 or another form not available for registering the Restricted Shares for sale
to the public), each such time it will give written notice to all holders of
outstanding Restricted Shares of its intention so to do. Upon the written
request of any such holder, received by the Company within 20 days after the
giving of any such notice by the Company, to register any of its Restricted
Shares, the Company will, subject as provided below, cause the Restricted Shares
as to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by the holder of such Restricted Shares so registered. In the event that any
registration pursuant to this Section 4.01 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of Restricted Shares to
be included in such an underwriting may be reduced (pro rata among the
requesting holders based upon the number of Restricted Shares owned by such
holders) if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein; provided, however, that such
-------- -------
number of Restricted Shares shall not be reduced if any shares are to be
included in such underwriting for the account of any person other than the
Company or requesting holders of Restricted Shares. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 4.01 without thereby incurring any liability to the
holders of Restricted Shares. There shall be no limit to the number of
registrations of Restricted Shares which may be effected under this Section
4.01.
SECTION 4.02. Demand Registration. (a) At any time after the
--------------------
expiration of six months after the IPO, TDF may request the Company to register
under the Securities Act
<PAGE>
20
all or a portion of the shares of Restricted Shares held by it for sale in the
manner specified in such notice; provided, that (i) the reasonably anticipated
--------
aggregate net proceeds to the sellers from such public offering would exceed
$30,000,000, (ii) such request covers at least 5% of the Voting Securities then
outstanding and (iii) no such request may be made by TDF more than once every
nine months. Notwithstanding anything to the contrary contained herein, no
request may be made under this Section 4.02 within 90 days after the effective
date of a registration statement filed by the Company covering a firm commitment
underwritten public offering in which the holders of Restricted Shares shall
have been entitled to join pursuant to Sections 4.01 or 4.03 and in which there
shall have been effectively registered all shares of Restricted Shares as to
which registration shall have been requested.
(b) At any time after the expiration of six months after the IPO, any
Stockholder or group of Stockholders may request the Company to register under
the Securities Act all or a portion of the shares of Restricted Shares held by
such Stockholder or group of Stockholders for sale in the manner specified in
such notice; provided, that (i) the reasonably anticipated aggregate net
--------
proceeds to the sellers from such public offering would exceed $30,000,000, (ii)
such request covers at least 5% of the Voting Securities then outstanding and
(iii) no such request may be made by such Stockholders or group of Stockholders
more than once every nine months. Notwithstanding anything to the contrary
contained herein, no request may be made under this Section 4.02 within 90 days
after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering in which the holders of
Restricted Shares shall have been entitled to join pursuant to Sections 4.01 or
4.03 and in which there shall have been effectively registered all shares of
Restricted Shares as to which registration shall have been requested.
(c) Following receipt of any notice under this Section 4.02, the
Company shall immediately notify all holders of Restricted Shares from whom
notice has not been received and shall use its best efforts to register under
the Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of shares of
Restricted Shares specified in such notice (and in all notices received by the
Company from other holders within 20 days after the giving of such notice by the
Company). If such method of disposition shall be an underwritten public
offering, the holders of a majority of the shares of Restricted Shares to be
sold in such offering may designate the managing
<PAGE>
21
underwriter of such offering, subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed. The Company shall be
obligated to register Restricted Shares pursuant to Section 4.02(a) on three
occasions only and pursuant to Section 4.02(b) on three occasions only,
provided, however, that such obligations shall be deemed satisfied only when a
- -------- -------
registration statement covering all shares of Restricted Shares specified in
notices received as aforesaid, for sale in accordance with the method of
disposition specified by the requesting holders, shall have become effective
and, if such method of disposition is a firm commitment underwritten public
offering, all such shares shall have been sold pursuant thereto unless (i) any
such registration statement does not become effective due to the withdrawal
thereof by or on the request of the holders of 66% of the shares of Restricted
Shares to be registered or (ii) the reason all shares of Restricted Shares
specified in notices pursuant to this Section 4.02 are not registered is due to
a limitation on the registration of shares by the managing underwriter (which
limitation shall be applied pro rata) and no more than 50% of the Restricted
Shares so specified are not registered as a result of the limitation imposed by
such managing underwriter or the voluntary withdrawal of any such shares from
registration by the holder thereof.
(d) The Company shall be entitled to include in any registration
statement referred to in this Section 4.02, for sale in accordance with the
method of disposition specified by the requesting holders, shares of Common
Stock to be sold by the Company for its own account, except as and to the extent
that, in the opinion of the managing underwriter (if such method of disposition
shall be an underwritten public offering), such inclusion would adversely affect
the marketing of the Restricted Shares to be sold. Except for registration
statements on Forms S-4, S-8 or any successor thereto, the Company will not file
with the Commission any other registration statement with respect to its Common
Stock, whether for its own account or that of other stockholders, from the date
of receipt of a notice from requesting holders pursuant to this Section 4.02 90
days after the commencement of the public offering of the Restricted Shares
covered by the registration statement requested pursuant to this Section 4.02.
SECTION 4.03. Registration on Form S-3. If at any time (a) a holder
------------------------
or holders of 5% of the Voting Securities request that the Company file a
registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Restricted Shares held by such requesting
holder or holders, the reasonably
<PAGE>
22
anticipated aggregate price to the public of which would exceed $30,000,000, and
(b) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Restricted Shares specified in such notice.
Whenever the Company is required by this Section 4.03 to use its best efforts to
effect the registration of Restricted Shares, each of the procedures and
requirements of Section 4.02 and 4.04 (including but not limited to the
requirement that the Company notify all holders of Restricted Shares from whom
notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration, provided,
--------
however, the Company shall not be required to effect more than seven
- -------
registrations on Form S-3 which may be requested and obtained under this Section
4.03.
SECTION 4.04. Registration Procedures. If and whenever the Company
-----------------------
is required by the provisions of Sections 4.01, 4.02 or 4.03 to use its best
efforts to effect the registration of any Restricted Shares under the Securities
Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified in paragraph (i) below and
comply with the provisions of the Securities Act with respect to the
disposition of all Restricted Shares covered by such registration statement
in accordance with the sellers' intended method of disposition set forth in
such registration statement for such period;
(c) furnish to each seller of Restricted Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or
other disposition of the Restricted Shares covered by such registration
statement;
<PAGE>
23
(d) use its best efforts to register or qualify the Restricted Shares
covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Restricted Shares or, in the
case of an underwritten public offering, the managing underwriter
reasonably shall request; provided, however, that the Company shall not for
-------- -------
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Shares covered by
such registration statement with any securities exchange or market on which
the Common Stock of the Company, if applicable, is then listed or quoted;
(f) immediately notify each seller of Restricted Shares and each
underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(g) at the request of any seller of Restricted Shares, use its best
efforts to furnish on the date that Restricted Shares are delivered to the
underwriters for sale pursuant to such registration: (i) an opinion dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating
that such registration statement has become effective under the Securities
Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for
that purpose have been instituted or are pending or contemplated under the
Securities Act, (B) the registration statement, the related prospectus and
each amendment or supplement thereof comply as to form in all material
respects with the requirements of the Securities Act (except that such
counsel need not express any opinion as to financial statements contained
therein) and (C) to such other effects as reasonably may be requested by
counsel
<PAGE>
24
for the underwriters or by such seller or its counsel and (ii) a letter
dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that
they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereof, comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other
financial matters (including information as to the period ending no more
than five business days prior to the date of such letter) with respect to
such registration as such underwriters reasonably may request;
(h) (i) make available for inspection by each seller of Restricted
Shares, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent
retained by such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, (ii) cause the
Company's officers, Directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant
or agent in connection with such registration statement and (iii) provide
each seller and its counsel with the opportunity to participate in the
preparation of such registration statement;
(i) with respect to any registration statement pursuant to which
Restricted Shares are to be sold pursuant to Sections 4.01, 4.02 or 4.03,
the Company shall use its best efforts to cause such registration statement
to become and remain effective for 180 days; and
(j) enter into such agreements and take such other actions as the
sellers of Restricted Shares and the underwriters reasonably request in
order to expedite or facilitate the disposition of such Restricted Shares
including, without limitation, preparing for and participating in, such
number of "road shows" and all such other customary selling efforts as the
underwriters reasonably request in order to expedite or facilitate such
disposition.
<PAGE>
25
In connection with each registration hereunder, the sellers of
Restricted Shares will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with Federal and applicable
state securities laws.
In connection with each registration pursuant to Sections 4.01, 4.02
or 4.03 covering an underwritten public offering, the Company and each seller
agree to enter into a written agreement with the managing underwriter selected
in the manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature (it being
understood that the Company will not require a selling stockholder to make any
representation, warranty or agreement in such agreement other than with respect
to such stockholder, the ownership of such stockholder's securities being
registered and such stockholder's intended method of disposition). The
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of the underwriters in such written agreement
with the underwriters shall also be made to and for the benefit of the selling
stockholders. In the event that any condition to the obligations under any such
written agreement with the underwriters are not met or waived, and such failure
to be met or waived is not attributable to the fault of the selling stockholders
requesting a demand registration pursuant to Sections 4.02 and 4.03, such
request for registration shall not be deemed exercised for purposes of
determining whether such registration has been effected for purposes of Section
4.02 or 4.03.
SECTION 4.05. Expenses. Notwithstanding Section 10.10 of the
---------
Exchange Agreement, all expenses incurred by the Company in complying with
Sections 4.01, 4.02 or 4.03, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fees and disbursements of one counsel for the sellers of Restricted Shares, but
excluding any Selling Expenses, are called "Registration Expenses". All
---------------------
underwriting discounts and selling commissions applicable to the sale of
Restricted Shares are called "Selling Expenses".
----------------
<PAGE>
26
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 4.01, 4.02 or 4.03. All Selling Expenses
in connection with each registration statement under Sections 4.01, 4.02 or 4.03
shall be borne by the participating sellers in proportion to the number of
shares sold by each, or by such participating sellers other than the Company
(except to the extent the Company shall be a seller) as they may agree.
SECTION 4.06. Indemnification and Contribution. (a) In the event of
---------------------------------
a registration of any of the Restricted Shares under the Securities Act pursuant
to Sections 4.01, 4.02 or 4.03, the Company will indemnify and hold harmless
each seller of such Restricted Shares thereunder, each underwriter of such
Restricted Shares thereunder and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Shares were registered under the Securities Act
pursuant to Sections 4.01, 4.02 or 4.03, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing by such seller, such
underwriter or such controlling person specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Restricted Shares
under the Securities Act pursuant to Sections 4.01, 4.02 or 4.03, each seller of
such Restricted Shares thereunder, severally and not jointly, will indemnify and
hold harmless the Company, each person, if any, who
<PAGE>
27
controls the Company within the meaning of the Securities Act, each officer of
the Company who signs the registration statement, each Director of the Company,
each underwriter and each person who controls any underwriter within the meaning
of the Securities Act, against all losses, claims, damages or liabilities, joint
or several, to which the Company or such officer, Director, underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Restricted Shares were registered under the Securities Act pursuant
to Sections 4.01, 4.02, or 4.03, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, Director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that such seller will be
-------- -------
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus; and
provided further, however, that the liability of each seller hereunder shall be
- -------- ------- -------
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Shares covered
by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 4.06 and
<PAGE>
28
shall only relieve it from any liability which it may have to such indemnified
party under this Section 4.06 if and to the extent the indemnifying party is
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 4.06 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that, if the defendants in any such action
-------- -------
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any
indemnified party exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 4.06 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 4.06
provides for indemnification in such case, (ii) contribution under the
Securities Act may be required on the part of any such selling holder or any
such controlling person in circumstances for which indemnification is provided
under this Section 4.06, or (iii) the indemnification provided for by this
Section 4.06 is insufficient to hold harmless an indemnified party, other than
by reason of the exceptions provided therein; then, and in each such case, the
Company and such holder will contribute to the aggregate losses,
<PAGE>
29
claims, damages or liabilities to which they may be subject (after contribution
from others) (x) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party on the
other or (y) if the allocation provided by clause (x) above is not permitted by
Applicable Law, or provides a lesser sum to the indemnified party than the
amount hereinafter calculated, in such proportion as is appropriate to reflect
not only the relative fault referred to in clause (x) above but also the
relative benefits received by the indemnifying party and the indemnified party
from the offering of the securities (taking into account the portion of the
proceeds of the offering received by each such party) as well as the statements
or omissions which resulted in such losses, claims, damages or liabilities and
any other relevant equitable considerations. No person will be required to
contribute any amount in excess of the proceeds received by such person in
respect of all such Restricted Shares offered and sold by it pursuant to such
registration statement and no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
SECTION 4.07. Changes in Common Stock; Successors. (a) If, and as
------------------------------------
often as, there is any change in the Common Stock or Class A Stock by way of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or Class A Stock as so changed.
(b) If the Company consolidates or merges into or with, another person
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or a
majority of its assets to any person or group, or any person or group
consolidates with, or merges into or with, the Company, each Stockholder shall,
as a condition to the relevant transaction involving such person, group or
successor in business, be granted by such person, group or successor in business
(each a "Successor"), equivalent rights to the rights granted in this Agreement;
---------
provided, that in the case of a Successor which becomes a Successor in a
- --------------
transaction which constitutes a Business Combination (as such term is defined in
the Governance Agreement), such rights shall not include those granted under
Article III of this Agreement.
<PAGE>
30
SECTION 4.08. Rule 144 Reporting. With a view to making available
-------------------
the benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Restricted Shares to the public without registration, at
all times 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Shares forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents so filed by the Company as such holder
may reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Restricted Shares without
registration.
SECTION 4.09. Suspension of Registration Obligations.
---------------------------------------
Notwithstanding the provisions of Section 4.04(a), (i) the Company's obligation
to file a registration statement, or cause such registration statement to become
and remain effective (a) may be suspended on one occasion for a period not to
exceed 180 days if there exists at the time material nonpublic information
relating to the Company which, in the reasonable opinion of the Company, should
not be disclosed and (b) shall not apply for the period which begins seven days
prior to and ends 90 days after the commencement of a public offering of the
Common Stock, so long as the Company has fulfilled its notice obligations under
Sections 4.01, 4.02 or 4.03 with respect to such offering and (ii) if a public
offering of the Common Stock has been previously commenced, neither the Company
nor any controlling person of the Company shall commence another public offering
of the Common Stock until 90 days after the commencement of such prior offering.
SECTION 4.10. Transferability of Registration Rights; Termination.
----------------------------------------------------
(a) Registration rights conferred
<PAGE>
31
herein on the holders of Restricted Shares shall only inure to the benefit of a
Prospective Transferee who becomes a party to this Agreement pursuant to Section
2.05.
(b) The obligations of the Company to register shares of Restricted
Shares under Sections 4.01, 4.02 or 4.03 shall terminate as to each Stockholder,
on the later of (i) the sixth anniversary of the date of this Agreement and (ii)
such Stockholder's percentage (together with the percentage of Voting Securities
held by any member(s) of such Stockholder's Group) of Voting Securities falling
below 5%.
SECTION 4.11. Other Registration Rights. The Company has not granted
--------------------------
and shall not grant to any third party any registration rights more favorable
than or inconsistent with any of those contained herein, so long as any of the
registration rights under this Agreement remains in effect.
SECTION 4.12. Successors to the Company. The Company shall procure
--------------------------
that each of the Stockholders shall be granted by any Newco equivalent rights to
the rights contained in this Agreement as a condition to any transaction
involving the creation of such a Newco.
ARTICLE V
Tag-Along Rights
----------------
SECTION 5.01. General Restriction. Except as set forth in the
--------------------
Governance Agreement in the case of the TDF Group and except for transfers
within the TDF Group, the Candover Group, the Crown Group, the Berkshire Group,
the Centennial Group and the Nassau Group, no Stockholder shall transfer any
Shares without complying with the terms and conditions set forth in Section
5.02.
SECTION 5.02. Tag-Along. (a) Except in the case of the IPO, any
----------
registered sale of securities under the Securities Act or any other sales of
securities on the market, if at any time Stockholders holding at least 2% of the
Voting Securities of the Company (the "Initiating Stockholder(s)") shall
-------------------------
determine to sell or transfer (in a business combination or otherwise) 2% or
more of the Voting Securities then issuable or outstanding in one or a series of
bona fide arm's-length transactions to a third party who is not an Affiliate of
any of the Initiating Stockholders, the Initiating Stockholders shall give not
less than 30 days' prior written notice of such intended transfer to
<PAGE>
32
each of the other Stockholders (individually, a "Participating Offeree" and
---------------------
collectively, the "Participating Offerees") and to the Company. Such notice (the
----------------------
"Participation Notice") shall set forth the terms and conditions of such
--------------------
proposed transfer, including the name of the prospective transferee, the number
of Shares proposed to be transferred (the "Participation Securities") by the
------------------------
Initiating Stockholders, the purchase price per Share proposed to be paid
therefor, and the payment terms and type of transfer to be effectuated. Within
20 days following the delivery of the Participation Notice by the Initiating
Stockholders to each Participating Offeree and to the Company, each
Participating Offeree may, by notice in writing to the Initiating Stockholders
and to the Company, have the opportunity and the right to sell to the purchasers
in such proposed transfer (upon the same terms and conditions as the Initiating
Stockholders) up to that number of Shares owned by such Participating Offeree as
shall equal the product of (i) a fraction, the numerator of which is the number
of Shares owned by such Participating Offeree as of the date of such proposed
transfer and the denominator of which is the aggregate number of Shares owned as
of the date of such Participation Notice by the Initiating Stockholders and by
all Participating Offerees, multiplied by (ii) the number of Participation
Securities. The amount of Participation Securities to be sold by the Initiating
Stockholders shall be reduced to the extent necessary to provide for such sales
of Shares by Participating Offerees.
(b) At the closing of any proposed transfer in respect of which a
Participation Notice has been delivered, the Initiating Stockholders, together
with all Participating Offerees electing to sell Shares, shall deliver to the
proposed transferee certificates evidencing the Shares to be sold thereto duly
endorsed with stock powers and shall receive in exchange therefor the
consideration to be paid or delivered by the proposed transferee in respect of
such Shares as described in the Participation Notice.
(c) (i) the provisions of this Section 5.02 shall not apply to sales
pursuant to Sections 4.01, 4.02 and 4.03 of this Agreement and (ii) the
provisions of this Article V shall not apply to any transfer by a Stockholder to
(x) an Affiliate or limited partner of such Stockholder or (y) the Company.
<PAGE>
33
ARTICLE VI
Miscellaneous
-------------
SECTION 6.01. Survival of Warranties. The covenants, agreements,
-----------------------
representations and warranties of the parties contained herein or in any
certificate or other document delivered pursuant hereto or in connection
herewith shall survive the Closing and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any party hereto.
SECTION 6.02. Reasonable Efforts; Further Actions. The parties
------------------------------------
hereto each will use all reasonable efforts to take or cause to be taken all
action and to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
SECTION 6.03. Consents. The parties hereto will cooperate, with each
---------
other in filing any necessary applications, reports or other documents with,
giving any notices to, and seeking any consents from, all regulatory bodies and
all governmental agencies and authorities and all third parties as may be
required in connection with the consummation of the transactions contemplated by
this Agreement.
SECTION 6.04. Amendment and Waiver. This Agreement may not be
---------------------
amended, supplemented or discharged, and no provision hereof may be modified or
waived, except by the mutual agreement of the parties hereto. No waiver of any
provision hereof by any party shall constitute a waiver thereof by any other
party nor shall any such waiver constitute a continuing waiver of any matter by
such party.
SECTION 6.05. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, each of which shall be deemed an original but which together
shall constitute but one instrument. It shall not be necessary for each party
to sign each counterpart so long as every party has signed at least one
counterpart.
SECTION 6.06. Notices. All notices, requests, demands, waivers and
--------
other communications required or permitted to be given under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its
<PAGE>
34
address or facsimile number given below (or at such other address or facsimile
number for such party as shall be specified by notice given hereunder):
If to the Company: Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, TX 77057
Fax: (713) 570-3150
Attn: President
with a copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Fax: (212) 474-3700
Attn: Stephen L. Burns, Esq.
If to the Crowns: Robert A. Crown
Barbara A. Crown
c/o Crown Communication Inc.
375 Southpointe Blvd.
Canonsburg, PA 15317
Fax: (724) 416-2200
with a copy to: Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Fax: (412) 355-6501
Attn: Charles J. Queenan, Jr.,Esq.
If to the Initial
Stockholder: Ted B. Miller, Jr.
510 Bering, Suite 500
Houston, TX 77056
Fax: (713) 570-3150
If to any
Stockholder: At the address of such Stockholder
listed on Schedule I
with a copy (in the case of any Berkshire Party, any Centennial Party, any
Nassau Party, PNC Venture Corp.,
<PAGE>
35
Fay, Richwhite Communications Limited, New York Life Insurance Company,
American Home Assurance Company or The Northwestern Mutual Life Insurance
Company) to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Fax: (617) 951-1295
Attn: Harry A. Hanson III, Esq.
If to TDF: TeleDiffusion de France
International S.A.
10 Rue d'Oradour-sur-Glane
75732 Paris 15
France
Fax: 155 95 2066
Attn: Michel Azibert
with a copy to: Allen & Overy
One New Change
London EC4M 9QQ
Fax: 44 171 330 9999
Attn: Michael P. Scargill, Esq.
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed to be received or the validity of such facsimile notice.
SECTION 6.07. Binding Effect; Assignment. This Agreement and all of
---------------------------
the provisions hereof shall be binding upon and shall inure to the benefit of
the parties and their respective successors and permitted assigns. Except as
otherwise specifically provided for in this Agreement, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned,
directly or indirectly, including, without limitation, by operation of law, by
any party hereto without the prior written consent of the other parties hereto
(it being understood that TDF
<PAGE>
36
may not transfer to any person (other than to any of its Affiliates which
becomes a party to the Agreement and to whom there is transferred any Voting
Securities of the Company), by operation of law or otherwise, any right of TDF
hereunder which arises as a result of TDF being Qualified without the prior
written consent of the Company); provided, that TDF shall be entitled to
transfer any of its rights under this Agreement to any of its Affiliates subject
to any condition or obligation in connection with such right provided hereunder,
so long as such Affiliate agrees to become a party to this Agreement and such
Affiliate is a holder of the whole or any part of the TDF Group Interest or the
TDF Consolidated Group Interest, as applicable.
SECTION 6.08. Entire Agreement. This Agreement, the other
-----------------
Transaction Documents and the schedules, exhibits and other documents and
agreements referred to herein and therein or delivered pursuant hereto or
thereto which form a part hereof or thereof constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
This Agreement supersedes, replaces and renders null and void the Amended and
Restated Stockholders Agreement in its entirety.
SECTION 6.09. No Third Party Beneficiaries. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits, claims, liabilities, causes of action or remedies of any
nature whatsoever under or by reason of this Agreement.
SECTION 6.10. Expenses. Except as otherwise provided for in Section
---------
4.05, each of the parties hereto shall pay its own costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby,
including the fees and expenses of counsel, irrespective of when incurred.
SECTION 6.11. Applicable Law and Jurisdiction; Service of Process.
----------------------------------------------------
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York; provided, however, that the terms and conditions of
-------- -------
this Agreement relating to the internal affairs of the Company shall be
construed in accordance with and governed by the law of the State of Delaware.
<PAGE>
37
(b) Each of the parties to this Agreement hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(c) Each of the parties hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each of the parties to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 6.06. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 6.12. Waiver of Jury Trial. Each party hereto hereby waives,
---------------------
to the fullest extent permitted by Applicable Law, any right it may have to a
trial by jury in any legal proceeding directly or indirectly arising out of or
relating to this Agreement or the transactions contemplated hereby or thereby
(whether based on contract, tort or any other theory). Each party hereto (a)
certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
agreement by, among other things, the mutual waivers and certifications in this
Section.
<PAGE>
38
SECTION 6.13. Article and Section Headings. The article, section and
-----------------------------
other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
SECTION 6.14. Termination. This Agreement may be terminated by the
------------
mutual consent of the parties hereto.
SECTION 6.15. Specific Enforcement. The parties hereto acknowledge
---------------------
and agree that irreparable damage would occur in the event any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached for which money damages would not be an adequate remedy.
It is accordingly agreed that, so long as permitted by Applicable Law, the
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof without the necessity of proving the inadequacy of money
damages as a remedy.
Section 6.16. Severability. Should any provision of this Agreement
-------------
for any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect and
the application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by law.
<PAGE>
39
IN WITNESS WHEREOF, each party hereto has executed this Agreement as
of the day and year first above written.
COMPANY: /s/ Kathy Broussard
CROWN CASTLE INTERNATIONAL CORP.
By: Kathy Broussard
--------------------------
Title: Vice President
-----------------------
<PAGE>
EXHIBIT 10.28
EXECUTION COPY
GOVERNANCE AGREEMENT (this "Agreement") dated as of the 21st
---------
day of August, 1998, among CROWN CASTLE INTERNATIONAL CORP.
(formerly named Castle Tower Holding Corp.), a Delaware
corporation (the "Company"), TELEDIFFUSION DE FRANCE
-------
INTERNATIONAL S.A. ("TDF"), a company incorporated in France, and
---
DIGITAL FUTURE INVESTMENTS B.V., a wholly owned indirect
subsidiary of TeleDiffusion de France S.A. and a company
organized under the laws of the Netherlands ("DFI (BV)").
--------
W I T N E S S E T H :
WHEREAS the Company, Castle Transmission Services (Holdings) Ltd.
("CTSH"), DFI (BV), TDF, and certain other shareholders of CTSH are parties to a
- ------
Share Exchange Agreement (the "Exchange Agreement") pursuant to which DFI (BV)
------------------
and such other shareholders have agreed, subject to the terms and conditions of
the Exchange Agreement, to exchange (the "Exchange") their shares of capital
--------
stock of CTSH for shares of Common Stock (as defined) of the Company; and
WHEREAS, as an inducement to TDF to enter into the Exchange Agreement,
the Company and TDF desire to enter into this Agreement upon the Closing to
provide for certain rights and obligations of the Company and TDF with respect
to the governance of the Company following the consummation of the Exchange.
NOW, THEREFORE, the Company and TDF, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
----------------------
capitalized terms shall have the meanings assigned to such terms as set forth
below:
"Affiliate" and "Associate", when used with reference to any person,
--------- ---------
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
Exchange Act, as in effect on the date of this Agreement.
<PAGE>
2
"Anti-dilutive Rights" shall have the meaning set forth in Section
--------------------
2.01(a).
A person shall be deemed the "beneficial owner" of, and shall be
----------------
deemed to "beneficially own", and shall be deemed to have "beneficial ownership"
---------------- --------------------
of:
(i) any securities that such person or any of such person's
Affiliates or Associates is deemed to "beneficially own" within the meaning
of Rule 13d-3 under the Exchange Act, as in effect on the date of this
Agreement; and
(ii) any securities (the "underlying securities") that such person or
---------------------
any of such person's Affiliates or Associates has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (written or
oral), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise (it being understood that such person
shall also be deemed to be the beneficial owner of the securities
convertible into or exchangeable for the underlying securities).
"Appraiser" shall have the meaning set forth in Section 5.01(b).
---------
"Asset Swap" shall mean the exchange of wholly owned assets for other
----------
wholly owned assets of a similar nature and tenure where the Fair Market Value
of the assets received is at least equal to the Fair Market Value of the assets
disposed of or, if less, the difference is received in cash and such cash
constitutes a "disposition" for purposes of Section 4.02(a)(iii) and Section
4.02(b)(v).
"BBC" shall mean The British Broadcasting Corporation.
---
"BBC Analogue Transmission Contract" shall mean the BBC Analogue
----------------------------------
Transmission Contract among the BBC and Castle Transmission International Ltd.
("CTI"), dated as of February 28, 1997.
---
"BBC Contracts" shall mean the BBC Analogue Transmission Contract
-------------
among the BBC and Castle Transmission International Ltd., dated as of February
28, 1997, and the BBC Digital Transmission Contract among the BBC and CTI, dated
as of February 10, 1998.
<PAGE>
3
"BBC Digital Transmission Contract" shall mean the BBC Digital
---------------------------------
Transmission Contract among the BBC and CTI, dated as of February 10, 1998.
"Berkshire Group" shall have the meaning given to such term in the
---------------
Stockholders Agreement.
"Board" shall mean the Board of Directors of the Company.
-----
"Board Agenda" shall mean the agenda to be supplied pursuant to
------------
Section 3.07(b) of the Stockholders Agreement to each director of the Company
prior to any meeting of the Board.
"Business Combination" shall mean any of the following: (i) the sale,
--------------------
lease, transfer, conveyance of other disposition (other than by way of merger or
consolidation), of all or substantially all of the assets of the Company and its
Subsidiaries, taken as whole, to any person or (ii) any transaction (including,
without limitation, any merger or consolidation) the consummation of which would
result in any person (other than any Newco) becoming, directly or indirectly,
the beneficial owner of more than 50% of the Voting Securities and/or Equity
Securities (other than Customary Preferred Stock) of the Company (measured in
the case of Voting Securities by Voting Power rather than number of shares).
"Business Day" shall mean any day that is not a Saturday, a Sunday, a
------------
bank holiday or any other day on which commercial banking institutions in New
York, New York, Paris, France, or London, England, are not generally open for
business.
"By-laws" shall mean the By-laws of the Company to be adopted with
-------
immediate effect upon the Closing, as amended from time to time in accordance
with the terms of this Agreement and applicable law.
"Candover-Berkshire Agreement" shall have the meaning set forth in the
----------------------------
Exchange Agreement.
"Charter" shall mean the certificate of incorporation of the Company
-------
to be adopted with immediate effect upon the Closing, as amended from time to
time in accordance with the terms of this Agreement and applicable law.
<PAGE>
4
"Class A Stock" shall mean the Company's Class A Common Stock, $.01
-------------
par value per share, as designated in the Charter.
"Closing" shall have the meaning given to such term in the Exchange
-------
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act and the
Exchange Act.
"Commitment Agreement" shall mean the Commitment Agreement, dated
--------------------
February 28, 1997, as amended, among the BBC, the Company, TDF and TeleDiffusion
de France, S.A.
"Common Stock" shall mean shares of the Company's common stock, par
------------
value $.01 per share, as designated in the Charter.
"Common Stock Call Price" shall mean the weighted average price per
-----------------------
share of Common Stock over the five trading days immediately preceding the
second anniversary of the date of the Closing.
"Company Call Right" shall have the meaning set forth in Section 6.02.
------------------
"Company CTSH Shares" shall mean the CTSH Shares beneficially owned by
-------------------
the Company.
"Company CTSH Warrants" shall mean the CTSH Warrants beneficially
---------------------
owned by the Company.
"Conditions Precedent" shall mean the conditions precedent set forth
--------------------
on Schedule B hereto.
"Conflicted Action" shall mean any Significant Action under Section
-----------------
4.01(b)(iii) or (iv) proposed to be entered into by the Board, which TDF has not
confirmed to the Company in writing prior to exercising its Veto right under
Section 4.01(b) that, to TDF's knowledge (after having made all reasonable
inquiries in the circumstances of appropriate management of the members of the
TDF Group), is not proposed to be entered into by any member of the TDF Group in
---
competition with, or to the exclusion of, the Company or any Subsidiary of the
Company.
<PAGE>
5
"Consolidated Cash Flow" shall mean, with respect to any person for
----------------------
any period, the consolidated net income of such person for such period plus (i)
provision for taxes based on income or profits of such person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such consolidated net income, plus (ii) consolidated
interest expense of such person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, noncash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with capital lease
obligations, imputed interest with respect to attributable Indebtedness,
commissions, discounts and other fees and charges incurred in respect of letters
of credit or bankers acceptance financings, and net payments (if any) pursuant
to hedging obligations), to the extent that any such expense was deducted in
computing such consolidated net income, plus (iii) depreciation, amortization
(including amortization of goodwill and other intangibles and other noncash
expenses (excluding any such noncash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period) of such person and
its Subsidiaries for such period to the extent that such depreciation,
amortization and other noncash expenses were deducted in computing such
consolidated net income, minus (iv) noncash items increasing such consolidated
net income for such period (excluding any items that were accrued in the
ordinary course of business), in each case on a consolidated basis and
determined in accordance with U.S. generally accepted accounting principles.
"CTSH Credit Agreement" shall mean the credit agreement dated February
---------------------
28, 1997, as amended as of May 21, 1997, among CTI as borrower, CTSH as
guarantor, the lenders listed therein, Credit Suisse First Boston as agent and
arranger and J.P. Morgan Securities Ltd. as coarranger, together with the
documents related thereto (including, without limitation, any guarantee
agreements and security documents).
"CTSH Option" shall have the meaning set forth in Section 5.01(a).
-----------
"CTSH Ordinary Shares" shall mean the ordinary shares of 1p each of
--------------------
CTSH.
"CTSH Per Share Value" shall have the meaning set forth in Section
--------------------
5.01(a).
<PAGE>
6
"CTSH Preference Shares" shall mean the redeemable preference shares
----------------------
of 1p each of CTSH.
"CTSH Shares" shall mean the CTSH Ordinary Shares and the CTSH
-----------
Preference Shares.
"CTSH Shareholders Agreement" shall have the meaning set forth in the
---------------------------
Exchange Agreement.
"CTSH Warrants" shall mean the warrants dated February 28, 1997,
-------------
entitling TDF to subscribe for 257,000 CTSH Ordinary Shares and 257,242,500 CTSH
Preference Shares and the Company to subscribe for 515,000 CTSH Ordinary Shares
and 514,485,000 CTSH Preference Shares.
"Customary Preferred Stock" shall mean cash settled, non-convertible,
--------------------------
non-voting preferred stock of the Company, with no rights of governance, no
board representation rights (other than customary rights in connection with a
default), which is not a "tracking" stock and which carries a simple, pre-set
fixed percentage rate of yield dividend.
"Debt to Adjusted Consolidated Cash Flow Ratio" shall mean, as of any
---------------------------------------------
date of determination, the ratio of (a) the Indebtedness of the Company as of
such date to (b) the sum of (1) the Consolidated Cash Flow of the Company for
the four most recent full fiscal quarters ending immediately prior to such date
for which internal financial statements are available, less the Company's Tower
Cash Flow for such four-quarter period, plus (2) the product of four times the
Company's Tower Cash Flow for the most recent quarterly period (such sum being
referred to as "Adjusted Consolidated Cash Flow"), in each case determined on a
-------------------------------
pro forma basis after giving effect to all acquisitions or dispositions of
assets made by the Company and its Subsidiaries from the beginning of such four-
quarter period through and including such date of determination (including any
related financing transactions) as if such acquisitions and dispositions had
occurred at the beginning of such four-quarter period. For purposes of making
the computation referred to above, (i) acquisitions that have been made by the
Company or any of its Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the reference period or
subsequent to such reference period and on or prior to the calculation date
shall be deemed to have occurred on the first day of the reference period and
Consolidated Cash Flow for such reference period shall be calculated, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with U.S. generally
<PAGE>
7
accepted accounting principles, and operations or businesses disposed of prior
to the calculation date, shall be excluded.
"Equity Security" shall mean any security (whether or not a Voting
---------------
Security) which is an ordinary share, a preferred share (other than a preferred
share which is mandatorily redeemable for cash or mandatorily exchangeable for
debt securities) or a common share or is classified as an equity security under
U.S. generally accepted accounting principles, or any securities convertible or
exchangeable for any such equity security.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar Federal securities statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Exchange Agreement" shall mean the Share Exchange Agreement dated as
------------------
of April 24, 1998, among the Company, CTSH, TDF, and DFI (BV).
"Exchange Ratio" shall mean in the case of each CTSH Shareholder, 1.4
--------------
shares of Common Stock, and in the case of DFI (BV) and TDF, 1.4 shares of Class
A Stock, for (a) 1 CTSH Ordinary Share, 1p per share, together with 999 CTSH
Preference Shares, 1p per share, as adjusted pursuant to Section 1.2 of the
Exchange Agreement or (b) in the event that the CTSH Preference Shares are
redesignated into CTSH Ordinary Shares on a "one for one" basis, 1000 CTSH
Ordinary Shares, 1p per share, as adjusted pursuant to Section 1.02 of the
Exchange Agreement.
"Exercise Price" shall have the meaning set forth in Section
--------------
5.01(a)(i).
"Fair Market Value" shall mean, as to any property, the cash price at
-----------------
which a willing seller would sell and a willing buyer would buy such property in
an arms'-length negotiated transaction without time constraints.
"Indebtedness" shall mean all obligations, without duplication,
------------
(including without limitation hedging obligations), contingent and otherwise,
which should, in accordance with U.S. generally accepted accounting principles
consistently applied, be classified upon the obligor's consolidated balance
sheet as liabilities, including, without limitation, liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, and also
including, without limitation, (i) all
<PAGE>
8
guaranties, endorsements and other contingent obligations, in respect of
Indebtedness of others, whether or not the same are or should be so reflected in
the said balance sheet, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (ii) a preferred share which is mandatorily redeemable for
cash or exchangeable for debt securities and (iii) the present value of any
lease payments due under leases required to be capitalized in accordance with
applicable Statements of Financial Accounting Standards, determined in
accordance with applicable Statements of Financial Accounting Standards;
provided that the foregoing shall not include any such obligations with respect
- --------
to trade payables under 90 days old.
"Independent Director" shall have the meaning given to such term in
--------------------
the Stockholders Agreement.
"Initial Investors" shall mean, in each case as defined in the
-----------------
Stockholders Agreement, the Berkshire Group, the Centennial Group and the Nassau
Group.
"IPO" shall have the meaning set forth in the Exchange Agreement.
---
"Maintenance Securities" shall have the meaning set forth in Section
----------------------
2.01(a).
"Material Adverse Effect" shall mean, with respect to any person, a
-----------------------
material adverse effect on the business, financial condition or results of
operations of such person.
"Newco" shall mean any person which becomes a holding company of the
-----
Company all the shares in which (other than shares not exceeding the Relevant
Percentage) are held by the same persons as were stockholders in the Company
prior to such person becoming a holding company of the Company.
"Option Exercise Period" shall have the meaning set forth in Section
----------------------
5.01(a).
"Option Notice" shall have the meaning set forth in Section 5.01(a).
-------------
"Permitted Business Line" shall mean (i) the ownership, operation or
-----------------------
management (for third party owners or otherwise) of terrestrial wireless
communication (including without limitation voice, data and video)
infrastructure (including equipment and facilities
<PAGE>
9
principally related thereto) and (ii) the provision of infrastructure services
principally relating thereto, including but not limited to network transmission
and services (it being understood for the avoidance of doubt that the
transmission of radio and television broadcasting shall be within the foregoing
definition).
"Permitted Indebtedness" shall mean any of the following items of
----------------------
Indebtedness of the Company or any of its Subsidiaries: (i) any Indebtedness
under the Senior Credit Facility up to an aggregate principal amount of $100
million outstanding at any one time; (ii) Indebtedness represented by the 10-
5/8% Senior Discount Notes due 2007 of the Company; (iii) Indebtedness under the
CTSH Credit Agreement up to an aggregate principal amount of (Pounds)85,000,000
outstanding at any one time; or (iv) Indebtedness represented by the 9%
Guaranteed Bonds due 2007 of CTSH.
"person" shall mean an individual, corporation, limited liability
------
company, partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof and shall include any
"group" (which shall have the meaning given to such term in Section 13(d)(3) of
the Exchange Act).
"Preferred Security" shall mean any Equity Security of the Company
------------------
which is designated as "preferred" in the Company's Charter.
"Public Offering" shall mean an underwritten public offering of Equity
---------------
Securities pursuant to an effective registration statement filed by the Company
with the Commission in accordance with the Securities Act.
TDF will be "Qualified" for purposes of this Agreement if (i) during
---------
the period from the date of the Closing to (and including) the second
anniversary of such date, (A) the TDF Consolidated Group Interest is not at any
---
time less than 10.5%,(B) a Business Combination has not at any time been
---
consummated and (C) there has not occurred a TDF Change of Control and (ii)
---
following the occurrence of such second anniversary without any loss of
Qualification by TDF under clauses (i)(A), (B) or (C) preceding, (A) the TDF Put
Right has been exercised by TDF on or prior to the second anniversary of the
Closing, or the Company Call Right has been exercised by the Company on such
second anniversary, (B) the TDF Group Interest is not at any time less than
---
10.5%, (C) a Business Combination has not at any time been consummated and (D)
---
there has not occurred a TDF Change of Control. Notwithstanding the foregoing,
---
TDF shall also be deemed to be Qualified for purposes of this
<PAGE>
10
Agreement in the circumstances set forth in Section 6.01(b) and 6.02(b).
"Relevant Percentage" shall mean 25%, or if the Company elects by
-------------------
notice in writing to TDF, 30%.
"Restricted Party" shall mean any of the entities listed in Schedule A
----------------
hereto, including any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar Federal securities statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Senior Credit Facility" shall mean that certain Loan Agreement dated
----------------------
as of April 26, 1995, as amended by the First Amendment to the Loan Agreement
dated as of June 26, 1996, the Second Amendment to Loan Agreement dated as of
January 17, 1997, the Third Amendment to Loan Agreement dated as of April 3,
1997, the Fourth Amendment to Loan Agreement dated as of October 31, 1997, and
the Fifth Amendment to Loan Agreement dated as of November 24, 1997, by and
among Crown Communication Inc. (previously Castle Tower Corporation) and Crown
Castle International de Puerto Rico, as the borrowers, Key Bank National
Association, as agent, and PNC Bank, National Association, as arranger,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Senior Preferred Stock" shall mean the Company's Senior Convertible
----------------------
Preferred Stock, par value $.01 per share.
"Senior Preferred Warrants" shall mean the Company's Class B Common
-------------------------
Stock Warrants granted in connection with the issuance of the Senior Preferred
Stock.
"Significant Action" shall have the meaning set forth in Section
------------------
4.01(b).
"Simple Majority Event" shall mean any vote of the Board under the
---------------------
following circumstances: (i) following the second anniversary of the Closing,
six Independent Directors having been duly elected to, and qualified on, the
Board (which Board then contains no less than two Directors designated for
nomination by the Initial Investors) who are present, in person or by proxy, and
voting, provided, however, that one existing Independent Director (other than
-------- -------
<PAGE>
11
the Independent Director initially appointed by TDF pursuant to 3.02(a)(viii) of
the Stockholders Agreement) is replaced, (ii) seven Independent Directors having
been duly elected to, and qualified on, the Board who are present, in person or
by proxy, and voting, provided, however, that one existing Independent Director
-------- -------
(other than the Independent Director initially appointed by TDF pursuant to
3.02(a)(viii) of the Stockholders Agreement) is replaced or (iii) any vote of
the Board after the fifth anniversary of the date of the Closing.
"Special Business Combination" shall mean the occurrence of any event
----------------------------
or circumstance described in clause 13.5.1 of the Analogue Transmission Contract
(other than a breach by TDF of the Commitment Agreement) or clause 12.7.1 of the
Digital Transmission Contract in relation to any holding company (as defined in
Section 736 of the UK Companies Act 1985) of CTSH or a bona fide unsolicited
written offer to acquire a percentage of the Equity Securities of the Company
which, if it were to be consummated or otherwise allowed to occur without the
consent or approval of the BBC, would or might result in the BBC having the
right to terminate any BBC Contract in accordance with the terms of clauses
13.5.1 of the BBC Analogue Transmission Contract or clauses 12.7.1 of the BBC
Digital Transmission Contract.
"Special Majority Vote of the Board" shall mean (i) approval by two-
----------------------------------
thirds of the entire Board (it being understood that in the event that two-
thirds shall not be a whole number, such two-thirds number shall be rounded up
to the next integral number) or (ii) at such time as one existing Independent
Director (other than the Independent Director initially appointed by TDF
pursuant to 3.02(a)(viii) of the Stockholders Agreement) is replaced and five
Independent Directors shall have been duly elected and shall have qualified and
shall be present, in person or by proxy, and voting, approval by two-thirds of
the entire Board (it being understood that in the event that two-thirds number
shall not be a whole number, such two-thirds number shall be rounded down to the
next integral number); provided, however, that so long as the number of
-------- -------
directors constituting the entire Board is twelve, (a) under the circumstances
in clause (i) above, "Special Majority Vote of the Board" shall mean the
approval of nine directors and (b) under the circumstances in clause (ii) above,
"Special Majority Vote of the Board" shall mean the approval of eight directors.
<PAGE>
12
"Statement of Financial Accounting Standards" shall mean statements
-------------------------------------------
and pronouncements of the U.S. Financial Accounting Standards Board.
"Stockholder" shall mean any Stockholder which is a party to the
-----------
Stockholders Agreement.
"Stockholders Agreement" shall mean the Stockholders Agreement, dated
----------------------
as of August 21, 1998, among the Company, TDF and the other stockholders of the
Company named in Schedule I thereto.
"Strategic Alliance" shall mean any merger, consolidation, joint
------------------
venture, cooperative agreement or arrangement or co-ownership with, or
investment by or in any person. Strategic Alliance shall not, however, include
any purchase, lease or disposition for cash to or from any such person of all
but not part of certain of the assets (other than securities or other interests
in any person) of such person. If such Strategic Alliance also constitutes a
Business Combination, such Strategic Alliance shall be deemed to be only a
Business Combination for all purposes of this Agreement.
"Subsidiary" or "Subsidiaries" when used with respect to any person
---------- ------------
shall mean (i) any other person, whether incorporated or unincorporated, which
is either required to be consolidated with such person under U.S. generally
accepted accounting principles or (ii) is an affiliate controlled by such
person, directly or indirectly, through one or more intermediaries within the
meaning of Rule 1.02(x) of Regulation S-X under the Exchange Act.
"TDF Change of Control" shall occur if (i) TeleDiffusion de France
---------------------
S.A. ("TDF Parent") does not own, directly or indirectly, at least 30% of TDF,
----------
and any other person owns, directly or indirectly, 30% or more of TDF or (ii)
France Telecom does not own, directly or indirectly, at least 30% of TDF Parent,
and any other person owns, directly or indirectly, 30% or more of TDF Parent and
in each case, such other person conducts a core business in the Company's
Permitted Business Line in a geographic area in which the Company conducts more
than de-minimis business in its Permitted Business Line at the time of the
occurrence of the circumstances described in the preceding clauses (i) or (ii).
"TDF Consolidated Group Interest" shall mean the percentage of Voting
-------------------------------
Power that is controlled directly or indirectly by the TDF Group or would be
controlled directly
<PAGE>
13
or indirectly by the TDF Group on the exercise of the TDF Put Right (assuming
the exercise of the TDF CTSH Warrants).
"TDF CCIC Warrants" shall mean the warrants issued to TDF upon the
-----------------
exercise of the TDF Put Right in exchange for, and on substantially the same
terms (except with respect to the conversion ratio in respect thereof) as, the
TDF CTSH Warrants.
"TDF CTSH Shares" shall mean the CTSH Shares beneficially owned by the
---------------
TDF Group.
"TDF CTSH Warrants" shall mean the CTSH Warrants beneficially owned by
-----------------
TDF.
"TDF Designees" shall have the meaning set forth in the Stockholders
-------------
Agreement.
"TDF Group" shall mean TDF and its Affiliates (other than the Company
---------
and its Subsidiaries).
"TDF Group Interest" shall mean the percentage of Voting Power that is
------------------
controlled, directly or indirectly, by the TDF Group or would be controlled,
directly or indirectly, by the TDF Group (assuming the exercise of the TDF CCIC
Warrants).
"TDF Non-Voting Equity Interest" shall have the meaning set forth in
------------------------------
Section 2.01(a).
"TDF Put Notice" shall have the meaning set forth in Section 6.01(a).
--------------
"TDF Put Right" shall have the meaning set forth in Section 6.01(a).
-------------
"TDF Put Shares" shall have the meaning set forth in Section 6.01(a).
--------------
"TDF Rollup" shall mean the earlier to occur of (i) the closing of the
----------
TDF Put Right pursuant to Section 6.01(b) and (ii) the closing of the Company
Call Right pursuant to Section 6.02(b).
"Total Enterprise Value" of any person shall mean, as of any date of
----------------------
determination, the sum (without duplication) of (i) the Total Equity Market
Capitalization of such person and (ii) the Indebtedness of such person.
"Total Equity Market Capitalization" of any person shall mean, as of
----------------------------------
any day of determination, the sum of
<PAGE>
14
(i) the product of (A) the aggregate number of outstanding shares of Equity
Securities of such person on such day (which shall include any options or
warrants on, or securities convertible or exchangeable into, shares of Equity
Securities of such person) multiplied by (B) the average closing price of such
common stock listed on the New York Stock Exchange, the American Stock Exchange
or Nasdaq over the 20 consecutive Business Days immediately preceding such day,
plus (ii) the liquidation value of any outstanding shares of preferred stock of
such Person on such day, which preferred stock does not constitute Indebtedness
for purposes hereof.
"Tower Cash Flow" shall mean, for any period, the Consolidated Cash
---------------
Flow of the Company and its Subsidiaries for such period that is directly
attributable to site rental revenue or license fees paid to lease or sublease
space on communication sites owned or leased by the Company, all determined on a
consolidated basis and in accordance with U.S. generally accepted accounting
principles. Tower Cash Flow shall not include revenue or expenses attributable
to non-site rental services provided by the Company or any of its Subsidiaries
to lessees of communication sites or revenues derived from the sale of assets.
"Transaction Documents" shall have the meaning set forth in the
---------------------
Exchange Agreement.
"Unsolicited Offer" shall mean (i) a bona fide unsolicited written
-----------------
offer by any person to acquire Voting Securities and/or Equity Securities (other
than Customary Preferred Stock) of the Company (measured in the case of Voting
Securities by Voting Power rather than number of shares), which, if consummated,
or (ii) any acquisition by any person of any such Securities which, when
consummated, results in such person beneficially owning, directly or indirectly,
more than the Relevant Percentage of the Voting Securities and/or Equity
Securities (other than Customary Preferred Stock) of the Company.
"Voting Power", when used with reference to any class or series of
------------
securities of the Company, or any classes or series of securities of the Company
entitled to vote together as a single class or series, shall mean the power of
such class or series (or such classes or series) to vote for the election of
directors. For purposes of determining the percentage of Voting Power of any
class or series (or classes or series) beneficially owned by any person, any
securities not outstanding which are subject to conversion rights, exchange
rights, rights, warrants, options or similar securities held by such person
shall be deemed to be
<PAGE>
15
outstanding for the purpose of computing the percentage of outstanding
securities of the class or series (or classes or series) beneficially owned by
such person, but shall not be deemed to be outstanding for the purpose of
computing the percentage of the class or series (or classes or series)
beneficially owned by any other person.
"Voting Securities", when used with reference to any person, shall
-----------------
mean any securities of such person having Voting Power or any securities
convertible into or exchangeable for any securities having Voting Power.
SECTION 1.02. Securities Outstanding. In determining the number or
-----------------------
other amount outstanding of any securities of the Company or the percentage of
Voting Power of any class or series beneficially owned by such person,
securities owned by the Company or any of its Subsidiaries shall be deemed to be
not outstanding.
ARTICLE II
Anti-dilution
-------------
SECTION 2.01. Anti-dilutive Rights. (a) Except as provided in
---------------------
Section 2.01(c) below, so long as TDF is Qualified, the Company shall not issue,
sell or transfer any Equity Securities to any person (other than in connection
with the IPO but only to the extent that the TDF Consolidated Group Interest is
not thereby reduced to less than 20%) unless TDF is offered in writing the right
to purchase, at the same price in cash for which such Equity Security is being
offered to such other person(s) (provided that if such Equity Security is being
--------
offered to such other person(s) for consideration other than cash or cash
equivalents, the price in cash for which such Equity Security is being offered
shall be deemed to be the Fair Market Value (as determined in good faith by the
Board) of such consideration as of the date of issuance of such Equity
Security), and on the same other terms proposed to be issued and sold (it being
understood that TDF shall have the benefit of any underwriting or similar
discount), an amount of such Equity Securities (the "Maintenance Securities") as
----------------------
is necessary for the TDF Group to maintain the TDF Consolidated Group Interest,
the TDF Group Interest and the TDF Non-Voting Equity Interest (as defined), as
applicable, as would exist immediately prior to such issuance (the "Anti-
----
dilutive Rights"); provided that, with respect to the initial issuance by the
- --------------- --------
Company following the date of this Agreement of Equity Securities which are not
Voting Securities, the TDF Non-Voting Equity Interest shall be
<PAGE>
16
deemed to be equal to the TDF Consolidated Group Interest or the TDF Group
Interest, as applicable, and thereafter "TDF Non-Voting Equity Interest" shall
------------------------------
mean the percentage of non-voting Equity Securities owned, directly or
indirectly, by the TDF Group. TDF shall have the right, during the period
specified in Section 2.01(b), to accept the offer for any or all of the
Maintenance Securities.
(b) If TDF does not deliver to the Company written notice of
acceptance of any offer made pursuant to Section 2.01(a) within 20 Business Days
after TDF's receipt of such offer, TDF shall be deemed to have waived its right
to purchase all or any part of the Maintenance Securities as set forth in such
offer but TDF shall retain its rights under this Article II with respect to
future offers.
(c) The Anti-dilutive Rights set forth above shall not apply to (i)
the grant or exercise of options to purchase Common Stock to employees,
directors or consultants of the Company or any of its Subsidiaries prior to the
date of the Exchange Agreement and listed on Schedule 6.32 to the Exchange
Agreement or otherwise pursuant to a stock option or similar executive employee
benefit plan in existence on the date hereof; (ii) the grant or exercise of
options to purchase Common Stock or the issuance of shares of Common Stock as
compensation in the ordinary course of business consistent with practice for
public companies of a size and nature (e.g., high growth companies), as
----
determined by approval of a Special Majority Vote of the Board with a statement
to such effect, as the Company to employees or directors of the Company or any
of its Subsidiaries or otherwise pursuant to a stock option or similar executive
or employee benefit plan adopted by the Board after the Closing in the ordinary
course of business consistent with such practice; (iii) the grant or exercise of
options to purchase or the issuance of Common Stock of the Company as
compensation in the ordinary course of business consistent with past practice to
consultants of the Company or any of its Subsidiaries representing not more than
1% of the aggregate amount of the Common Stock outstanding at the time of such
grant or issuance; (iv) the issuance of shares of Common Stock issuable upon
conversion of, or in respect of dividends on, the Senior Preferred Stock, or
upon exercise of the Senior Preferred Warrants; (v) securities issued pursuant
to any stock split, stock dividend, rights offering, recapitalization,
reclassification or similar transaction, which securities are issued pro rata
among, and pro rata within, all classes of stock which are subject to such stock
split, stock dividend, rights offering, recapitalization, reclassification or
similar transaction; (vi) securities issued upon conversion or exchange of any
<PAGE>
17
Equity Security in connection with which TDF had been granted Anti-dilutive
Rights upon the issuance thereof in accordance with Section 2.01(a); and (vii)
Voting Securities issued upon exercise of the Rights (as defined in the Exchange
Agreement) pursuant to the Rights Plan (as defined in the Exchange Agreement);
provided that the action referred to in clauses (ii), (iii) or (v) of this
- --------
Section 2.01(c), as the case may be, shall have been approved (to the extent
required) in accordance with the provisions of this Agreement.
(d) A closing for the purchase of Maintenance Securities pursuant to
Section 2.01(a) shall occur on the later of (i) the date on which such public or
private issuance occurs and (ii) such date as may be agreed to by TDF and the
Company, at a time and place specified by TDF in a notice provided to the
Company at least 10 days prior to such closing date. In connection with such
closing, the Company and TDF shall provide such customary closing certificates
and opinions as TDF or the Company, as appropriate, shall reasonably request.
ARTICLE III
Standstill
----------
SECTION 3.01. Standstill. Subject to Section 3.04, no member of the
-----------
TDF Group shall, without the prior written consent of the Board (not to be
unreasonably withheld or delayed):
(a) except as permitted under the Transaction Documents, acquire,
offer to acquire, or agree to acquire, by purchase, gift or otherwise, the
beneficial ownership of any Voting Securities of the Company if the TDF Group
Interest upon the consummation thereof would be greater than the Relevant
Percentage, except pursuant to a stock split, stock dividend, rights offering,
recapitalization, reclassification or similar transaction;
(b) except as contemplated by the Transaction Documents, publicly
propose that TDF or any member of the TDF Group enter into, directly or
indirectly, any Business Combination involving the Company or propose to
purchase, directly or indirectly, a material portion of the assets of the
Company or any Subsidiary of the Company, or make any such proposal privately
(other than any such proposal with respect to CTSH and its assets) if it would
reasonably be expected to require the Company to make a public announcement
regarding such proposal;
<PAGE>
18
(c) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms used in Regulation 14A promulgated
under the Exchange Act) to vote or consent with respect to any Voting Securities
of the Company in opposition to the recommendation of a Special Majority Vote
of the Board or become a "participant" in any "election contest" (as such terms
are defined or used in Rule 14a-11 under the Exchange Act) in opposition to the
recommendation of a Special Majority Vote of the Board;
(d) act in concert with any person for the purposes prohibited by
subparagraph (a) or (b) above;
(e) except in accordance with the terms of the Stockholders Agreement,
seek election to or seek to place a representative on the Board or seek the
removal of any member of the Board;
(f) (i) solicit, seek to effect, negotiate with or provide nonpublic
information to any other person with respect to or (ii) otherwise make any
public announcement or proposal whatsoever with respect to, any form of business
combination (with any person) involving a change of control of the Company or
the acquisition of a substantial portion of the Voting Securities and/or Equity
Securities or assets of the Company or any Subsidiary of the Company (except, in
the case of CTSH and its Subsidiaries, as permitted under Section 5.01 or the
CTSH Shareholders Agreement), including a merger, consolidation, tender offer,
exchange offer or liquidation of the Company assets, or any restructuring,
recapitalization or similar transaction with respect to the Company or any
Subsidiary of the Company; or
(g) publicly disclose any intention, plan or arrangement, or provide
advice or assistance to any person, inconsistent with the foregoing.
If TDF or any member of the TDF Group owns or acquires any Voting
Securities in violation of this Agreement, such Voting Securities shall
immediately be disposed of to persons who are not members of the TDF Group in
compliance with the provisions of this Agreement (but, for the avoidance of
doubt, if at any time the TDF Consolidated Group Interest or the TDF Group
Interest, as applicable, is increased to more than the Relevant Percentage as a
result of a repurchase of Voting Securities by the Company or any other change
in the Company's capitalization no Voting Securities shall be required to be
disposed of by any member of the TDF Group); provided that
--------
<PAGE>
19
the Company may also pursue any other available remedy to which it may be
entitled as a result of such violation.
SECTION 3.02. Transfer Restrictions. Subject to Section 3.04, TDF
----------------------
shall not, without the prior written consent of the Company, sell, or otherwise
dispose of, or agree to dispose of, any Voting Securities of the Company, or any
rights or options to acquire such Voting Securities, except pursuant to a
transaction contemplated by the Transaction Documents or otherwise in a
transaction, subject to Section 3.05, complying with any of the following
clauses:
(a) an underwritten public offering of shares of such Voting
Securities in a manner intended to effect a broad distribution;
(b) to any person (other than an underwriter which intends to effect a
broad distribution of such Securities) in a transaction that complies with
the volume and manner of sale provisions contained in Rules 144(e) and Rule
144(f) as in effect on the date hereof under the Securities Act (whether or
not Rule 144 is in effect on the date of such transaction);
(c) subject to Section 7.08, to any Affiliate of TDF; provided,
--------
however, that such transferee becomes a party to this Agreement;
-------
(d) to any person in a transaction which complies with the Securities
Act that TDF knows or, after commercially reasonable inquiry believes,
after giving effect to such sale, will beneficially own not more than the
greater of (x) 15% of the aggregate Voting Power of the Voting Securities
of the Company and (y) the percentage of Common Stock of the Company which
would result in any person (other than any member of the TDF Group or the
Berkshire Group (as defined in the Stockholders Agreement)), upon the
acquisition of the beneficial ownership of such percentage, constituting an
"Acquiring Person" under the Rights Plan (as defined in the Stockholders
Agreement), or any successor plan to such Rights Plan;
(e) in a bona fide pledge of shares of Voting Securities of the
Company to a financial institution to secure borrowings as permitted by
applicable laws, rules and regulations; or
(f) upon five Business Days' prior notice to the Company, pursuant to
the terms of any tender or
<PAGE>
20
exchange offer for Voting Securities of the Company made pursuant to the
applicable provisions of the Exchange Act or pursuant to any business
combination (provided that such tender or exchange offer is not materially
--------
related to any past noncompliance of Sections 3.01 and 3.03(a) by TDF).
SECTION 3.03. Voting. (a) Whenever (i) TDF shall have the right to
-------
vote any Voting Securities of the Company and (ii) any person shall have
initiated, proposed or otherwise solicited stockholders of the Company in a
"proxy-contest" or with respect to any proposal for the election of any member
to the Board, which in either case, the Board has recommended by a Special
Majority Vote receives a negative vote, TDF shall (a) be present, in person or
represented by proxy, at any stockholder meeting of the Company relating to such
contest or proposal for the purpose of determining the presence of a quorum at
such meeting or for such consent, and (B) vote or consent with respect to all
Voting Securities of the Company beneficially owned by it in the manner
recommended by a Special Majority Vote of the Board or, if so requested by a
Special Majority Vote of the Board, vote or cause to be voted all Voting
Securities of the Company beneficially owned by it in the same proportion as the
votes cast by or on behalf of the other holders of Voting Securities of the
Company.
(b) Subject only to Section 3.03(a), TDF shall have the right at any
time to vote any Voting Securities of the Company in its sole discretion.
SECTION 3.04. Time Limit. (a) Prior to any cessation of the
-----------
provisions of Sections 3.01, 3.02 and 3.03(a) pursuant to Section 3.04(b), the
provisions of Section 3.01 and Section 3.03 shall be suspended during any period
from the date of the commencement by any person (other than TDF or any member of
the TDF Group) of an Unsolicited Offer or a Special Business Combination to the
date of closing, abandonment or termination of all such Offers (including any
such Offer commenced by TDF or any member of the TDF Group following any
suspension of Sections 3.01 and 3.03 pursuant to this Section 3.04(a)) and shall
thereafter, subject to such Section 3.04(b), be reinstated as in effect prior to
the commencement of any such Unsolicited Offer or Special Business Combination,
as applicable.
<PAGE>
21
(b) The provisions of Sections 3.01, 3.02 and 3.03(a) shall cease
to apply after the fifth anniversary of the Closing or the earlier of:
(i) any person (other than any person who is a member of the
Berkshire Group who holds, in person or as a group, less than the amount
permitted to be held by the Berkshire Group without such person
constituting an "Acquiring Person" under the Rights Plan), beneficially
owns or controls 15% or more of the Voting Securities and/or 15% or more of
the outstanding Equity Securities (other than Customary Preferred Stock) of
the Company without a standstill agreement (which includes customary
standstill provisions, voting restrictions and transfer restrictions, on no
more favorable terms than those to which TDF is subject under this
Agreement and with governance rights and, taken as a whole, other rights
which are no more favorable than those granted to TDF in this Agreement and
the Stockholders Agreement) being entered into between the Company and such
person;
(ii) a business combination or other change in control of the
Company has occurred or has been agreed to or acquiesced in by the Board or
any Unsolicited Offer or Special Business Combination has been consummated;
(iii) TDF shall no longer be Qualified;
(iv) no Voting Security of the Company is publicly traded; or
(v) the Company has redeemed the Rights (as defined in the
Stockholders Agreement) under the Rights Agreement (as defined Stockholders
Agreement).
SECTION 3.05. Right of First Refusal. (a) If TDF or any member of
-----------------------
the TDF Group desires to transfer to any person 5% or more of the Voting
Securities of the Company pursuant to Section 3.02(d) (other than a transfer to
an underwriter which intends to effect a broad distribution of such Voting
Securities), TDF, or such member of the TDF Group, as applicable, shall give
prompt written notice (the "Transfer Notice") to the Company of such intention,
---------------
specifying the number of Voting Securities proposed to be transferred (the
"Offered Securities") and the price at which they are to be transferred (the
- -------------------
"Offer Price"). The Transfer Notice shall constitute an irrevocable offer (the
- ------------
"Offer") by TDF to sell to the Company the Offered Securities at the Offer
-----
Price. The
<PAGE>
22
Company shall have the right, exercisable by written notice given by the Company
to TDF within twenty Business Days after receipt of such Transfer Notice, to
purchase (or to cause a person or group designated by the Company to purchase)
all, or any part in excess of 5% of the Voting Securities of the Company, of
such Offered Securities specified in such Transfer Notice for cash at the Offer
Price by delivery of a notice (the "Exercise Notice") to TDF stating the
---------------
Company's irrevocable acceptance of the Offer.
(b) If the Company elects to purchase the Offered Securities, the
closing of the purchase of the Offered Securities shall take place on a mutually
acceptable closing date which shall be not more than 30 days after delivery of
the Exercise Notice. The closing shall be held at 10:00 a.m., time, at the
principal office of the Company or at such other time or place as the parties
mutually agree.
(c) On the closing date, TDF shall deliver (or cause to be delivered)
(i) certificates representing the Offered Securities to be purchased by the
Company, free and clear of any lien, claim or encumbrance, and (ii) such other
documents, including evidence of ownership and authority, as the Company may
reasonably request. The Offer Price shall be paid by wire transfer of
immediately available funds no later than 2:00 p.m., local time, on such closing
date and the Company shall on such closing date issue to TDF (or to its order)
certificates for any balance of the Offered Securities which are not purchased
by the Company.
ARTICLE IV
Governance
----------
SECTION 4.01. Approval Required for Certain Actions. (a) Without
--------------------------------------
prejudice to TDF's rights under clauses three and six of the CTSH Shareholders
Agreement, in the case of a Simple Majority Event, the Company or any Subsidiary
of the Company may take any action set forth in clauses (i) through (ix) below
without the approval of a Special Majority Vote of the Board. In the absence of
a Simple Majority Event, without prejudice to TDF's rights under clauses three
and six of the CTSH Shareholders Agreement, so long as TDF is Qualified, no
action by the Company or any Subsidiary of the Company (including but not
limited to any action by their respective boards of directors or any committee
thereof) shall be taken with respect to any of the following matters without the
approval
<PAGE>
23
of the Board, which approval shall be by a Special Majority Vote of the Board:
(i) the amendment of the Charter or By-laws;
(ii) any acquisition of any assets, business, operations or
securities (other than with respect to any redemption of the Senior
Preferred Stock in accordance with its terms) by the Company or any
Subsidiary thereof by merger, joint venture or otherwise (whether in one
transaction or a series of related transactions, including without
limitation any enforceable right of any other person to require the
deferred acquisition thereof) other than any such acquisition by the
Company or any of its Subsidiaries if the Company's and/or any such
Subsidiary's pro rata Total Enterprise Value in respect of such
acquisition, prior to giving effect thereto, is less than or equal to the
greater of $20 million and 2% of the Total Enterprise Value of the Company
and its Subsidiaries taken as a whole (it being understood that at the time
of any subsequent optional purchase relating to such acquisition, the value
of the Company's and/or any such Subsidiary's pro rata Total Enterprise
Value shall be the pro forma value of the entire interest);
(iii) any disposition (other than with respect to Asset Swaps) of any
assets, business, operations or securities by the Company or any Subsidiary
thereof (whether in one transaction or a series of related transactions,
including without limitation any enforceable right any other person to
require the deferred disposition thereof) other than a disposition by the
Company or any of its Subsidiaries where the Company's and/or any such
Subsidiary's pro rata Total Enterprise Value in the consideration received
in respect of such disposition, prior to giving effect thereto, (including
the assumption of any Indebtedness of the Company in connection therewith)
is less than or equal to whichever is the greater of $20 million and 2% of
the Total Enterprise Value of the Company and its Subsidiaries taken as a
whole;
(iv) any Strategic Alliance which is material to the Company and its
Subsidiaries, taken as a whole;
(v) any incurrence, assumption or issuance by the Company or any of
its Subsidiaries of Indebtedness other than (A) Indebtedness existing on
the date hereof and any Permitted Indebtedness (including in each case any
refinancings which do not increase the principal
<PAGE>
24
amount thereof), (B) any other Indebtedness if the Company's Debt to
Adjusted Consolidated Cash Flow Ratio at the time of incurrence of such
Indebtedness, after giving pro forma effect to such incurrence or issuance
as of such date and to the use of proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal
quarterly periods of the Company for which internal financial statements
are available, would have been no greater than 5.5 to 1 and (C) any
refinancing of any Indebtedness the incurrence of which was approved by the
Board in accordance with this Section 4.01(a), which refinancing does not
increase the principal amount of such Indebtedness;
(vi) any transaction between (A) the Company or any of its
Subsidiaries, on the one hand, and (B) any Stockholder or Affiliate of the
Company (other than any Subsidiary of the Company and other than TDF and
its Affiliates), on the other hand (other than as contem plated by the
Transaction Documents);
(vii) the issuance of any Equity Security of the Company or any
Subsidiaries of the Company (other than (i) the grant or exercise of
options to purchase Common Stock to employees, directors or consultants of
the Company or any of its Subsidiaries prior to the date of the Exchange
Agreement and listed on Schedule 6.32 to the Exchange Agreement or
otherwise pursuant to a stock option or similar executive employee benefit
plan in existence on the date hereof; (ii) the grant or exercise of options
to purchase Common Stock or the issuance of shares of Common Stock as
compensation in the ordinary course of business consistent with practice
for public companies of a similar size and nature (e.g., high growth
----
companies), as determined by approval of a Special Majority Vote of the
Board with a statement to such effect, as the Company to employees or
directors of the Company or any of its Subsidiaries or otherwise pursuant
to a stock option or similar executive or employee benefit plan adopted by
the Board after the Closing in the ordinary course of business consistent
with such practice; (iii) the grant or exercise of options to purchase or
issuance of Common Stock of the Company as compensation in the ordinary
course of business consistent with past practice to consultants of the
Company or any of its Subsidiaries representing not more than 1% of the
aggregate amount of the Common Stock outstanding at the time of such grant
or issuance; (iv) the issuance of shares of Common Stock issuable upon
conversion of, or in respect of dividends on, the Senior Preferred Stock,
or upon
<PAGE>
25
exercise of the Senior Preferred Warrants; (v) securities issued pursuant
to any stock split, stock dividend, rights offering, recapitalization,
reclassification or similar transaction, which securities are issued pro
rata among and pro rata within all classes of stock which are subject to
such stock split, stock dividend, rights offering, recapitalization,
reclassification or similar transaction; (vi) securities issued upon
conversion or exchange of any Equity Security in connection with which TDF
had been granted Anti-dilutive Rights upon the issuance thereof in
accordance with Section 2.01(a); (vii) Voting Securities issued upon
exercise of the Rights (as defined in the Stockholders Agreement) pursuant
to the Rights Plan (as defined in the Stockholders Agreement); (viii) the
issuance of shares of Common Stock issuable upon conversion of, or in
respect of dividends on, the Senior Preferred Stock, the exercise of the
Senior Preferred Warrants, or upon the conversion or exercise of Equity
Securities the issuance of which was approved in accordance with this
Section 4.01(a)(vii); provided that the actions referred to in clauses
--------
(ii), (iii) or (v) of this Section 4.01(a)(vii), as the case may be, shall
have been approved (to the extent required) in accordance with the
provisions of this Agreement).
(viii) any Business Combination entered into by the Company;
(ix) the dissolution of the Company, the adoption of a plan of
liquidation of the Company or any action by the Company to commence any
suit, case, proceeding or other action (i) under any existing or future law
of any jurisdiction relating to bankruptcy, insolvency, reorganization or
relief of debtors seeking to have an order for relief entered with respect
to the Company, or seeking to adjudicate the Company bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding up,
liquidation, dissolution, composition or other relief with respect to the
Company or (ii) seeking appointment of a receiver, trustee, custodian or
other similar official for the Company, or making a general assignment for
the benefit of the creditors of the Company; or
(x) any amendment to the Rights Plan (as defined in the
Stockholders Agreement) other than any such amendment (A) for the purpose
of permitting any transaction (and only to the extent necessary to permit
such transaction) which is permitted under the terms of
<PAGE>
26
this Agreement or (B) required by applicable law or any ruling or order of
any court or governmental body.
(b) Without prejudice to TDF's rights under clauses three and six of
the CTSH Shareholders' Agreement, following the fifth anniversary of the
Closing, the Company or any of its Subsidiaries may take any of the actions set
forth in clauses (ii), (iii), (iv) and (v) below without the prior written
consent of TDF, and following the tenth anniversary of the Closing, the Company
or any of its Subsidiaries may take the action set forth in clauses (i), (vi)
and (vii) below without the prior written consent of TDF. Prior to such fifth
or tenth anniversary, as applicable, so long as TDF is Qualified, no action by
the Company or any Subsidiary (including but not limited to any action by their
respective boards of directors or any committee thereof), other than, in the
case of clauses (iii) and (iv) below, any Conflicted Action, shall be taken with
respect to any of the following matters (each such matter, a "Significant
-----------
Action") without the approval by a majority of the entire Board and the prior
- ------
written consent of TDF (any written notice refusing to provide such consent
being hereinafter referred to as a "Veto"):
----
(i) (A) the creation or issuance of any new class of security of the
Company or any class of security of a Subsidiary of the Company (other than
where all such Subsidiary's securities are issued to the Company), or any
right to acquire such security, (B) the issuance of any Class A Stock to
any person other than TDF or any member of the TDF Group or (C) any
amendment to the Charter or By-laws (other than any amendment required by
applicable law or any ruling or order of any court or governmental body)
(including without limitation any such amendment to increase the number of
directors constituting the entire Board), with, in the case of clauses (A)
or (B), the intent or effect of materially adversely affecting the legal
rights of TDF under this Agreement or the Stockholders Agreement;
(ii) the acquisition in one or a series of related transactions,
including without limitation any enforceable right of any other person to
require any deferred acquisition (whether by merger, consolidation, joint
venture, the purchase of stock or assets or otherwise) of a business,
operations, securities or assets not in a Permitted Business Line, which
acquisition by the Company or any of its Subsidiaries if the Company's
and/or any such Subsidiary's pro rata Total Enterprise Value in respect of
such acquisition,
<PAGE>
27
immediately prior to giving effect thereto, would constitute more than 10%
of the Total Enterprise Value of the Company and its Subsidiaries taken as
a whole (it being understood that at the time of any subsequent optional
purchase relating to such acquisition the value of the Company's and/or any
such Subsidiary's pro rata Total Enterprise Value shall be the pro forma
value of the entire interest);
(iii) the acquisition in one or a series of related transactions,
including without limitation any enforceable right of any other person to
require any deferred acquisition (whether by merger, consolidation, joint
venture, the purchase of stock or assets or otherwise) of a business,
operations, securities or assets which is (or are) in a Permitted Business
Line (other than any part thereof which is not material in relation to the
whole of such business, operations, securities or assets), which
acquisition, by the Company or any of its Subsidiaries if the value of the
Company's and/or any such Subsidiary's pro rata Total Enterprise Value in
respect of such acquisition, immediately prior to giving effect thereto,
would constitute, (A) prior to December 31, 1999, the greater of $750
million and more than 25% of the Total Enterprise Value of the Company and
its Subsidiaries taken as a whole and (B) following December 31, 1999, more
than 25% of the Total Enterprise Value of the Company and its Subsidiaries
taken as a whole (it being understood that at the time of any subsequent
optional purchase relating to such acquisition the value of the Company's
and/or any such Subsidiary's pro rata Total Enterprise Value shall be the
pro forma value of the entire interest);
(iv) any Strategic Alliance with any Restricted Party;
(v) the disposition (other than with respect to Asset Swaps) in one
or a series of related transactions, including without limitation any
enforceable right of any other person to require any deferred disposition
(whether by merger, consolidation, the sale or distribution of stock or
assets or otherwise) of a business or assets, if the value of the Company's
and/or any such Subsidiary's pro rata Total Enterprise Value in the
consideration received in respect of such disposition, immediately prior to
giving effect thereto, (including the assumption of any Indebtedness of the
Company in connection therewith) exceeds 10% of the Total Enterprise Value
of the
<PAGE>
28
Company and its Subsidiaries taken as a whole; provided, however, that
-------- -------
there shall be excluded from the foregoing any disposition by the Company
or any of its Subsidiaries of any specific interest of the Company and/or
any of its Subsidiaries in any acquisition permitted under the terms of
this Agreement, which interest the Board, as evidenced by resolution duly
adopted by the Board prior to such acquisition, firmly intended to dispose
of following such acquisition, and which is disposed of by the Company or
any Subsidiary of the Company within twelve months of such acquisition;
(vi) any Business Combination, except as permitted pursuant to
Section 5.01(a);
(vii) the issuance by the Company to any person in one or more
transactions of Equity Securities or the right to purchase Equity
Securities (other than with respect to the Rights (as defined in the
Stockholders Agreement) issued under the Rights Plan (as defined in the
Stockholders Agreement)) representing the Relevant Percentage or more of
the aggregate amount of the outstanding Equity Securities of the Company
(it being understood that any such issuance the consummation of which would
result in a Business Combination shall be treated solely under the
foregoing clause (vi)).
(c) Prior to proposing to take any action set forth in Sections
4.01(a) or 4.01(b) at any meeting of the Board, the Secretary of the Company
shall cause (i) to be included in the Board Agenda a statement that such
proposed action is an action set forth in such Section 4.01(a) or 4.01(b), as
applicable, the vote required by the Board to approve such action in accordance
with this Agreement and the party or parties proposing such action, which party
or parties shall provide the Secretary of the Company with all relevant
information relating to such action to accompany such Board Agenda and the
Secretary of the Company shall cause such Board Agenda to be supplied to each
director at least five Business Days prior to such Board meeting and (ii) shall
cause a copy of such Board Agenda to be supplied to TDF in accordance with
Section 7.07 at least five Business Days prior to such Board Meeting, and TDF
shall deliver to the Company Secretary notice of its intent to consent to or
Veto such Significant Action prior to such Board Meeting (provided that the
--------
failure to deliver such notice shall not impair TDF's right to Veto such
Significant Action under Section 4.01(b)). Following the approval of such
Significant Action by the Board, the Company Secretary shall promptly deliver to
TDF notice of such approval in
<PAGE>
29
accordance with Section 7.07 and TDF shall have three Business Days following
delivery of such notice to deliver to the Company Secretary its consent to, or
Veto of, such Significant Action; provided, however, that if TDF shall Veto any
-------- -------
proposed Business Combination which has been approved by the Board, the Company
may override such Veto pursuant to Section 5.01. If TDF shall fail to deliver to
the Company Secretary notice of its consent to, or Veto of, such Significant
Action prior to 5:00 p.m. U.S. Central time on the third Business Day following
the date of delivery by the Company Secretary to TDF of notice of the Board's
approval of such Significant Action in accordance with the preceding sentence,
TDF shall be deemed to have consented to such Significant Action and the Company
may thereafter consummate such Significant Action.
SECTION 4.02. Negative Covenants. (a) Notwithstanding any other
-------------------
provision of the Transaction Documents, neither the Company, any of its
Subsidiaries, TDF nor any member of the TDF Group shall take or approve any
action which would result in the BBC having the right to terminate a BBC
Contract in accordance with the terms of such BBC Contract.
(b) TDF agrees that neither TDF nor any member of the TDF Group shall
enter into any transaction falling within a Permitted Business Line which TDF
Vetoed in accordance with Section 4.01(b)(iii) and Section 4.01(b)(iv) within
six months after the relevant Veto.
SECTION 4.03. Successors to the Company. The Company shall procure
--------------------------
that TDF shall be granted by any Newco equivalent rights to the rights contained
in this Agreement as a condition to any transaction involving the creation of
any such Newco.
ARTICLE V
CTSH Option
-----------
SECTION 5.01. CTSH Option. (a) Notwithstanding any other provision
------------
of this Agreement, TDF shall have the right to the CTSH Option (as defined) if,
and only if, TDF is Qualified and (i)(A) the Board has approved a Business
Combination by a Special Majority Vote, (B) TDF thereafter gives a Veto in
respect of such Business Combination in accordance with Section 4.01(b) and
4.01(c) and (C) subsequent to the exercise of the Veto by TDF, a majority of the
entire Board (excluding the two TDF Designees) resolves that such Veto by TDF
shall be
<PAGE>
30
overridden in accordance with this Section 5.01; (ii) the commencement or
occurrence of an Unsolicited Offer by any person (other than any member of the
TDF Group); or (iii) a Special Business Combination shall have been commenced by
any person (other than any member of the TDF Group), TDF shall have the option,
exercisable, subject to subparagraph (d) below, irrevocably by notice in writing
given to the Company within five days following agreement between the parties as
to, or (as the case may be), receipt of notice of the determination of the Fair
Market Value per share of the CTSH Shares and the CTSH Warrants (assuming the
payment of the exercise price of such Warrants) (the "CTSH Per Share Value") as
--------------------
set forth below, to (x) acquire for cash by itself or together with any other
person, all, but not less than all, the Company CTSH Shares at such CTSH Per
Share Value, (y) sell for cash to the Company the TDF CTSH Shares and the TDF
CTSH Warrants at such CTSH Per Share Value or (z) maintain the TDF CTSH Shares
and the TDF CTSH Warrants without regard to the event giving rise to the CTSH
Option (the "CTSH Option").
-----------
(b) The valuation procedures shall be as follows. Each of the Company
and TDF shall, commencing upon the date of the occurrence of any of the events
set forth in Section 5.01(a)(i)(C), Section 5.01(a)(ii) or Section 5.01(a)(iii),
negotiate in good faith to determine a CTSH Per Share Value of the CTSH Shares
within thirty days following the occurrence of any such event. If the parties do
not agree on a CTSH Per Share Value within such thirty-day period, they shall,
within three days, appoint an independent investment banker of international
stature with its principal office in New York City (the "Appraiser") and shall
---------
provide such Appraiser with their respective written determinations of the CTSH
Per Share Value. Such Appraiser shall then choose (taking into account all
relevant factors, but no discount shall be applied as a result of the
termination or potential termination of the BBC Contracts), as between the
written determinations of the CTSH Per Share Value provided by each party to the
Appraiser, the CTSH Per Share Value which most closely approximates, in the
expert opinion of the Appraiser, the Fair Market Value per share of the CTSH
Shares and the CTSH Warrants. If the parties are unable to agree on the
selection of such Appraiser within such three-day period, they shall on such
third day so notify the Chairman of the New York Stock Exchange, Inc., who
shall, within five days of such notification, (or if unwilling or unable to
serve in such capacity, the senior partner of one the following accounting
firms, in order of priority for selection, KPMG Peat Marwick LLP, Price
Waterhouse LLP, Ernst & Young LLP and Arthur Anderson LLP) appoint an investment
banker meeting the qualifications set
<PAGE>
31
forth above to serve as the Appraiser. In any case, the Appraiser shall make its
decision with respect to the CTSH Per Share Value within ten days of the date of
its engagement and must choose a Value presented by either of the parties
pursuant to their respective written determinations (i.e., such Appraiser may
----
not select a different value). The fees and expenses of the Appraiser shall be
paid by the Company.
(c) If a Business Combination, Unsolicited Offer or Special Business
Combination is abandoned or terminated, the CTSH Option and any exercise thereof
by TDF pursuant to Section 5.01(a)(x) or (y) shall become null and void and
ownership in CTSH shall continue as if such CTSH Option had not come into
effect, unless the Company exercises its right to cause TDF to purchase the
Company CTSH Shares pursuant to subparagraph (d) below.
(d) Any closing of a sale and purchase of CTSH Shares pursuant to the
CTSH Option shall take place on the date of consummation of the Business
Combination and, subject as provided in the next following sentence, the
Unsolicited Offer or Special Business Combination which gave rise thereto,
subject to the satisfaction or waiver of the Conditions Precedent; provided that
--------
any such Business Combination may not be consummated by the Company other than
substantially simultaneously with (but not before) the consummation of the sale
and purchase of the CTSH Shares pursuant to such CTSH Option; provided further
----------------
that each of the Company and TDF shall continue to use its reasonable best
efforts to obtain the satisfaction or waiver of such Conditions Precedent so
long as such Business Combination, Unsolicited Offer a Special Business
Combination is outstanding. In the case of an Unsolicited Offer or a Special
Business Combination, if TDF has elected to exercise the CTSH Option pursuant to
Section 5.01(a)(x) and the Conditions Precedent to such CTSH Option are not
waived or satisfied on or before the third Business Day prior to the date of
consummation of the Unsolicited Offer or the Special Business Combination which
gave rise to such CTSH Option, TDF shall have the option by written notice (a
"Withdrawal Notice") to the Company to be given no later than the date of
-----------------
consummation of such Unsolicited Offer or Special Business Combination, as
applicable, to declare the exercise of the CTSH Option pursuant to Section
5.01(a)(x) to be null and void and to exercise the CTSH Option pursuant to
either Section 5.01(a)(y) or Section 5.01(a)(z) in lieu thereof. If TDF fails to
give a Withdrawal Notice prior to the date of consummation of the Unsolicited
Offer or the Special Business Combination, TDF shall be deemed to have affirmed
<PAGE>
32
the exercise of the CTSH Option pursuant to Section 5.01(a)(x).
If such Business Combination is not consummated (or an Unsolicited
Offer or Special Business Combination is abandoned or terminated) by reason
primarily of the exercise by TDF of the CTSH Option pursuant to Section
5.01(a)(x), then the Company may nevertheless require TDF to proceed with the
purchase (the "Required Purchase") of the Company CTSH Shares at the CTSH Per
-----------------
Share Value, subject to the satisfaction or waiver of the Conditions Precedent
and the non-occurrence prior to the closing of the Required Purchase of (i) any
event or development of a state of circumstances or facts which has had or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CTSH and its Subsidiaries taken as a whole or (ii)(A) a suspension of
trading in the Company's Common Stock by the Commission or Nasdaq or the
establishment of limited or minimum prices in trading of securities generally on
the New York Stock Exchange, Inc., or Nasdaq or (B) banking moratoriums having
been declared either by Federal or New York State authorities. Such Required
Purchase by TDF of the Company CTSH Shares shall, subject to the satisfaction or
waiver of the Conditions Precedent and the nonoccurrence of any such event as
aforesaid, close thirty days after announcement of the abandonment or
termination of such Business Combination, Unsolicited Offer, or Special Business
Combination, as applicable (or, if later, the second Business Day following the
date of the satisfaction or waiver of the Conditions Precedent). If TDF shall
exercise the CTSH Option pursuant to Section 5.01(a)(x), TDF may pay all or any
part of the purchase price therefor by surrendering to the Company on the
closing of such exercise shares of Class A Stock (which shall be valued at the
offer price per share of Common Stock pursuant to the Business Combination,
Unsolicited Offer, or Special Business Combination, as applicable, giving rise
to the CTSH Option).
(e) If the price offered in any proposed Business Combination,
Unsolicited Offer or Special Business Combination is increased or decreased by
the offeror by more than 10% after the commencement or determination of the CTSH
Per Share Value pursuant to subparagraph (b), the Company shall promptly notify
the Appraiser of such increase or decrease and the Appraiser shall take into
account such increase or decrease (and any other relevant factor in connection
therewith), except that if the Appraiser has previously completed the appraisal
procedure set forth in such subparagraph (b) and selected the CTSH Per Share
Value, (i) such appraisal procedure shall recommence and the choice of the CTSH
Per Share Value by the Appraiser shall be made
<PAGE>
33
within five days of the notice to the Appraiser by the Company of such increase
or decrease and (ii) any exercise by TDF of the CTSH Option by written notice to
the Company pursuant to Section 5.01(b) shall be null and void, and TDF may
thereafter exercise the CTSH Option by subsequent written notice to the Company
in accordance with such Section 5.01(b).
(f) Immediately prior to the consummation of any Business
Combination, Unsolicited Offer or Special Business Combination, TDF shall have
the right to require the Company to purchase one-half (1/2) of the shares of
Class A Stock held by the TDF Group, as applicable, for cash in an amount equal
to the product of (x) the offer price per share of Common Stock pursuant to the
Business Combination, Unsolicited Offer or Special Business Combination, as
applicable, and (y) one-half (1/2) of the number of such shares of Class A Stock
held by the TDF Group.
ARTICLE VI
Put and Call Rights
-------------------
SECTION 6.01. TDF Put Right. (a) The Company agrees that from the
-------------
date of this Agreement and continuing until the second anniversary of the
Closing, TDF shall have the right in its sole discretion (the "TDF Put Right"),
-------------
upon the delivery of a notice (the "TDF Put Notice") by TDF to the Company, to
--------------
require the Company, subject to the satisfaction of the Conditions Precedent
(A), subject to proviso (B) to clause (b) below, to purchase all, but not less
than all (except for one CTSH Ordinary Share), of the TDF CTSH Shares
beneficially owned by the TDF Group in exchange for that number of shares of
Class A Stock which is equal to the product of (x) the Exchange Ratio and (y)
the number of all (but one CTSH Ordinary Share) of such TDF CTSH Shares (the
"TDF Put Shares") and (B) to issue in exchange for the TDF CTSH Warrants (i) TDF
--------------
CCIC Warrants for a number of shares of Class A Stock which is equal to the
product of (x) the Exchange Ratio and (y) the number of TDF CTSH Shares
represented by the TDF CTSH Warrants and (ii) 100,000 shares of Class A Stock
(as adjusted from time to time after the date hereof in accordance with the
provisions contained in Section 1.02 of the Exchange Agreement).
(b) The closing of the TDF Put Right shall, subject to the
satisfaction of the Conditions Precedent, take place on the tenth Business Day
after the date on which the Company shall have received the TDF Put Notice (or
such date which is the second Business Day after the date on which such
conditions shall have been satisfied, not in any case to be later than the
fortieth Business Day following such date on
<PAGE>
34
which the Company received the TDF Put Notice, at which time the TDF Put Right
shall, subject to the following provisos (A) and (B), terminate and be of no
further force or effect), at a time and place specified by TDF in such notice or
such other date, time and place as may be agreed to by TDF and the Company;
provided that, notwithstanding any other provision of this Agreement, if (A) (i)
- --------
any statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered or enforced by any court or governmental body
or authority which prohibits consummation of the TDF Put Right substantially on
the terms contemplated hereby, each of the Company and TDF shall use its
reasonable best efforts to remove any such order, decree or injunction and TDF
shall be deemed to be Qualified for purposes of this Agreement for the lesser of
(x) the first anniversary of the date of the TDF Put Notice and (y) the closing
of the TDF Put Right following such removal or (ii) (A) the BBC shall not have
approved the exercise of the TDF Put Right or shall have approved the TDF Put
Right subject to conditions which are reasonably deemed by the Company or TDF to
be onerous, each of the Company and TDF shall use its reasonable best efforts to
obtain such BBC approval and TDF shall be deemed to be Qualified for purposes of
this Agreement for so long as (x) TDF continues to exercise its reasonable best
efforts to obtain such removal or approval and (y) the TDF Consolidated Group
Interest is not less than 10.5% or (B) if the BBC does not approve the exercise
of the TDF Put Right in whole or approves the TDF Put Right in whole subject to
conditions which are reasonably deemed by the Company or TDF to be onerous, TDF
shall be entitled to exercise the TDF Put Right in respect of so many of the TDF
CTSH Shares and TDF CTSH Warrants as do not require the consent of the BBC and
TDF shall be deemed to be Qualified for the purposes of this Agreement for so
long as (x) TDF continues to exercise its reasonable best efforts to obtain such
removal or approval and (y) the TDF Consolidated Group Interest is not less than
10.5%. The TDF Put Right shall expire and be of no further force or effect at
such time as TDF is no longer deemed to be Qualified under the preceding clause
(i) and/or clause (ii), as applicable. On the closing date of the TDF Put
Right, the Company shall deliver to TDF, against delivery of (i) duly executed
transfers in respect of (all but one of) the TDF CTSH Shares and the share
certificate(s) in respect thereof (which shares TDF undertakes to sell free and
clear of all liens, claims, charges or other encumbrances ("Liens")) and a duly
-----
executed deed of termination in respect of the TDF CTSH Warrants and (ii) such
other documents, including evidence of ownership
<PAGE>
35
and authority, as the Company may reasonably request, the TDF Put Shares, the
TDF CCIC Warrants and 100,000 shares of Class A Stock (adjusted as aforesaid).
In connection with such closing, the Company and TDF shall also provide such
other customary closing certificates and opinions as TDF or the Company, as
appropriate, may reasonably request.
SECTION 6.02. Company Call Right. (a) TDF agrees that on the second
-------------------
anniversary of the Closing (or, if an Unsolicited Offer or Special Business
Combination is outstanding on such date, such date as is five days following the
termination or abandonment of such Unsolicited Offer or Special Business
Combination) unless (i) the TDF Rollup shall have previously been consummated,
(ii) the Common Stock Call Price shall be less than or equal to $60 (as adjusted
for any stock split, stock dividend, rights offering, recapitalization,
reclassification or other similar transaction), or (iii) a Business Combination
been consummated, or an Unsolicited Offer or a Special Business Combination is
outstanding or has been consummated and TDF has exercised the CTSH Option
pursuant to Section 5.01(a)(x) above, the Company shall have the right in its
sole discretion (the "Company Call Right"), upon the delivery of a notice (the
------------------
"Company Call Notice") by the Company to TDF on such date, to require, subject
- --------------------
to the satisfaction of the Conditions Precedent, subject to proviso (B) to
clause (b) below, TDF to transfer and deliver to the Company all, but not less
than all (except for one CTSH Ordinary Share), of the TDF CTSH Shares and the
TDF CTSH Warrants beneficially owned by the TDF Group in exchange for the TDF
Put Shares, the TDF CCIC Warrants and 100,000 shares of Class A Stock (as
adjusted from time to time after the date hereof in accordance with the
provisions contained in Section 1.02 of the Exchange Agreement).
(b) The closing of the Company Call Right shall, subject to the
satisfaction of the Conditions Precedent, take place on the tenth Business Day
after the date on which TDF received the Company Call Notice (or such date which
is the second Business Day after the date on which such conditions shall have
been satisfied, not in any case to be later than the fortieth Business Day
following such date on which TDF received the Company Call Notice, at which time
the Company Call Right shall, subject to the following provisos (A) and (B),
terminate and be of no further force or effect), at a time and place specified
by the Company in such notice or such other date, time and place as may be
agreed to by TDF and the Company; provided that, notwithstanding any other
--------
provision of this Agreement, if (A) (i) any statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted,
<PAGE>
36
entered or enforced by any court or governmental body or authority which
prohibits consummation of the Company Call Right substantially on the terms
contemplated hereby, each of the Company and TDF shall use its reasonable best
efforts to remove any such order, decree or injunction and TDF shall be deemed
to be Qualified for purposes of this Agreement for the lesser of (x) the first
anniversary of the date of the Company Call Notice and (y) the closing of the
Company Call Right following such removal or (ii) the BBC shall not have
approved the exercise of the Company Call Right or shall have approved the
Company Call Right subject to conditions which are reasonably deemed by the
Company or TDF to be onerous, each of the Company and TDF shall use its
reasonable best efforts to obtain such BBC approval and to permit the Company to
consummate the Company Call Right, and TDF shall be deemed to be Qualified for
purposes of this Agreement for so long as (x) TDF continues to exercise its
reasonable best efforts to obtain such removal or approval and (y) the TDF
Consolidated Group Interest is not less than 10.5% or (B) if the BBC does not
approve the exercise of the Company Call Right in whole or approves the Company
Call Right in whole subject to conditions which are reasonably deemed by the
Company or TDF to be onerous, the Company shall be entitled to exercise the
Company Call Right in respect of so many of the TDF CTSH Shares and TDF CTSH
Warrants as do not require the consent of the BBC and TDF shall be deemed to be
Qualified for the purposes of this Agreement for so long as (x) TDF continues to
exercise its reasonable best efforts to obtain such removal or approval and (y)
the TDF Consolidated Group Interest is not less than 10.5%. On the closing date
of the Company Call Right, the Company shall deliver to TDF, against delivery of
(i) duly executed transfers in respect of (all but one of) the TDF CTSH Shares
and the share certificate(s) in respect thereof (which shares TDF undertakes to
sell free and clear of all Liens) and a duly executed deed of termination in
respect of the TDF CTSH Warrants and (ii) such other documents, including
evidence of ownership and authority, as the Company may reasonably request, the
TDF Put Shares and the TDF CCIC Warrants and 100,000 shares of Class A Stock
(adjusted as aforesaid). In connection with such closing, the Company and TDF
shall also provide such other customary closing certificates and opinions as TDF
or the Company, as appropriate, may reasonably request.
<PAGE>
37
ARTICLE VII
Miscellaneous
-------------
<PAGE>
38
SECTION 7.01. Access to Information; Confidenti ality. The Company
----------------------------------------
shall, and shall cause each of its Subsidiaries to, afford to TDF reasonable
access prior to the termination of this Agreement to their respective corporate
books and records (including without limitation copies of the minutes of the
meetings of their respective boards of directors) and, without prejudice to
TDF's rights under the CTSH Shareholders Agreement, TDF shall have the right to
attend any meeting of the board of directors of the Company or any Subsidiary of
the Company as an observer upon reasonable prior notice to the Corporate
Secretary of each of the Company and any such Subsidiary. Except as required by
applicable law, TDF will hold, and will use its reasonable best efforts to cause
its officers, employees, accountants, counsel, financial advisors and other
representatives and controlled affiliates to hold, in confidence any and all
non-public information received from the Company or any of its Subsidiaries,
directly or indirectly, and to use such information solely for purposes of
effecting the transactions contemplated by this Agreement and the other
Transaction Documents.
SECTION 7.02. Survival of Warranties. The covenants, agreements,
-----------------------
representations and warranties of the parties contained herein or in any
certificate or other document delivered pursuant hereto or in connection
herewith shall survive the Closing and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any party hereto.
SECTION 7.03. Reasonable Efforts; Further Actions. The parties
------------------------------------
hereto each will use all reasonable efforts to take or cause to be taken all
action and to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
SECTION 7.04. Consents. The parties hereto will cooperate with each
---------
other in filing any necessary applica tions, reports or other documents with,
giving any notices to, and seeking any consents from, all regulatory bodies and
all governmental agencies and authorities and all third parties as may be
required in connection with the consum mation of the transactions contemplated
by this Agreement.
SECTION 7.05. Amendment and Waiver. This Agreement may not be
---------------------
amended, supplemented or discharged, and no provision hereof may be modified or
waived, except expressly by an instrument in writing signed by the parties
hereto. Any term or provision of this Agreement may be waived, but only in
writing by the party which is entitled
<PAGE>
39
to the benefit thereof. No waiver of any provision hereof by any party shall
constitute a waiver thereof by any other party nor shall any such waiver
constitute a continuing waiver of any matter by such party.
SECTION 7.06. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, each of which shall be deemed an original but which together
shall constitute but one instrument. It shall not be necessary for each party
to sign each counterpart so long as every party has signed at least one
counterpart.
SECTION 7.07. Notices. All notices, requests, demands, waivers and
--------
other communications required or permitted to be given under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
If to the Company: Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, TX 77057
Fax: (713) 570-3150
Attn: President
with a copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Fax: (212) 474-3700
Attn: Stephen L. Burns, Esq.
If to TDF: TeleDiffusion de France
International, S.A.
10 Rue d'Oradour sur Glane
75732 Paris 15
France
Fax: ###-##-####
Attn: Michel Azibert
with a copy to: Allen & Overy
One New Change
London EC4M 9QQ
Fax: 44-171-330-9999
Attn: Michael P. Scargill, Esq.
<PAGE>
40
All such notices, requests, demands, waivers and communi cations shall be
deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address or (iii) in the case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed to be received or the validity of such facsimile notice.
SECTION 7.08. Binding Effect; Assignment. This Agreement and all of
---------------------------
the provisions hereof shall be binding upon and shall inure to the benefit of
the parties and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, directly or indirectly, including, without limitation, by operation of
law, by any party hereto without the prior written consent of the other parties
hereto (it being understood that TDF may not transfer to any person (other than
to any of its Affiliates which becomes a party to the Agreement and to whom
there is transferred any Voting Securities of the Company) by operation of law
or otherwise, any right of TDF hereunder which arises as a result of TDF being
Qualified without the prior written consent of the Company); provided, that TDF
shall be entitled to transfer any of its rights under this Agreement to any of
its Affiliates subject to any condition or obligation in connection with such
right provided hereunder, so long as such Affiliate agrees to become a party to
this Agreement and such Affiliate is a holder of the whole or any part of the
TDF Group Interest or the TDF Consolidated Group Interest, as applicable.
SECTION 7.09. Entire Agreement. This Agreement, the other
-----------------
Transaction Documents and the schedules, exhibits and other documents and
agreements referred to herein or therein or delivered pursuant hereto or thereto
which form a part hereof or thereof constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties or any
of them with respect to the subject matter hereof.
SECTION 7.10. No Third Party Beneficiaries. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns, and nothing in this
<PAGE>
41
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits, claims, liabilities, causes of action or remedies
of any nature whatsoever under or by reason of this Agreement.
SECTION 7.11. Expenses. Each of the parties hereto shall pay its own
---------
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including the fees and expenses of counsel,
irrespective of when incurred.
SECTION 7.12. Applicable Law and Jurisdiction; Service of Process.
----------------------------------------------------
(a) This Agreement shall be construed in accordance with and governed by the
law of the State of New York; provided, however, that to the extent that the
-------- -------
terms and conditions of this Agreement relate to the internal affairs of the
Company, such terms and conditions shall be construed in accordance with and
governed by the laws of the State of Delaware.
(b) Each of the parties to this Agreement hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(c) Each of the parties hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each of the parties to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.07. Nothing
in this
<PAGE>
42
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.13. Waiver of Jury Trial. Each party hereto hereby waives,
---------------------
to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in any legal proceeding directly or indirectly arising out of or
relating to this Agreement or the transactions contem plated hereby or thereby
(whether based on contract, tort or any other theory). Each party hereto (a)
certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this agree
ment by, among other things, the mutual waivers and certifications in this
Section.
SECTION 7.14. Article and Section Headings. The article, section and
-----------------------------
other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
SECTION 7.15. Termination. This Agreement may be terminated by the
------------
mutual consent of the parties hereto.
SECTION 7.16. Specific Enforcement. The parties hereto acknowledge
---------------------
and agree that irreparable damage would occur in the event any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached for which money damages would not be an adequate remedy.
It is accordingly agreed that, so long as permitted by applicable law, the
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof without the necessity of proving the inadequacy of money
damages as a remedy.
SECTION 7.17. Severability. Should any provision of this Agreement
-------------
for any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect and
the application of such invalid or unenforceable provision to persons or
circumstances other
<PAGE>
43
than those as to which it is held invalid or unenforceable shall be valid and
enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, each party hereto has executed this Agreement as
of the day and year first above written.
CROWN CASTLE INTERNATIONAL CORP.,
by
/s/ Kathy Broussard
-------------------
Name: Kathy Broussard
Title: Vice President
TELEDIFFUSION DE FRANCE INTERNATIONAL S.A.,
by
/s/ Michel Azibert
------------------
Name: Michel Azibert
Title: Chief Executive of TdF
DIGITAL FUTURE INVESTMENTS B.V.
by
/s/ Michel Azibert
------------------
Name: Michel Azibert
Title: Acting on Behalf of
TdF, Managing
Director of DFI
<PAGE>
Schedule A
Restricted Parties
------------------
British Telecom
Bouygues
Cegetel
Stet
<PAGE>
Schedule B
1. The delivery of all notices required by law or regulation in relation to
the transaction and the expiration of all waiting or notice periods in
relation thereto;
2. The receipt of all governmental and other regulatory consents or
notifications required in relation to the transaction, including, without
limitation, where the grant or the exercise of any of the rights under
Articles V or VI of this Agreement requires a notification to be made to
the European Commission under the Merger Regulation (4064/89, as amended):
(a) the European Commission issuing a Phase I decision under Article
6(1)(a) or Article 6(1)(b) of the Merger Regulation and not making a
decision under Article 9(1) thereof; or
(b) in respect of the United Kingdom, as follows:
(a) the Office of Fair Trading indicating in terms satisfactory to
the parties, that it is not the intention of the Secretary of
State to refer the acquisition of the shares to the UK Monopolies
and Mergers Commission ("MMC") pursuant to the Fair Trading Act
---
1973; or
(b) the Secretary of State accepting undertakings from the buyer of
the shares in lieu of a reference of the said acquisition to the
MMC as aforesaid.
3. The prior written consent of the BBC to the extent required in relation to
the transaction under or otherwise necessary to prevent triggering a right
of the BBC to terminate any of the Analogue Transmission Contract, the
Digital Transmission Contract, the Commitment Agreement pursuant to the
terms thereof and any other agreement containing substantially similar
restrictions and any agreement amending or replacing the same; and
4. The receipt of any consent required under the Finance Documents (as defined
in the CTSH Shareholders Agreement) in relation to the transaction or any
agreement (whether or not with the same banks) amending, replacing or
refinancing (in whole or in part) the same or any other agreement providing
finance to the CTSH Group; and
5. Good and indefeasible title being transferred by the party transferring
such shares.
<PAGE>
EXHIBIT 10.46
RIGHTS AGREEMENT dated as of August 21, 1998, between CROWN
CASTLE INTERNATIONAL CORP., a Delaware corporation (the
"Company"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as
Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Right (as hereinafter defined) for each share of Common Stock,
par value $.01 per share, of the Company (the "Common Stock") and each share of
Class A Common Stock, par value $.01 per share, of the Company (the "Class A
Common Stock") outstanding at the Close of Business (as hereinafter defined) on
the date hereof (the "Record Date"), and has authorized the issuance of one
Right (as such number may hereafter be adjusted pursuant to the provisions of
this Rights Agreement) with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date or the Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to Common
-------- -------
Shares that shall become outstanding after the Distribution Date and prior to
the earlier of the Redemption Date or the Expiration Date in accordance with the
provisions of Section 23. Each Right shall initially represent the right to
purchase one one-thousandth (1/1,000th) of a share of Series A Participating
Cumulative Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Shares"), having the powers, rights and preferences set forth in the
Certificate of Designation attached as Exhibit A.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Rights
--------------------
Agreement, the following terms have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, alone or
----------------
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of more than 15% of the Voting Securities then outstanding, but
shall not include (a) the Company, any Subsidiary of the Company, any employee
benefit or compensation plan of the Company or of any of its Subsidiaries, or
any Person holding Voting Securities for or pursuant to the terms of any such
employee
<PAGE>
2
benefit or compensation plan and (b) any such Person who has become and is the
Beneficial Owner of more than 15% of the Voting Securities then outstanding
solely as the result of (i) a change in the aggregate number of Voting
Securities outstanding since the last date on which such Person acquired
Beneficial Ownership of any Voting Securities, (ii) the acquisition by such
Person or one or more of its Affiliates or Associates of Beneficial Ownership of
additional Voting Securities if such acquisition was made in the good faith
belief that such acquisition would not (A) cause the Beneficial Ownership by
such Person, together with its Affiliates and Associates, to exceed 15% of the
Voting Securities outstanding at the time of such acquisition and such good
faith belief was based on the good faith reliance on information contained in
publicly filed reports or documents of the Company that are inaccurate or out-
of-date or (B) otherwise cause a Distribution Date or the adjustment provided
for in Section 11(a) to occur, or (iii) the acquisition by such Person or one or
more of its Affiliates or Associates of Beneficial Ownership of additional
Voting Securities if the Board of Directors of the Company determines that such
acquisition was made in good faith without the knowledge by such Person or
Affiliates or Associates that such Person would thereby become an Acquiring
Person, which determination of the Board of Directors of the Company shall be
conclusive and binding on such Person, the Rights Agent, the holders of the
Rights and all other Persons; provided that no member of the TDF Group shall be
-------- ----
deemed an Acquiring Person if (x) during the period from the date of this
Agreement up to and including the fifth anniversary of this Agreement, the TDF
Group Interest shall not exceed 25% of the Voting Securities then outstanding,
provided that if the Board elects to increase such percentage to 30%, such TDF
Group Interest shall not exceed 30% of the Voting Securities then outstanding or
(y) after the fifth anniversary of this Agreement, the TDF Group Interest shall
not exceed the lesser of (1) 25% or 30%, as applicable, of the Voting Securities
then outstanding and (2) the greater of (A) the TDF Group Interest at and as of
the fifth anniversary of this Agreement and (B) 15% of the Voting Securities
then outstanding (the TDF Group Interest under (x) or (y), as applicable, the
"Relevant TDF Percentage"); provided further that no member of the Berkshire
-------- -------
Group shall be deemed an Acquiring Person if the Berkshire Group Interest does
not exceed the greater of (a) 23%, reduced by an amount equal to any disposition
of Voting Securities by any member of the Berkshire Group following the date
hereof and (b) 15% of the Voting Securities then outstanding (the Berkshire
Group Interest under (a) and (b), the "Relevant Berkshire Percentage").
Notwithstanding clause (b)(ii) or (b)(iii) of the prior sentence, if any
<PAGE>
3
Person that is not an Acquiring Person solely by reason of such clause (b)(ii)
or (b)(iii) does not reduce its percentage of Beneficial Ownership of Voting
Securities to 15% or less by the Close of Business on the tenth calendar day
after notice from the Company (the date of notice being the first day) that such
Person's Beneficial Ownership of Voting Securities would make it an Acquiring
Person, such Person shall, at the end of such ten calendar day period, become an
Acquiring Person (and such clause (b)(ii) or (b)(iii) shall no longer apply to
such Person). For purposes of this definition, the determination whether any
Person acted in "good faith" shall be conclusively determined by the Board of
Directors of the Company.
"Affiliate" and "Associate", when used with reference to any Person,
--------- ---------
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Rights Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be
----------------
deemed to "beneficially own", and shall be deemed to have "Beneficial Ownership"
---------------- --------------------
of, any securities:
(a) which such Person or any of such Person's Affiliates or Associates
is deemed to "beneficially own" within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date of this Rights Agreement;
(b) which such Person or any of such Person's Affiliates or Associates
has: (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (written or oral), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall
-------- -------
not be deemed under clause (i) to be the Beneficial Owner of, or to
beneficially own, or to have Beneficial Ownership of, any securities
tendered pursuant to a tender or exchange offer made by or on behalf of
such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange thereunder or
cease to be subject to withdrawal by the tendering security holder; or (ii)
the right to vote pursuant to any agreement, arrangement or understanding
(written or oral); provided, however, that a Person shall not be deemed
--------- -------
under this clause (ii) to be the Beneficial Owner of, or to beneficially
own, or to have Beneficial Ownership
<PAGE>
4
of, any security if (A) the agreement, arrangement or understanding
(written or oral) to vote such security arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or
consent solicitation made generally to all holders of Common Shares of the
Company pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act and (B) the beneficial ownership of such
security is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (written or
oral) for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to clause (b)(ii) of this
definition) or disposing of any securities of the Company.
Notwithstanding the foregoing, nothing contained in this definition shall cause
a Person ordinarily engaged in business as an underwriter of securities to be
deemed the "Beneficial Owner" of, or to "beneficially own", or to have
"Beneficial Ownership" of, any securities acquired in a bona fide firm
commitment underwriting pursuant to an underwriting agreement with the Company.
"Berkshire Group" shall mean Berkshire Fund III, A Limited
---------------
Partnership, Berkshire Investors LLC, Berkshire Fund IV, Limited Partnership,
their Affiliates and their respective partners and members, collectively.
"Berkshire Group Interest" shall mean the percentage of Voting Power
------------------------
that is controlled, directly or indirectly, by the Berkshire Group.
"Book Value", when used with reference to Common Shares issued by any
----------
Person, shall mean the amount of equity of such Person applicable to each Common
Share, determined (a) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (b) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (c) after giving effect
to (i) the exercise of all rights, options and warrants to purchase such Common
Shares (other than, in the case of the Company, the Rights), and the
<PAGE>
5
conversion of all securities convertible into such Common Shares, at an exercise
or conversion price, per Common Share, which is less than such Book Value before
giving effect to such exercise or conversion (whether or not exercisability or
convertibility is conditioned upon occurrence of a future event), (ii) all
dividends and other distributions on the capital stock of such Person declared
prior to the date as of which such Book Value is to be determined and to be paid
or made after such date, and (iii) any other agreement, arrangement or
understanding (written or oral), or transaction or other action contemplated
prior to the date as of which such Book Value is to be determined that would
have the effect of thereafter reducing such Book Value.
"Business Combination" shall have the meaning set forth in Section
--------------------
11(c)(i).
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
------------
and Friday that is not a day on which banking institutions in the Borough of
Manhattan, the City of New York, are authorized or obligated by law or executive
order to close.
"Certificate of Designation" shall mean the Certificate of Designation
--------------------------
of Series A Participating Cumulative Preferred Stock setting forth the powers,
preferences, rights, qualifications, limitations and restrictions of such series
of Preferred Stock of the Company, a copy of which is attached as Exhibit A.
"Class A Common Stock" shall have the meaning set forth in the
--------------------
introductory paragraph of this Rights Agreement.
"Close of Business" on any given date shall mean 5:00 p.m., Eastern
-----------------
time, on such date; provided, however, that, if such date is not a Business Day,
-------- -------
"Close of Business" shall mean 5:00 p.m., Eastern time, on the next succeeding
Business Day.
"Common Shares", when used with reference to the Company prior to a
-------------
Business Combination, shall mean the shares of Common Stock and Class A Common
Stock of the Company or any other shares of capital stock of the Company into
which the Common Stock or Class A Common Stock shall be reclassified or changed.
"Common Shares", when used with reference to any Person (other than the Company
prior to a Business Combination), shall mean shares of capital stock of such
Person (if such Person is a corporation) of any class or series, or units of
equity interests in such Person (if
<PAGE>
6
such Person is not a corporation) of any class or series, the terms of which do
not limit (as a maximum amount and not merely in proportional terms) the amount
of dividends or income payable or distributable on such class or series or the
amount of assets distributable on such class or series upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person and do not
provide that such class or series is subject to redemption at the option of such
Person, or any shares of capital stock or units of equity interests into which
the foregoing shall be reclassified or changed.
"Common Stock" shall have the meaning set forth in the introductory
------------
paragraph of this Rights Agreement.
"Company" shall have the meaning set forth in the heading of this
-------
Rights Agreement; provided, however, that if there is a Business Combination,
-------- -------
"Company" shall have the meaning set forth in Section 11(c)(iii).
The term "control" with respect to any Person shall mean the power to
-------
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"Distribution Date" shall have the meaning set forth in Section 3(b).
-----------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, as in effect on the date in question, unless otherwise specifically
provided.
"Exchange Consideration" shall have the meaning set forth in Section
----------------------
11(b)(i).
"Expiration Date" shall have the meaning set forth in Section 7(a).
---------------
"Governance Agreement" shall mean the Governance Agreement, dated as
--------------------
of August 21, 1998, among the Company, TDF and Digital Future Investments B.V.
"Major Part", when used with reference to the assets of the Company
----------
and its Subsidiaries as of any date, shall mean assets (a) having a fair market
value aggregating 50% or more of the total fair market value of all the assets
<PAGE>
7
of the Company and its Subsidiaries (taken as a whole) as of the date in
question, (b) accounting for 50% or more of the total value (net of depreciation
and amortization) of all the assets of the Company and its Subsidiaries (taken
as a whole) as would be shown on a consolidated or combined balance sheet of the
Company and its Subsidiaries as of the date in question, prepared in accordance
with generally accepted accounting principles then in effect, or (c) accounting
for 50% or more of the total amount of earnings before interest, taxes,
depreciation and amortization or of the revenues of the Company and its
Subsidiaries (taken as a whole) as would be shown on, or derived from, a
consolidated or combined statement of income or net earnings of the Company and
its Subsidiaries for the period of 12 months ending on the last day of the
Company's monthly accounting period next preceding the date in question,
prepared in accordance with generally accepted accounting principles then in
effect.
"Market Value", when used with reference to the Company, shall mean
------------
the average of the daily closing prices, per share, of the Common Stock for the
period which is the shorter of (a) 30 consecutive Trading Days ending on the
Trading Day immediately prior to the date in question or (b) the number of
consecutive Trading Days beginning on the Trading Day immediately after the date
of the first public announcement of the event requiring a determination of the
Market Value of Common Stock and ending on the Trading Day immediately prior to
the record date of such event; provided, however, that, in the event that the
-------- -------
Market Value of such Common Stock is to be determined in whole or in part during
a period following the announcement by the issuer of such Common Stock of any
action of the type described in Section 12(a) that would require an adjustment
thereunder, then, and in each such case, the Market Value of such Common Stock
shall be appropriately adjusted to reflect the effect of such action on the
market price of such Common Stock, and "Market Value", when used with reference
to any Person other than the Company, shall mean the Common Shares of such
Person on any date and each of the foregoing references to "Common Stock" shall,
when used with reference to such Person, be deemed to be a reference to the
Common Shares of such Person. The closing price for each Trading Day shall be
the closing price quoted on the composite tape for securities listed on the New
York Stock Exchange, or, if such securities are not quoted on such composite
tape or if such securities are not listed on such exchange, on the principal
United States securities exchange registered under the Exchange Act (or any
recognized foreign stock exchange) on which such securities are listed, or, if
such securities are not listed on any such exchange, the closing price
<PAGE>
8
quoted on The Nasdaq Stock Market or, if such securities are not so quoted, the
average of the closing bid and asked quotations with respect to a share of such
securities on any National Association of Securities Dealers, Inc. quotations
system or such other system then in use, or if no such quotations are available,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in such securities selected by the Board of
Directors of the Company, or if on any such Trading Day no market maker is
making a market in such securities, the closing price of such securities on such
Trading Day shall be deemed to be the fair value of such securities as
determined in good faith by the Board of Directors of the Company (whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent, the holders of Rights and all other
Persons); provided, however, that for the purpose of determining the closing
-------- -------
price of the Preferred Shares for any Trading Day on which there is no such
market maker for the Preferred Shares the closing price on such Trading Day
shall be deemed to be the Formula Number (as defined in the Certificate of
Designation) multiplied by the closing price per share of the Common Stock of
the Company on such Trading Day.
"Person" shall mean an individual, corporation, partnership, limited
------
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Preferred Shares" shall have the meaning set forth in the
----------------
introductory paragraph of this Rights Agreement. Any reference in this Rights
Agreement to Preferred Shares shall be deemed to include any authorized fraction
of a Preferred Share, unless the context otherwise requires.
"Principal Party" shall mean the Surviving Person in a Business
---------------
Combination; provided, however, that, (i) if such Surviving Person is a direct
-------- -------
or indirect Subsidiary of any other Person, "Principal Party" shall mean the
Person which is the ultimate parent of such Surviving Person and which is not
itself a Subsidiary of another Person, and (ii) in the event ultimate control of
such Surviving Person is shared by two or more Persons, "Principal Party" shall
mean that Person that is immediately controlled by such two or more Persons.
"Purchase Price" with respect to each Right shall mean $110, as such
--------------
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of
<PAGE>
9
the United States of America. All references herein to the Purchase Price shall
mean the Purchase Price as in effect at the time in question.
"Record Date" shall have the meaning set forth in the introductory
-----------
paragraph of this Rights Agreement.
"Redemption Date" shall have the meaning set forth in Section 24(a).
---------------
"Redemption Price" with respect to each Right shall mean $.01, as such
----------------
amount may from time to time be adjusted in accordance with Section 12. All
references herein to the Redemption Price shall mean the Redemption Price as in
effect at the time in question.
"Registered Common Shares" shall mean Common Shares that are, as of
------------------------
the date of consummation of a Business Combination, and have continuously been
for the 12 months immediately preceding such date, registered under Section 12
of the Exchange Act.
"Right Certificate" shall mean a certificate evidencing a Right in
-----------------
substantially the form attached as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or other
------
securities) as provided in this Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, as
--------------
in effect on the date in question, unless otherwise specifically provided.
"Senior Preferred Stock" shall mean the Senior Convertible Preferred
----------------------
Stock of the Company, par value $.01 per share.
"Subsidiary" shall mean a Person, at least a majority of the total
----------
outstanding voting power (being the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation)) of
which is owned, directly or indirectly, by another Person or by one or more
other Subsidiaries of such other Person or by such other Person and one or more
other Subsidiaries of such other Person.
<PAGE>
10
"Surviving Person" shall mean (a) the Person which is the continuing
----------------
or surviving Person in a consolidation or merger specified in Section
11(c)(i)(A) or 11(c)(i)(B) or (b) the Person to which the Major Part of the
assets of the Company and its Subsidiaries is sold, leased, exchanged or
otherwise transferred or disposed of in a transaction specified in Section
11(c)(i)(C); provided, however, that, if the Major Part of the assets of the
-------- -------
Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred
or disposed of in one or more related transactions specified in Section
11(c)(i)(C) to more than one Person, the "Surviving Person" in such case shall
mean the Person that acquired assets of the Company and/or its Subsidiaries with
the greatest fair market value in such transaction or transactions.
"TDF" shall mean TeleDiffusion de France International S.A.
---
"TDF Group" shall mean TDF and its Affiliates (other than the Company
---------
and its Subsidiaries).
"TDF Group Interest" shall mean the percentage of Voting Power that is
------------------
controlled, directly or indirectly, by the TDF Group or would be controlled,
directly or indirectly, by the TDF Group (assuming the exercise by TDF of any
warrants held by the TDF Group to purchase Common Shares of the Company).
"Trading Day" shall mean a day on which the principal national
-----------
securities exchange (or principal recognized foreign stock exchange, as the case
may be) on which any securities or Rights, as the case may be, are listed or
admitted to trading is open for the transaction of business or, if the
securities or Rights in question are not listed or admitted to trading on any
national securities exchange (or recognized foreign stock exchange, as the case
may be), a Business Day.
"Voting Power", when used with reference to any class or series of
------------
securities of the Company, or any classes or series of securities of the Company
entitled to vote together as a single class or series, shall mean the power of
such class or series (or such classes or series) to vote for the election of
directors. For purposes of determining the percentage of Voting Power of any
class or series (or classes or series) beneficially owned by any person, any
securities not outstanding which are subject to conversion rights, exchange
rights, rights, warrants, options or similar securities held by such person
shall be deemed to be outstanding for the purpose of computing the percentage of
<PAGE>
11
outstanding securities of the class or series (or classes or series)
beneficially owned by such person, but shall not be deemed to be outstanding for
the purpose of computing the percentage of the class or series (or classes or
series) beneficially owned by any other person.
"Voting Securities", when used with reference to the Company shall
-----------------
mean any securities of the Company having Voting Power or any securities
convertible into or exchangeable for any securities having Voting Power,
including but not limited to the Common Stock, the Class A Common Stock and the
Senior Preferred Stock.
SECTION 2. Appointment of Rights Agent. The Company hereby appoints
----------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint one or more co-Rights Agents as it may
deem necessary or desirable (the term "Rights Agent" being used herein to refer,
collectively, to the Rights Agent together with any such co-Rights Agents). In
the event the Company appoints one or more co-Rights Agents, the respective
duties of the Rights Agent and any co-Rights Agents shall be as the Company
shall determine.
SECTION 3. Issue of Rights and Right Certificates. (a) One Right
---------------------------------------
shall be associated with each Common Share outstanding on the Record Date, each
additional Common Share that shall become outstanding between the Record Date
and the earliest of the Distribution Date, the Redemption Date or the Expiration
Date and each additional Common Share with which Rights are issued after the
Distribution Date but prior to the earlier of the Redemption Date or the
Expiration Date as provided in Section 23; provided, however, that, if the
-------- -------
number of outstanding Rights are combined into a smaller number of outstanding
Rights pursuant to Section 12(a), the appropriate fractional Right determined
pursuant to such Section shall thereafter be associated with each such Common
Share.
(b) Until the earlier of (i) such time as the Company learns that a
Person has become an Acquiring Person or (ii) the Close of Business on such
date, if any, as may be designated by the Board of Directors of the Company
following the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit or compensation plan of the
Company or of any of its Subsidiaries, or any Person holding Voting Securities
for or pursuant to the terms of any such
<PAGE>
12
employee benefit or compensation plan) for outstanding Voting Securities, if
upon consummation of such tender or exchange offer such Person could be the
Beneficial Owner of more than 15% of the outstanding Voting Securities, or in
the case of any such offer by the TDF Group or the Berkshire Group, as
applicable, if the TDF Group or the Berkshire Group could be, upon consummation
of such offer, the Beneficial Owner of more than the Relevant TDF Percentage or
the Relevant Berkshire Percentage, applicable, (the Close of Business on the
earlier of such dates being the "Distribution Date"), (x) the Rights shall be
evidenced by the certificates for Common Shares registered in the names of the
holders thereof and not by separate Right Certificates, (y) the Rights,
including the right to receive Right Certificates, shall be transferable only in
connection with the transfer of Common Shares and (z) the Company shall notify
the Rights Agent as promptly as practicable that the Distribution Date has
occurred. As soon as practicable after the Distribution Date, the Rights Agent
shall send, by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the Distribution Date, at the address of such holder shown
on the records of the Company, a Right Certificate evidencing one whole Right
for each Common Share (or for the number of Common Shares with which one whole
Right is then associated if the number of Rights per Common Share held by such
record holder has been adjusted in accordance with the proviso in Section 3(a)).
If the number of Rights associated with each Common Share has been adjusted in
accordance with the proviso in Section 3(a), at the time of distribution of the
Right Certificates the Company may make any necessary and appropriate rounding
adjustments so that Right Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Right in accordance
with Section 15(a). The Company shall notify the Rights Agent as promptly as
practicable of any such adjustments. As of and after the Distribution Date, the
Rights shall be evidenced solely by such Right Certificates.
(c) With respect to any certificate for Common Shares outstanding as
of the Record Date, until the earliest of the Distribution Date, the Redemption
Date or the Expiration Date, (i) the Rights associated with the Common Shares
represented by any such certificate shall be evidenced by such certificates for
the Common Shares and the registered holders of the Common Shares shall also be
the registered holders of the associated Rights and (ii) the surrender for
transfer of any such certificate, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby; provided, however,
-------- -------
that the Rights associated with shares of Class A Common Stock
<PAGE>
13
shall be deemed null and void upon surrender of any certificate representing
Class A Common Stock for conversion into shares of Common Stock or upon an
automatic conversion of the Class A Common Stock into Common Stock pursuant to
the terms of such Class A Common Stock (it being understood that any Common
Stock issued upon any conversion of Class A Common Stock shall be issued with
the associated Rights).
(d) Certificates issued for Common Shares after the Record Date
(including upon transfer or exchange of outstanding Common Shares), but prior to
the earliest of the Distribution Date, the Redemption Date or the Expiration
Date, shall have printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of August 21,
1998 as it may be amended from time to time (the "Rights Agreement"),
between Crown Castle International Corp. (the "Company") and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), the
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such Rights
shall be evidenced by separate certificates and shall no longer be
evidenced by this certificate. The Rights Agent shall mail to the holder of
this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Rights beneficially owned by
Acquiring Persons or their Affiliates or Associates (as such terms are
defined in the Rights Agreement) and by any subsequent holder of such
Rights are null and void and nontransferable.
Notwithstanding this Section 3(d), neither the omission of a legend nor the
inclusion of a legend that makes reference to a rights agreement other than the
Rights Agreement shall affect the enforceability of any part of this Rights
Agreement or the rights of any holder of Rights.
SECTION 4. Form of Right Certificates. The Right Certificates (and
--------------------------
the form of election to purchase and form of assignment to be printed on the
reverse side thereof) shall be in substantially the form set forth as Exhibit B
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Rights Agreement, or as
may be required to comply with any applicable law or with any rule
<PAGE>
14
or regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Sections 7, 11 and 23, the Right
Certificates, whenever issued, shall be dated as of the Distribution Date, and
on their face shall entitle the holders thereof to purchase such number of
Preferred Shares as shall be set forth therein for the Purchase Price set forth
therein, subject to adjustment from time to time as herein provided.
SECTION 5. Execution, Countersignature and Registration. (a) The
---------------------------------------------
Right Certificates shall be executed on behalf of the Company by the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Financial
Officer, a Vice President (whether preceded by any additional title), the
Treasurer or the Secretary of the Company, either manually or by facsimile
signature, and have affixed thereto the Company's seal or a facsimile thereof,
which shall be attested by the Secretary, an Assistant Secretary or a Vice
President (whether preceded by any additional title, provided that such Vice
President shall not have also executed the Right Certificates) of the Company,
either manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid or obligatory
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Right Certificates shall cease to be such an
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Right Certificates may nevertheless be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Right
Certificates had not ceased to be such an officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of execution of such Right Certificate, shall be a proper officer of
the Company to sign such Right Certificate, although at the date of execution of
this Rights Agreement any such person was not such an officer of the Company.
(b) Following the Distribution Date, the Rights Agent shall keep or
cause to be kept, at its principal office in New Jersey, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
<PAGE>
15
SECTION 6. Transfer, Split-Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates;
- ----------------------------------------------------------------------
Uncertificated Rights. (a) Subject to the provisions of Sections 7(e) and 15,
- ----------------------
at any time after the Distribution Date, and at or prior to the Close of
Business on the earlier of the Redemption Date or the Expiration Date, any Right
Certificate or Right Certificates may be transferred, split-up, combined or
exchanged for another Right Certificate or Right Certificates representing, in
the aggregate, the same number of Rights as the Right Certificate or Right
Certificates surrendered then represented. Any registered holder desiring to
transfer, split-up, combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent and shall surrender the Right
Certificate or Right Certificates to be transferred, split-up, combined or
exchanged at the principal office of the Rights Agent; provided, however, that
-------- -------
neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any Right Certificate surrendered for
transfer until the registered holder shall have completed and signed the
certification contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e) and 15, countersign
and deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split-up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a valid Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancelation of the Right Certificate if mutilated, the Company shall make a new
Right Certificate of like tenor and deliver such new Right Certificate to the
Rights Agent for delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
<PAGE>
16
(c) Notwithstanding any other provision hereof, the Company and the
Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. Exercise of Rights; Expiration Date of Rights. (a)
----------------------------------------------
Subject to Section 7(e) and except as otherwise provided herein (including
Section 11), each Right shall entitle the registered holder thereof, upon
exercise thereof as provided herein, to purchase for the Purchase Price, at any
time after the Distribution Date and at or prior to the earliest of (i) the
Close of Business on the 10th anniversary of the date of this Rights Agreement
(the Close of Business on such date being the "Expiration Date") and (ii) the
Redemption Date, one one-thousandth (1/1,000th) of a Preferred Share, subject to
adjustment from time to time as provided in Sections 11 and 12.
(b) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent
in New Jersey, together with payment of the Purchase Price for each one one-
thousandth (1/1,000th) of a Preferred Share as to which the Rights are
exercised, at or prior to the earlier of (i) the Expiration Date or (ii) the
Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the Preferred Shares to be purchased together
with an amount equal to any applicable transfer tax, in lawful money of the
United States of America, in cash or by certified check or money order payable
to the order of the Company, the Rights Agent shall thereupon (i) either (A)
promptly requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent) certificates for the
number of Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B) if the
Company shall have elected to deposit the Preferred Shares with a depositary
agent under a depositary arrangement, promptly requisition from the depositary
agent depositary receipts representing the number of one one-thousandths
(1/1,000s) of a Preferred Share to be purchased (in which case certificates for
the Preferred Shares to be represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the
<PAGE>
17
Company shall direct the depositary agent to comply with all such requests, (ii)
when appropriate, promptly requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 15,
(iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 15.
(e) Notwithstanding anything in this Rights Agreement to the
contrary, any Rights that are at any time beneficially owned by (i) an Acquiring
Person or an Affiliate or Associate of an Acquiring Person, (ii) a transferee of
an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such (other than pursuant to the
penultimate sentence of the definition of "Acquiring Person"), or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Rights Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) are complied with,
but shall have no liability to any holder of any Right Certificate or any other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliate or Associate, or any transferee thereof,
hereunder.
<PAGE>
18
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of any Right
Certificates upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not to
exceed 90 calendar days after the Distribution Date, the exercisability of the
Rights in order to prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such registration statement
to become effective; provided, however, that no such suspension shall remain
-------- -------
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such registration statement. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect. Notwithstanding any provision herein
to the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification under the blue sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
SECTION 8. Cancelation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered or presented for the purpose of exercise,
transfer, split-up, combination or exchange shall, and any Right Certificate
representing Rights that have become null and void and nontransferable pursuant
to Section 7(e) surrendered or presented for any purpose shall, if surrendered
or presented to the Company or to any of its agents, be delivered to the Rights
Agent for cancelation or in canceled form, or, if surrendered or presented to
the Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by this Rights Agreement.
The Company shall deliver to the Rights Agent for cancelation and retirement,
and the Rights Agent shall so cancel and retire, any Right Certificate purchased
or
<PAGE>
19
acquired by the Company. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Preferred Shares. (a)
-------------------------------------------------
The Company covenants and agrees that it shall cause to be reserved and kept
available out of its authorized and unissued Preferred Shares or any authorized
and issued Preferred Shares held in its treasury, free from preemptive rights or
any right of first refusal, a number of Preferred Shares sufficient to permit
the exercise in full of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred Shares
issued but not outstanding or authorized but unissued to permit the exercise or
exchange of Rights in accordance with Section 11, the Company covenants and
agrees that it shall take all such action as may be necessary to authorize
additional Preferred Shares for issuance upon the exercise or exchange of Rights
pursuant to Section 11; provided, however, that if the Company is unable to
-------- -------
cause the authorization of additional Preferred Shares, then the Company shall,
or in lieu of seeking any such authorization, the Company may, to the extent
necessary and permitted by applicable law and any agreements or instruments in
effect prior to the Distribution Date to which it is a party, (i) upon surrender
of a Right, pay cash equal to the Purchase Price in lieu of issuing Preferred
Shares and requiring payment therefor, (ii) upon due exercise of a Right and
payment of the Purchase Price for each Preferred Share as to which such Right is
exercised, issue equity securities having a value equal to the value of the
Preferred Shares that otherwise would have been issuable pursuant to Section 11,
which value shall be determined by a nationally recognized investment banking
firm selected by the Board of Directors of the Company, or (iii) upon due
exercise of a Right and payment of the Purchase Price for each Preferred Share
as to which such Right is exercised, distribute a combination of Preferred
Shares, cash and/or other equity and/or debt securities having an aggregate
value equal to the value of the Preferred Shares that otherwise would have been
issuable pursuant to Section 11, which value shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company. To the extent that any legal or contractual restrictions (pursuant to
agreements or instruments in effect prior to the Distribution Date to which it
is party) prevent the Company from paying the full amount payable in accordance
with the
<PAGE>
20
foregoing sentence, the Company shall pay to holders of the Rights as to which
such payments are being made all amounts that are not then restricted on a pro
rata basis as such payments become permissible under such legal or contractual
restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it shall take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights are to be listed on any national securities exchange, the
Company covenants and agrees to use its best efforts to cause, from and after
such time as the Rights become exercisable or exchangeable, all Preferred Shares
reserved for such issuance to be listed on such securities exchange upon
official notice of issuance upon such exercise or exchange.
(e) The Company further covenants and agrees that it shall pay when
due and payable any and all Federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of Right Certificates or
of any Preferred Shares or Common Stock or other securities upon the exercise or
exchange of the Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or in respect of the issuance or
delivery of certificates for the Preferred Shares or Common Stock or other
securities, as the case may be, in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or
exchange or to issue or deliver any certificates for Preferred Shares or Common
Stock or other securities, as the case may be, upon the exercise or exchange of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Right Certificate at the time of surrender) or until it
has been established to the Company's satisfaction that no such tax is due.
SECTION 10. Preferred Shares Record Date. Each Person in whose name
-----------------------------
any certificate for Preferred Shares or Common Stock or other securities is
issued upon the exercise or exchange of Rights shall for all purposes be deemed
to have become the holder of record of the Preferred Shares or Common Stock or
other securities, as the case may be,
<PAGE>
21
represented thereby on, and such certificate shall be dated, the date on which
the Right Certificate evidencing such Rights was duly surrendered and payment of
any Purchase Price (and any applicable transfer taxes) was made; provided,
--------
however, that, if the date of such surrender and payment is a date upon which
- -------
the transfer books of the Company for the Preferred Shares or Common Stock or
other securities, as the case may be, are closed, such Person shall be deemed to
have become the record holder of such Preferred Shares or Common Stock or other
securities, as the case may be, on, and such certificate shall be dated, the
next succeeding Business Day on which the transfer books of the Company for the
Preferred Shares or Common Stock or other securities, as the case may be, are
open.
SECTION 11. Adjustments in Rights After There Is an Acquiring Person;
---------------------------------------------------------
Exchange of Rights for Shares; Business Combinations. (a) Upon a Person
- -----------------------------------------------------
becoming an Acquiring Person, proper provision shall be made so that each holder
of a Right, except as provided in Section 7(e), shall thereafter have a right to
receive, upon exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, such number of one one-thousandths (1/1,000s) of
a Preferred Share as shall equal the result obtained by multiplying the Purchase
Price by a fraction, the numerator of which is the number of one one-thousandths
(1/1,000s) of a Preferred Share for which such Right is then exercisable and the
denominator of which is 50% of the Market Value of the Common Stock on the date
on which such Person became an Acquiring Person. As soon as practicable after a
Person becomes an Acquiring Person (provided the Company shall not have elected
to make the exchange permitted by Section 11(b)(i) for all outstanding Rights),
the Company covenants and agrees to use its best efforts to:
(i) prepare and file a registration statement under the Securities
Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights;
(ii) cause such registration statement to become effective as soon as
practicable after such filing;
(iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date; and
(iv) qualify or register the Preferred Shares purchasable upon
exercise of the Rights under the blue
<PAGE>
22
sky or securities laws of such jurisdictions as may be necessary or
appropriate.
(b)(i) The Board of Directors of the Company may, at its option, at
any time after a Person becomes an Acquiring Person, mandatorily exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e)) for consideration per Right consisting of either (A)
one-half of the securities that would be issuable at such time upon the exercise
of one Right in accordance with Section 11(a) or, if applicable, Section
9(b)(ii) or 9(b)(iii) or (B) if applicable, the cash consideration specified in
Section 9(b)(i) (the consideration issuable per Right pursuant to this Section
11(b)(i) being the "Exchange Consideration"). The Board of Directors of the
Company may, at its option, issue, in substitution for Preferred Shares, Common
Stock in an amount per Preferred Share equal to the Formula Number (as defined
in the Certificate of Designation) if there are sufficient shares of Common
Stock issued but not outstanding or authorized but unissued. If the Board of
Directors of the Company elects to exchange all the Rights for the Exchange
Consideration pursuant to this Section 11(b)(i) prior to the physical
distribution of the Right Certificates, the Corporation may distribute the
Exchange Consideration in lieu of distributing Right Certificates, in which case
for purposes of this Rights Agreement holders of Rights shall be deemed to have
simultaneously received and surrendered for exchange Right Certificates on the
date of such distribution.
(ii) Any action of the Board of Directors of the Company ordering
the exchange of any Rights pursuant to Section 11(b)(i) shall be irrevocable
and, immediately upon the taking of such action and without any further action
and without any notice, the right to exercise any such Right pursuant to Section
11(a) shall terminate and the only right thereafter of a holder of such Right
shall be to receive the Exchange Consideration in exchange for each such Right
held by such holder or, if the Exchange Consideration shall not have been paid
or issued, to exercise any such Right pursuant to Section 11(c)(i). The Company
shall promptly give public notice of any such exchange; provided, however, that
-------- -------
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
<PAGE>
23
notice. Each such notice of exchange shall state the method by which the
exchange of the Rights for the Exchange Consideration will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which shall have become null and void and nontransferable
pursuant to the provisions of Section 7(e)) held by each holder of Rights.
(c) (i) In the event that, following a Distribution Date, directly
or indirectly, any transactions specified in the following clause (A), (B) or
(C) of this Section 11(c)(i) (each such transaction being a "Business
Combination") shall be consummated:
(A) the Company shall consolidate with, or merge with and into, any
Acquiring Person or any Affiliate or Associate of an Acquiring Person;
(B) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into the Company and, in connection
with such merger, all or part of the Common Shares shall be changed into or
exchanged for capital stock or other securities of the Company or of any
Acquiring Person or Affiliate or Associate of an Acquiring Person or cash
or any other property; or
(C) the Company shall sell, lease, exchange or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall sell, lease, exchange
or otherwise transfer or dispose of), in one or more transactions, the
Major Part of the assets of the Company and its Subsidiaries (taken as a
whole) to any Acquiring Person or any Affiliate or Associate of an
Acquiring Person,
then, in each such case, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, the securities specified below (or, at such
holder's option, the securities specified in Section 11(a)):
(1) if the Principal Party in such Business Combination has
Registered Common Shares outstanding, each Right shall thereafter represent
the right to receive, upon the exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, such number of
Registered Common Shares of
<PAGE>
24
such Principal Party, free and clear of all liens, encumbrances or other
adverse claims, as shall have an aggregate Market Value as of the time of
exercise thereof equal to the result obtained by multiplying the Purchase
Price by two;
(2) if the Principal Party involved in such Business Combination does
not have Registered Common Shares outstanding, each Right shall thereafter
represent the right to receive, upon the exercise thereof for the Purchase
Price in accordance with the terms of this Rights Agreement, at the
election of the holder of such Right at the time of the exercise thereof,
any of:
(x) such number of Common Shares of the Surviving Person in such
Business Combination as shall have an aggregate Book Value immediately
after giving effect to such Business Combination equal to the result
obtained by multiplying the Purchase Price by two;
(y) such number of Common Shares of the Principal Party in such
Business Combination (if the Principal Party is not also the Surviving
Person in such Business Combination) as shall have an aggregate Book
Value immediately after giving effect to such Business Combination
equal to the result obtained by multiplying the Purchase Price by two;
or
(z) if the Principal Party in such Business Combination is an
Affiliate of one or more Persons that has Registered Common Shares
outstanding, such number of Registered Common Shares of whichever of
such Affiliates of the Principal Party has Registered Common Shares
with the greatest aggregate Market Value on the date of consummation
of such Business Combination as shall have an aggregate Market Value
on the date of such Business Combination equal to the result obtained
by multiplying the Purchase Price by two.
(ii) The Company shall not consummate any Business Combination unless
each issuer of Common Shares for which Rights may be exercised, as set forth in
this Section 11(c), shall have sufficient authorized Common Shares that have not
been issued or reserved for issuance (and which shall, when issued upon exercise
thereof in accordance with this Rights Agreement, be validly issued, fully paid
and nonassessable and free of preemptive rights,
<PAGE>
25
rights of first refusal or any other restrictions or limitations on the transfer
or ownership thereof) to permit the exercise in full of the Rights in accordance
with this Section 11(c) and unless prior thereto:
(A) a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, shall be effective under
the Securities Act; and
(B) the Company and each such issuer shall have:
(i) executed and delivered to the Rights Agent a supplemental
agreement providing for the assumption by such issuer of the
obligations set forth in this Section 11(c) (including the obligation
of such issuer to issue Common Shares upon the exercise of Rights in
accordance with the terms set forth in Sections 11(c)(i) and
11(c)(iii)) and further providing that such issuer, at its own
expense, shall use its best efforts to:
(x) cause a registration statement under the Securities Act
on an appropriate form, with respect to the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights, to
remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date;
(y) qualify or register the Rights and the Common Shares of
such issuer purchasable upon exercise of the Rights under the
blue sky or securities laws of such jurisdictions as may be
necessary or appropriate; and
(z) list the Rights and the Common Shares of such issuer
purchasable upon exercise of the Rights on each national
securities exchange on which the Common Shares were listed prior
to the consummation of the Business Combination or, if the Common
Shares were not listed on a national securities exchange prior to
the consummation of the Business Combination, on a national
securities exchange;
<PAGE>
26
(2) furnished to the Rights Agent a written opinion of
independent counsel stating that such supplemental agreement is a
valid, binding and enforceable agreement of such issuer; and
(3) filed with the Rights Agent a certificate of a nationally
recognized firm of independent accountants setting forth the number of
Common Shares of such issuer that may be purchased upon the exercise
of each Right after the consummation of such Business Combination.
(iii) After consummation of any Business Combination and subject to
the provisions of Section 11(c)(ii), (A) each issuer of Common Shares for which
Rights may be exercised as set forth in this Section 11(c) shall be liable for,
and shall assume, by virtue of such Business Combination, all the obligations
and duties of the Company pursuant to this Rights Agreement, (B) the term
"Company" shall thereafter be deemed to refer to such issuer, (C) each such
issuer shall take such steps in connection with such consummation as may be
necessary to assure that the provisions hereof (including the provisions of
Sections 11(a), 11(b) and 11(c)) shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights, and (D) the number of Common Shares of each such
issuer thereafter receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Sections 11 and 12 and the provisions of
Section 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly
as reasonably may be, on like terms to any such Common Shares.
SECTION 12. Certain Adjustments. (a) To preserve the actual or
--------------------
potential economic value of the Rights, if at any time after the date of this
Rights Agreement there shall be any change in the Common Shares or the Preferred
Shares, whether by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of securities, split-ups,
split-offs, spin-offs, liquidations, other similar changes in capitalization,
any distribution or issuance of cash, assets, evidences of indebtedness or
subscription rights, options or warrants to holders of Common Shares or
Preferred Shares, as the case may be (other than distribution of the Rights or
regular quarterly cash dividends), or otherwise, then, in each such event the
Board of Directors of the Company shall make such appropriate adjustments in the
number of Preferred Shares (or the number and kind of other
<PAGE>
27
securities) issuable upon exercise of each Right, the Purchase Price and
Redemption Price in effect at such time and the number of Rights outstanding at
such time (including the number of Rights or fractional Rights associated with
each Common Share) such that following such adjustment such event shall not have
had the effect of reducing or limiting the benefits the holders of the Rights
would have had absent such event.
(b) If, as a result of an adjustment made pursuant to Section 12(a),
the holder of any Right thereafter exercised shall become entitled to receive
any securities other than Preferred Shares, thereafter the number of such
securities so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Sections 11 and 12 and the provisions of
Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly
as reasonably may be, on like terms to any such other securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities relating
to a Right shall evidence the right to purchase, for the Purchase Price, the
adjusted number and kind of securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(d) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Shares or number or kind of other securities issuable
upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the terms that were expressed in the
initial Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section 12(a)
requires that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the Preferred Shares and/or other securities, if any, issuable upon such
exercise over and above the Preferred Shares and/or other securities, if any,
issuable before giving effect to such adjustment; provided, however, that the
-------- -------
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional securities upon the
occurrence of the event requiring such adjustment.
<PAGE>
28
SECTION 13. Certificate of Adjustment. Whenever an adjustment is
--------------------------
made as provided in Section 11 or 12, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate (or, prior to
the Distribution Date, of the Common Shares) in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
SECTION 14. Additional Covenants. (a) Notwithstanding any other
---------------------
provision of this Rights Agreement, no adjustment to the number of Preferred
Shares (or fractions of a share) or other securities for which a Right is
exercisable or the number of Rights outstanding or associated with each Common
Share or any similar or other adjustment shall be made or be effective if such
adjustment would have the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such adjustment, including the
benefits under Sections 11 and 12, unless the terms of this Rights Agreement are
amended so as to preserve such benefits.
(b) The Company covenants and agrees that, after the Distribution
Date, except as permitted by Section 26, it shall not take (or permit any
Subsidiary of the Company to take) any action if at the time such action is
taken it is intended or reasonably foreseeable that such action will reduce or
otherwise limit the benefits the holders of the Rights would have had absent
such action, including the benefits under Sections 11 and 12. Any action taken
by the Company during any period after any Person becomes an Acquiring Person
but prior to the Distribution Date shall be null and void unless such action
could be taken under this Section 14(b) from and after the Distribution Date.
The Company shall not consummate any Business Combination if any issuer of
Common Shares for which Rights may be exercised after such Business Combination
in accordance with Section 11(c) shall have taken any action that reduces or
otherwise limits the benefits the holders of the Rights would have had absent
such action, including the benefits under Sections 11 and 12.
SECTION 15. Fractional Rights and Fractional Shares. (a) The
----------------------------------------
Company may, but shall not be required to, issue fractions of Rights or
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, the Company may pay to the registered
<PAGE>
29
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 15(a), the
current market value of a whole Right shall be the closing price of the Rights
(as determined pursuant to the second and third sentences of the definition of
Market Value contained in Section 1) for the Trading Day immediately prior to
the date on which such fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue fractions of
Preferred Shares upon exercise of the Rights or distribute certificates that
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one one-thousandth (1/1,000th) of a Preferred Share or any
integral multiple thereof), pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current Market Value of one Preferred Share, if any
are outstanding and publicly traded (or the Formula Number times the current
Market Value of one share of Common Stock if the Preferred Shares are not
outstanding and publicly traded). For purposes of this Section 15(b), the
current Market Value of a Preferred Share (or share of Common Stock) shall be
the closing price of a Preferred Share (or share of Common Stock) (as determined
pursuant to the second and third sentences of the definition of Market Value
contained in Section 1) for the Trading Day immediately prior to the date of
such exercise. If, as a result of an adjustment made pursuant to Section 12(a),
the holder of any Right thereafter exercised shall become entitled to receive
any securities other than Preferred Shares, the provisions of this Section 15(b)
shall apply, as nearly as reasonably may be, on like terms to such other
securities.
(c) The Company may, but shall not be required to, issue fractions of
Common Stock upon exchange of Rights pursuant to Section 11(b), or to distribute
certificates that evidence fractional Common Stock. In lieu of such fractional
Common Stock, the Company may pay to the registered holders of the Right
Certificates with regard to which such fractional Common Stock would otherwise
be issuable an amount in cash equal to the same fraction of the current Market
Value of one share of Common Stock as of the date on which a Person became an
Acquiring Person.
<PAGE>
30
(d) The holder of Rights by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as provided in this Section 15.
SECTION 16. Rights of Action. (a) All rights of action in respect
-----------------
of this Rights Agreement are vested in the respective registered holders of the
Right Certificates (or, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Shares) may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Rights Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Rights Agreement and shall be entitled to
specific performance of the obligations of any Person under, and injunctive
relief against actual or threatened violations of the obligations of any Person
subject to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the reasonable
costs and expenses, including attorneys' fees, incurred in such action.
SECTION 17. Transfer and Ownership of Rights and Right Certificates.
--------------------------------------------------------
(a) Prior to the Distribution Date, the Rights shall be transferable only in
connection with the transfer of the Common Shares and the Right associated with
each Common Share shall, subject to the proviso set forth in Section 3(c), be
automatically transferred upon the transfer of each Common Share.
(b) After the Distribution Date, the Right Certificates shall be
transferable, subject to Section 7(e), only on the registry books of the Rights
Agent if surrendered at the principal office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the Person in
whose name a Right Certificate (or,
<PAGE>
31
prior to the Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificates
or the associated certificate for Common Shares made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.
SECTION 18. Right Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote or receive
dividends or be deemed, for any purpose, the holder of the Preferred Shares or
of any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company,
including any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders, or to receive dividends or other distributions or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
SECTION 19. Concerning the Rights Agent. (a) The Company agrees to
----------------------------
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Rights Agreement and the exercise and performance of its
duties hereunder, including any taxes or governmental charges imposed as a
result of the action taken by it hereunder (other than any taxes on the fees
payable to it).
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Rights Agreement in reliance upon any Right
Certificate or certificate for the Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
<PAGE>
32
SECTION 20. Merger or Consolidation or Change of Rights Agent. (a)
--------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Rights Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided that such corporation would be eligible for
--------
appointment as a successor Rights Agent under the provisions of Section 22. In
case, at the time such successor Rights Agent shall succeed to the agency
created by this Rights Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any succes sor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not deliv ered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so counter signed; and, in case at that
time any of the Right Certifi cates shall not have been countersigned, the
Rights Agent may countersign such Right Certificates either in its prior name or
in its changed name; and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this Rights Agreement.
SECTION 21. Duties of Rights Agent. The Rights Agent undertakes the
-----------------------
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates (or, prior to the Distribution Date, of the Common Shares), by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
<PAGE>
33
taken, suffered or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including the identity of any Acquiring Person) be proved or established
by the Company prior to taking, refraining from taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the Chief Financial Officer, a Vice President (whether
preceded by any additional title), the Treasurer or the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Rights Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or wilful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Rights Agreement or in the
Right Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Rights Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or 12 or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Preferred Shares or shares of
Common Stock to be issued pursuant to this Rights Agreement or any Right
Certificate
<PAGE>
34
or as to whether any Preferred Shares or shares of Common Stock will, when so
issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it shall perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the Chief
Financial Officer, a Vice President (whether preceded by any additional title),
the Treasurer or the Secretary of the Company, in connection with its duties and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct provided reasonable care was exercised in the selection
and continued employment thereof.
(j) The Company shall indemnify the Rights Agent for, and hold it
harmless against, any loss, liability, claim or expense ("Loss") arising out of
or in connection with its duties under this Agreement, including then costs and
expenses of defending itself against any Loss, unless such Loss shall have been
determined by a court of competent jurisdiction to be a result of the Rights
Agent's gross
<PAGE>
35
negligence or intentional misconduct. In no case, however, will the Rights Agent
be liable for special, indirect, incidental or consequential loss or damages of
any kind whatsoever (including but not limited to lost profits), even if the
Rights Agent has been advised of the possibility of such damages. The Rights
Agent shall promptly notify the Company, by letter or by facsimile confirmed by
letter, of the assertion of any action, proceeding, suit or claim against the
Rights Agent, promptly after the Rights Agent shall have notice of any such
assertion of an action, proceeding, suit or claim or have been served with the
summons or other first legal process giving information as to the nature and
basis of the action, proceeding, suit or claim. The Company shall be entitled to
participate at its own expense in the defense of any such action, proceeding,
suit or claim, and, if the Company so elects, the Company shall assume the
defense of any such action, proceeding, suit or claim. In the event that the
Company assumes such defense, the Company shall not thereafter be liable for the
fees and expenses of any additional counsel retained by the Rights Agent, so
long as the Company shall retain counsel satisfactory to the Rights Agent, in
the exercise of its reasonable judgment, to defend such action, proceeding, suit
or claim. The Rights Agent agrees not to settle any litigation in connection
with any action, proceeding, suit or claim with respect to which it may seek
indemnification from the Company without the prior written consent of the
Company. The obligations of the Company under this section shall survive the
termination of this Agreement.
SECTION 22. Change of Rights Agent. The Rights Agent or any
-----------------------
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares and the Preferred Shares by registered
or certified mail, and to the holders of the Right Certificates (or, prior to
the Distribution Date, of the Common Shares) by first-class mail. The Company
may remove the Rights Agent or any successor Rights Agent upon 30 days' notice
in writing, mailed to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Shares and the Preferred Shares
by registered or certified mail, and to the holders of the Right Certificates
(or, prior to the Distribution Date, of the Common Shares) by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapaci-
<PAGE>
36
tated Rights Agent or by the holder of a Right Certificate (or, prior to the
Distribution Date, of the Common Shares) (who shall, with such notice, submit
his Right Certificate or, prior to the Distribution Date, the certificate
representing his Common Shares, for inspection by the Company), then the
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares) may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such corporation is authorized
to conduct a stock transfer or corporate trust business in the State of New
York), in good standing, having a principal office in the State of New York,
which is authorized under such laws to exercise stock transfer or corporate
trust powers and is subject to supervision or examination by Federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000; provided that the
--------
principal transfer agent for the Common Shares shall in any event be qualified
to be the Rights Agent. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and the Preferred Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares). Failure to give any notice provided
for in this Section 22, however, or any defect therein shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
SECTION 23. Issuance of Additional Rights and Right Certificates.
-----------------------------------------------------
Notwithstanding any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change made in accordance with the provisions of this
Rights Agreement. In addition, in connection with the issuance or sale of
<PAGE>
37
Common Shares following the Distribution Date and prior to the earlier of the
Redemption Date and the Expiration Date, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company, and (b) may,
in any other case, if deemed necessary or appropriate by the Board of Directors
of the Company, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
-------- -------
such Right Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Right Certificate would be issued, (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof and (iii) no such Right Certificate
shall be issued to an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
SECTION 24. Redemption and Termination. (a) The Board of Directors
---------------------------
of the Company may, at its option, at any time prior to the earlier of (i) such
time as a Person becomes an Acquiring Person and (ii) the Expiration Date, order
the redemption of all, but not fewer than all, the then outstanding Rights at
the Redemption Price (the date of such redemption being the "Redemption Date"),
and the Company, at its option, may pay the Redemption Price either in cash or
Common Stock or other securities of the Company deemed by the Board of Directors
of the Company, in the exercise of its sole discretion, to be at least
equivalent in value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10 Business Days after the action of the Board of
Directors of the Company ordering the redemption of the Rights, the Company
shall give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Each such notice of redemption shall state the method by which payment
of the Redemption Price will be made. The notice, if mailed in the manner herein
<PAGE>
38
provided, shall be conclusively presumed to have been duly given, whether or not
the holder of Rights receives such notice. In any case, failure to give such
notice by mail, or any defect in the notice, to any particular holder of Rights
shall not affect the sufficiency of the notice to other holders of Rights.
SECTION 25. Notices. Notices or demands authorized by this Rights
--------
Agreement to be given or made by the Rights Agent or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Crown Castle International Corp.
510 Bering Drive
Suite 500
Houston, TX 77057
Attention: Corporate Secretary
Subject to the provisions of Section 22, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
2323 Bryan St., Suite 2300
Dallas, TX 75201
Attention: Timothy D. Oliver - Relationship Manager
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Right Certificate (or, prior
to the Distribution Date, of the Common Shares) shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares.
SECTION 26. Supplements and Amendments. At any time prior to the
---------------------------
time any person becomes an Acquiring Person, and subject to the last sentence of
this Section 26, the Company may, and the Rights Agent shall if the Company
<PAGE>
39
so directs, supplement or amend any provision of this Rights Agreement
(including the date on which the Expiration Date or the Distribution Date shall
occur, the amount of the Purchase Price, the definition of "Acquiring Person" or
the time during which the Rights may be redeemed pursuant to Section 24) without
the approval of any holder of the Rights. From and after the Distribution Date,
and subject to applicable law, the Company may, and the Rights Agent shall if
the Company so directs, amend this Rights Agreement without the approval of any
holders of Right Certificates (a) to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision of this Rights Agreement or (b) to make any other
provisions in regard to matters or questions arising hereunder which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person). Any supplement or
amendment adopted during any period after any Person has become an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
supplement or amendment could have been adopted under the prior sentence from
and after the Distribution Date. Any supplement or amendment to this Rights
Agreement duly approved by the Company that does not amend Sections 19, 20, 21
or 22 in a manner adverse to the Rights Agent shall become effective immediately
upon execution by the Company, whether or not also executed by the Rights Agent.
In addition, notwithstanding anything to the contrary contained in this Rights
Agreement, no supplement or amendment to this Rights Agreement shall be made
which reduces the Redemption Price (except as required by Section 12(a)).
SECTION 27. Successors. All the covenants and provisions of this
-----------
Rights Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. Benefits of Rights Agreement; Determinations and Actions
--------------------------------------------------------
by the Board of Directors, etc. (a) Nothing in this Rights Agreement shall be
- -------------------------------
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares) any legal or equitable right, remedy or claim under
this Rights Agreement; but this Rights Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (or, prior to the Distribution Date, of the Common
Shares).
<PAGE>
40
(b) Except as explicitly otherwise provided in this Rights Agreement,
the Board of Directors of the Company shall have the exclusive power and
authority to administer this Rights Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Rights Agreement, including the right and power to (i) interpret the provisions
of this Rights Agreement and (ii) make all determinations deemed necessary or
advisable for the administration of this Rights Agreement (including a
determination to redeem or not redeem the Rights or to amend this Rights
Agreement and a determination of whether there is an Acquiring Person).
(c) Nothing contained in this Rights Agreement shall be deemed to be
in derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to reject any tender offer or other acquisition proposal, or to
recommend that holders of Common Shares reject any tender offer, or to take any
other action (including the commencement, prosecution, defense or settlement of
any litigation and the submission of additional or alternative offers or other
proposals) with respect to any tender offer or other acquisition proposal that
the Board of Directors believes is necessary or appropriate in the exercise of
such fiduciary duty.
SECTION 29. Severability. If any term, provision, covenant or
-------------
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
SECTION 30. Governing Law. This Rights Agreement and each Right
--------------
Certificate issued hereunder shall be deemed to be a contract made under the law
of the State of Delaware and for all purposes shall be governed by and construed
in accordance with the law of such State applicable to contracts to be made and
performed entirely within such State; provided, however, that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely with such State.
<PAGE>
41
SECTION 31. Counterparts; Effectiveness. This Rights Agreement may
----------------------------
be executed in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. This Rights Agreement
shall be effective as of the Close of Business on the date hereof.
SECTION 32. Descriptive Headings. Descriptive headings of the
---------------------
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
of this Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.
CROWN CASTLE INTERNATIONAL CORP.,
by
_____________________________
Name:
Title:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
by
_____________________________
Name:
Title:
<PAGE>
CERTIFICATE OF THE VOTING POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SERIES A
PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
CROWN CASTLE INTERNATIONAL CORP.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, Crown Castle International Corp. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors
of the Company by Article IV of the Amended and Restated Certificate of
Incorporation of the Company (the "Charter"), the Board of Directors (the
"Board") of the Company on August 20, 1998, adopted the following resolution:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of the Amended
and Restated Certificate of Incorporation of the Company and the provisions
of Section 151(g) of the General Corporation Law of the State of Delaware,
the issuance of a series of Preferred Stock, par value $0.01 per share (the
"Preferred Stock"), which shall consist of 2,000,000 of the shares of
Preferred Stock which the Company has authority to issue, is authorized,
and the Board hereby fixes the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are
hereby amended and restated to read in their entirety (in addition to the
designation, preferences and relative, participating and other special
rights, and the qualifications, limitations or restrictions thereof, set
forth in the Amended and Restated Certificate of Incorporation, as amended,
which are applicable to the Preferred Stock of all series) as follows:
SECTION 1. Designation and Number of Shares. The shares of such
---------------------------------
series shall be designated as "Series A Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"). The number of shares initially
constituting the Series A Preferred Stock shall be 2,000,000; provided, however,
-------- -------
that, if more than a total of 2,000,000 shares of Series A Preferred Stock shall
be issuable upon the
<PAGE>
2
exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated
as of August 21, 1998, between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (the "Rights Agreement"), the Board of Directors of the
Company, pursuant to Section 151(g) of the General Corporation Law of the State
of Delaware, shall direct by resolution or resolutions that a certificate be
properly executed, acknowledged, filed and recorded, in accordance with the
provisions of Section 103 thereof, providing for the total number of shares of
Series A Preferred Stock authorized to be issued to be increased (to the extent
that the Charter then permits) to the largest number of whole shares (rounded up
to the nearest whole number) issuable upon exercise of such Rights.
SECTION 2. Dividends or Distributions. (a) Subject to the superior
--------------------------
rights of the holders of shares of any other series of Preferred Stock or other
class of capital stock of the Company ranking superior to the shares of Series A
Preferred Stock with respect to dividends, the holders of shares of the Series A
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of the assets of the Company legally available therefor,
(1) quarterly dividends payable in cash on the 1st day of February, May, August
and November in each year, or such other dates as the Board of Directors of the
Company shall approve (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or a fraction of a share of Series A
Preferred Stock, in the amount of $[ ] per whole share (rounded to the
nearest cent) less the amount of all cash dividends declared on the Series A
Preferred Stock pursuant to the following clause (2) since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock (the total of which shall not,
in any event, be less than zero) and (2) dividends payable in cash on the
payment date for each cash dividend declared on the Common Shares in an amount
per whole share (rounded to the nearest cent) equal to the Formula Number (as
hereinafter defined) then in effect times the cash dividends then to be paid on
each Common Share. In addition, if the Company shall pay any dividend or make
any distribution on the Common Shares payable in assets, securities or other
forms of noncash consideration (other than dividends or distributions solely in
Common Shares), then, in each such case, the Company shall simultaneously pay or
make on each outstanding whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in effect times such
dividend or distribution on each Common Share. As used
<PAGE>
3
herein, the "Formula Number" shall be 1,000; provided, however, that, if at any
-------- -------
time after August 21, 1998, the Company shall (i) declare or pay any dividend on
the Common Shares payable in shares or make any distribution on the Common
Shares in Common Shares, (ii) subdivide (by a stock split or otherwise) the
outstanding shares into a larger number of Common Shares or (iii) combine (by a
reverse stock split or otherwise) the outstanding Common Shares into a smaller
number of Common Shares, then in each such event the Formula Number shall be
adjusted to a number determined by multiplying the Formula Number in effect
immediately prior to such event by a fraction, the numerator of which is the
number of Common Shares that are outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that are
outstanding immediately prior to such event (and rounding the result to the
nearest whole number); and provided further that, if at any time after August
----------------
21, 1998, the Company shall issue any shares of its capital stock in a merger,
reclassification, or change of the outstanding Common Shares, then in each such
event the Formula Number shall be appropriately adjusted to reflect such merger,
reclassification or change so that each share of Preferred Stock continues to be
the economic equivalent of a Formula Number of Common Shares prior to such
merger, reclassification or change.
(b) The Company shall declare a dividend or distribution on the
Series A Preferred Stock as provided in Section 2(a) immediately prior to or at
the same time it declares a dividend or distribution on the Common Shares (other
than a dividend or distribution solely in Common Shares); provided, however,
-------- -------
that, in the event no dividend or distribution (other than a dividend or
distribution in Common Shares) shall have been declared on the Common Shares
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a dividend or distribution declared thereon, which record date shall
be the same as the record date for any corresponding dividend or distribution on
the Common Shares.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of original issue of such shares of Series A
Preferred Stock; provided, however, that dividends on such shares which are
-------- -------
originally issued after the record date for
<PAGE>
4
the determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and on or prior to the next succeeding Quarterly
Dividend Payment Date shall begin to accrue and be cumulative from and after
such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends
on shares of Series A Preferred Stock which are originally issued prior to the
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend on the first Quarterly Dividend
Payment Date shall be calculated as if cumulative from and after the last day of
the fiscal quarter next preceding the date of original issuance of such shares.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Shares
unless, in each case, the dividend required by this Section 2 to be declared on
the Series A Preferred Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not
be entitled to receive any dividends or other distributions except as provided
herein.
SECTION 3. Voting Rights. The holders of shares of Series A
--------------
Preferred Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Shares or stockholders generally are entitled to vote, multiplied by the
maximum number of votes per share which any holder of the Common Shares or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein, by the Charter or by
applicable law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock (and any other capital stock of the Company at
the time entitled thereto) shall vote together as one class for the election of
directors of the Company and on all other matters
<PAGE>
5
submitted to a vote of stockholders of the Company except that while holders of
shares of Series A Preferred Stock, voting as a class, are entitled to elect two
directors as provided in the Charter, they shall not be entitled to participate
with the Common Stock (or any other capital stock as aforesaid) in the election
of any other directors.
(c) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for authorizing or taking
any corporate action.
SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends
---------------------
or other dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Preferred Stock outstanding shall have been paid in full, the Company shall
not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock;
provided that the Company may at any time redeem, purchase or otherwise
--------
acquire shares of any such parity stock in exchange for shares of any stock
of the Company ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of
<PAGE>
6
stock ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. Liquidation Rights. Upon the liquidation, dissolution or
-------------------
winding up of the Company, whether voluntary or involuntary, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $1,000 per whole share
or (y) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Shares or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
SECTION 6. Consolidation, Merger, etc. In case the Company shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the Common Shares are exchanged for or changed into other stock or securities,
cash or any other property, then in any such case the then outstanding shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the Formula Number then in effect
times the aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which each Common Share
is exchanged or changed. In the event both this Section 6 and Section 2 appear
to apply to a transaction, this Section 6 will control.
<PAGE>
7
SECTION 7. No Redemption; No Sinking Fund. (a) The shares of Series
------------------------------
A Preferred Stock shall not be subject to redemption by the Company or at the
option of any holder of Series A Preferred Stock; provided, however, that the
-------- -------
Company may purchase or otherwise acquire outstanding shares of Series A
Preferred Stock in the open market or by offer to any holder or holders of
shares of Series A Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
SECTION 8. Ranking. The Series A Preferred Stock shall rank junior
--------
to all other series of Preferred Stock of the Company unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations and restrictions
thereof.
SECTION 9. Fractional Shares. The Series A Preferred Stock shall be
------------------
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandth of a share
or any integral multiple of such fraction which shall entitle the holder, in
proportion to such holder's fractional shares, to receive dividends, exercise
voting rights, participate in distributions and to have the benefit of all other
rights of holders of Series A Preferred Stock. In lieu of fractional shares,
the Company, prior to the first issuance of a share or a fraction of a share of
Series A Preferred Stock, may elect (a) to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-thousandths of
a share or any integral multiple thereof or (b) to issue depository receipts
evidencing such authorized fraction of a share of Series A Preferred Stock
pursuant to an appropriate agreement between the Company and a depository
selected by the Company; provided that such agreement shall provide that the
--------
holders of such depository receipts shall have all the rights, privileges and
preferences to which they are entitled as holders of the Series A Preferred
Stock.
SECTION 10. Reacquired Shares. Any shares of Series A Preferred
------------------
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancelation become authorized but unissued shares of
Preferred Stock, without designation as to series until such shares are once
more designated as part of a
<PAGE>
8
particular series by the Board of Directors pursuant to the provisions of the
Charter.
SECTION 11. Amendment. None of the powers, preferences and relative,
----------
participating, optional and other special rights of the Series A Preferred Stock
as provided herein, in the Company's by-laws or in the Charter shall be amended
in any manner which would alter or change the powers, preferences, rights or
privileges of the holders of Series A Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of Series A Preferred Stock, voting as a separate class;
provided, however, that no such amendment approved by the holders of at least
- -------- -------
66-2/3% of the outstanding shares of Series A Preferred Stock shall be deemed to
apply to the powers, preferences, rights or privileges of any holder of shares
of Series A Preferred Stock originally issued upon exercise of the Rights after
the time of such approval without the approval of such holder.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed in its corporate name on this 21st day of August, 1998.
CROWN CASTLE INTERNATIONAL CORP.,
by
/s/ Kathy Broussard
-------------------------------
Name: Kathy Broussard
Title: Vice President
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. [R]-
___________ Rights
NOT EXERCISABLE AFTER August 21, 2008, OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.
Right Certificate
CROWN CASTLE INTERNATIONAL CORP.
This certifies that , or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of August 21, 1998 (the "Rights Agreement"),
between Crown Castle International Corp., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agent"), unless the Rights evidenced hereby shall have been previously
redeemed by the Company, to purchase from the Company at any time after the
Distribution Date (as defined in the Rights Agreement) and prior to 5:00 p.m.,
New York City time, on the 10th anniversary of the date of the Rights Agreement
(the "Expiration Date"), at the principal office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one one-
thousandth (1/1,000th) of a fully paid, nonassessable share of Series A
Participating Cumulative Preferred Stock, par value $.01 per share, of the
Company (the "Preferred Shares"), at a purchase price per one one-thousandth
(1/1,000th) of a share equal to $110 (the "Purchase Price") payable in cash,
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be
purchased upon exercise of each Right evidenced by this Right Certificate, as
set forth above, are the Purchase Price and the number and kind of shares which
may be
<PAGE>
2
so purchased as of . As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate may be redeemed by the Company at its option
at a redemption price (in cash or shares of Common Stock or other securities of
the Company deemed by the Board of Directors to be at least equivalent in value)
of $.01 per Right (which amount shall be subject to adjustment as provided in
the Rights Agreement) at any time prior to the earlier of (i) such time as a
Person becomes an Acquiring Person and (ii) the Expiration Date.
<PAGE>
3
The Company may, but shall not be required to, issue fractions of
Preferred Shares or distribute certificates which evidence fractions of
Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In
lieu of issuing fractional shares, the Company may elect to make a cash payment
as provided in the Rights Agreement for fractions of a share other than one one-
thousandth (1/1,000th) of a share or any integral multiple thereof or to issue
certificates or utilize a depository arrangement as provided in the terms of the
Rights Agreement and the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company, including, without limitation,
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or other distributions or subscription rights, or otherwise, until the
Right or Rights evidenced by this Right Certificate shall have been exercised as
provided in accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by an authorized signatory of the
Rights Agent.
<PAGE>
4
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of:
CROWN CASTLE INTERNATIONAL CORP.,
by
_____________________________
Name:
Title:
Attest:
_________________________
Name:
Title:
Date of countersignature:
Countersigned:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
as Rights Agent,
by
_____________________
Authorized Signatory
<PAGE>
5
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Right Certificate to purchase the Preferred Shares
(or other shares) issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
<PAGE>
6
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ___________, 19__
______________________________
Signature
Signature Guaranteed:
<PAGE>
7
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto ____________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________, 19__
______________________________
Signature
Signature Guaranteed:
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), (2) this Right Certificate
is not being sold, assigned or transferred to or on behalf of any such Acquiring
Person, Affiliate or Associate and (3) after inquiry and to the best knowledge
of the undersigned, the undersigned did not acquire the Rights evidenced by this
Right Certificate from any Person who is or was an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
______________________________
Signature
<PAGE>
1
NOTICE
------
The signature on the foregoing Form of Election to Purchase or Form of
Assignment must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT 10.56
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 21, 1998
by and among
CROWN CASTLE INTERNATIONAL CORP.
AND
LEHMAN BROTHERS INC.
SALOMON SMITH BARNEY INC.
AND
GOLDMAN, SACHS & CO.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of December 21, 1998 by and between Crown Castle International Corp., a
Delaware corporation (the "Company"), and Lehman Brothers Inc., Salomon Smith
-------
Barney Inc. and Goldman, Sachs & Co. (each an "Initial Purchaser," and together,
-----------------
the "Initial Purchasers"), who have agreed to purchase the Company's 12 3/4%
------------------
Senior Exchangeable Preferred Stock due 2010 (the "Preferred Stock") pursuant to
---------------
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated December
16, 1998, (the "Purchase Agreement"), by and among the Company and the Initial
------------------
Purchasers. Pursuant to the Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof (the "Certificate of
--------------
Designations") relating to the Preferred Stock and the New Preferred Stock (as
- ------------
defined) and under the terms of the Purchase Agreement, the Preferred Stock may
under certain conditions be exchanged for the Company's 12 3/4% Senior
Subordinated Exchange Debentures due 2010 (the "Exchange Debentures").
-------------------
In order to induce the Initial Purchasers to purchase the Preferred Stock,
the Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Certificate of Designations and in the
Indenture, dated December 21, 1998 (the "Exchange Indenture"), between the
------------------
Company and United States Trust Company of Texas, N.A., as trustee (the
"Exchange Trustee"), relating to the Exchange Debentures and the New Exchange
- -----------------
Debentures (as defined).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Affiliate: As defined in Rule 144 of the Act.
---------
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Business Day: Any day except a Saturday, Sunday or other day in the City
------------
of New York on which banks are authorized or ordered to close.
Certificate of Designations: The Certificate of Designations, Preferences
---------------------------
and Relative, Participating, Optional and Other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions Thereof, of the Preferred
Stock, dated December 18, 1998.
Closing Date: The date of this Agreement.
------------
<PAGE>
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New
Preferred Stock or, if the New Preferred Stock has been exchanged for the
Exchange Debentures, the New Exchange Debentures to be issued in the Exchange
Offer, (b) the maintenance of such Exchange Offer Registration Statement
continuously effective and the keeping of the Exchange Offer open for a period
not less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the Transfer Agent of New Preferred Stock in the same
aggregate liquidation preference as the aggregate liquidation preference of
Preferred Stock tendered by Holders thereof pursuant to the Exchange Offer or,
if the Preferred Stock has been exchanged for Exchange Debentures, the delivery
by the Company to the Exchange Trustee of New Exchange Debentures in the same
aggregate principal amount as the aggregate principal amount of Exchange
Debentures tendered by Holders thereof pursuant to the Exchange Offer.
Debentures: The Exchange Debentures and the New Exchange Debentures.
----------
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Debentures: The Company's 12 3/4% Senior Subordinated Exchange
-------------------
Debentures due 2010 issued pursuant to the Exchange Indenture, under certain
circumstances and at the Company's option, in exchange for all outstanding
shares of Preferred Stock and including, without limitation, all additional
Exchange Debentures issued in lieu of payment of cash interest in accordance
with the terms of the Exchange Indenture.
Exchange Offer: The registration by the Company under the Act of the New
--------------
Preferred Stock or, if the Preferred Stock has been exchanged for Exchange
Debentures, the New Exchange Debentures, pursuant to the Exchange Offer
Registration Statement, pursuant to which the Company shall offer the Holders of
all Transfer Restricted Securities held by such Holders the opportunity to
exchange all such outstanding Transfer Restricted Securities for New Preferred
Stock with the same aggregate liquidation preference as the Preferred Stock
tendered in such Exchange Offer by such Holders, or New Exchange Debentures in
an aggregate principal amount equal to the aggregate principal amount of the
Exchange Debentures tendered in such exchange offer by such Holders, as the case
may be.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Preferred Stock or, if issued in exchange therefor, the Exchange
Debentures to certain "qualified institutional buyers," as such term is defined
in Rule 144A under the Act and pursuant to Regulation S under the Act.
2
<PAGE>
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
---------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
New Exchange Debentures: The Company's 12 3/4% Senior Subordinated
-----------------------
Exchange Debentures due 2010 to be issued pursuant to the Exchange Indenture (i)
in the Exchange Offer or (ii) upon the request of any Holder of Exchange
Debentures covered by a Shelf Registration Statement, in exchange for such
Exchange Debentures and including, without limitation, all additional New
Exchange Debentures issued in lieu of payment of cash interest in accordance
with the terms of the Exchange Indenture.
New Preferred Stock: The Company's 12 3/4% Senior Exchangeable Preferred
-------------------
Stock due 2010 to be issued pursuant to the Certificate of Designations (i) in
the Exchange Offer or (ii) upon the request of any Holder of Preferred Stock
covered by a Shelf Registration Statement, in exchange for such Preferred Stock
and including, without limitation, all additional shares of New Preferred Stock
issued in lieu of payment of dividends in accordance with the terms of the
Certificate of Designations.
Person: An individual, partnership, corporation, trust or unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Preferred Stock: The Company's 12 3/4% Senior Exchangeable Preferred Stock
---------------
due 2010 issued pursuant to the Certificate of Designations, including, without
limitation, all additional shares of Preferred Stock issued in lieu of payment
of cash dividends in accordance with the terms of the Certificate of
Designations.
Recommencement Date: As defined in Section 6(d) hereof.
-------------------
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company relating
----------------------
to (a) an offering of New Preferred Stock or New Exchange Debentures pursuant to
an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
------------
3
<PAGE>
Rule 144: Rule 144 promulgated under the Act.
--------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Stock: The Preferred Stock and the New Preferred Stock.
-----
Suspension Notice: As defined in Section 6(d) hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Exchange Indenture.
Transfer Agent: ChaseMellon Shareholder Services, L.L.C.
--------------
Transfer Restricted Securities: Each share of Stock or Debenture, as the
------------------------------
case may be, until the earliest to occur of (a) the date on which such share of
Stock or such Debenture is exchanged in the Exchange Offer and entitled to be
resold to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Act, (b) the date on which such share of Stock or
such Debenture has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such share of Stock or such Debenture is
disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein) or (d) the date on which such share of Stock
or such Debenture is distributed to the public pursuant to Rule 144 under the
Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date (the
"Exchange Offer Filing Date"), but in no event later than 60 days after the
--------------------------
Closing Date (such 60th day being the "Filing Deadline"), (ii) use all
---------------
commercially reasonable efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date (such 150th day being the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all
----------------------
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the New Preferred Stock or
the New Exchange Debentures, as the case may be, to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
4
<PAGE>
Exchange Offer and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting registration of the New
Preferred Stock or the New Exchange Debentures, as the case may be, to be
offered in exchange for the Preferred Stock or the Exchange Debentures,
respectively, that are Transfer Restricted Securities and to permit resales of
New Preferred Stock or New Exchange Debentures, as the case may be, by Broker-
Dealers that tendered into the Exchange Offer for Preferred Stock or Exchange
Debentures, respectively, that such Broker-Dealer acquired for its own account
as a result of market making activities or other trading activities (other than
Preferred Stock or, if issued in exchange therefor, Exchange Debentures acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the New Preferred
Stock or, if issued in exchange therefor, the New Exchange Debentures shall be
included in the Exchange Offer Registration Statement. The Company shall use its
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer that holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any New Preferred
Stock or New Exchange Debentures, as the case may be, received by such Broker-
Dealer in the Exchange Offer and that the Prospectus contained in the Exchange
Offer Registration Statement may be used to satisfy such prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission as a result of a change in policy,
rules or regulations after the date of this Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of New Preferred Stock or New Exchange
Debentures, as the case may be, by Broker-Dealers, the Company agrees to use its
best efforts to keep the Exchange Offer
5
<PAGE>
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of 180 days from
the date on which the Exchange Offer is Consummated, or such shorter period as
will terminate when all Transfer Restricted Securities held by such Broker-
Dealers covered by such Registration Statement have been sold pursuant thereto
(unless such period is extended pursuant to Section 6(c)(i) below). The Company
shall promptly provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealers promptly upon request, and in no event later
than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law (after the Company has complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 Business Days following the Consummation of
the Exchange Offer that (A) such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder may not
resell the New Preferred Stock or New Exchange Debentures, as the case may be,
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Preferred Stock or, if issued in
exchange therefor, Exchange Debentures acquired directly from the Company or any
of its Affiliates, then the Company shall:
(x) cause to be filed, on or prior to 45 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a) (ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
---------------
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
----------------------------
all Transfer Restricted Securities, and
(y) shall use all commercially reasonable efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline (such 90th day the "Effectiveness Deadline").
----------------------
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented and
amended as required by and
6
<PAGE>
subject to the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for sales of Transfer Restricted
Securities by the Holders thereof entitled to the benefit of this Section 4(a),
and to ensure that it conforms with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for a period of at least two years (as extended pursuant to Section
6(c)(i)) following the date on which such Shelf Registration Statement first
becomes effective under the Act, or such shorter period as will terminate when
all Transfer Restricted Securities covered by such Registration Statement (i)
have been sold pursuant thereto or (ii) are no longer restricted Securities (as
defined in Rule 144 under the Act).
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
(a) If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Exchange Offer Registration Statement is first declared effective by the
Commission or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (except as permitted in
paragraph (b); such period of time during which any such Registration Statement
is not effective or any such Registration Statement or the related Prospectus is
not usable being referred to as a Blackout Period") (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the Company hereby
--------------------
agrees to pay to each Holder of Transfer Restricted Securities affected thereby
liquidated damages in an amount equal to $.05 per week per $1,000 in liquidation
preference (in the case of Stock) or principal amount (in the case of
Debentures) of Transfer Restricted Securities held by such Holder for each week
or portion thereof that the Registration Default continues for the first 90-day
period immediately following the occurrence of such Registration Default. The
amount of the liquidated damages shall increase by an additional $.05 per week
per $1,000 in liquidation preference (in the case of Stock) or principal amount
(in the case of Debentures) of Transfer Restricted Securities with respect to
each
7
<PAGE>
subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages for all Registration Defaults of
$.50 per week per $1,000 in liquidation preference (in the case of Stock) or
principal amount (in the case of Debentures) of Transfer Restricted Securities.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-
effective amendment to the Registration Statement or an additional Registration
Statement that causes the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement) to again be declared effective or
made usable in the case of (iv) above, the liquidated damages payable with
respect to the Transfer Restricted Securities as a result of such clause (i),
(ii), (iii) or (iv), as applicable, shall cease.
(b) A Registration Default referred to in Section 5(a)(iv) shall be deemed
not to have occurred and be continuing in relation to a Registration Statement
or the related Prospectus if (i) the Blackout Period has occurred solely as a
result of (x) the filing of a post-effective amendment to such Shelf
Registration Statement to incorporate annual audited financial information with
respect to the Company where such post-effective amendment is not yet effective
and needs to be declared effective to permit Holders to use the related
Prospectus or (y) the occurrence of other material events with respect to the
Company that would need to be described in such Registration Statement or the
related Prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement (including by way of filing
documents under the Exchange Act which are incorporated by reference into the
Registration Statement) such Registration Statement and the related Prospectus
to describe such events: provided, however, that in any case if such Blackout
Period occurs for a continuous period in excess of 30 days, a Registration
Default shall be deemed to have occurred on the 31st day of such Blackout Period
and liquidated damages shall be payable in accordance with the above paragraph
from the day such Registration Default occurs until such Registration Default is
cured or until the Company is no longer required pursuant to this Agreement to
keep such Registration Statement effective or such Registration Statement or the
related Prospectus usable; provided further, however, that in no event shall the
total of all Blackout Periods exceed 60 days in the aggregate in any 12-month
period.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of dividends in the Certificate
of Designations, on each Dividend Payment Date, as more fully set forth in the
Certificate of Designations or, if the Preferred Stock has been exchanged for
Exchange Debentures, in the manner provided for the payment of interest in the
Exchange Indenture, on each Interest Payment Date, as more fully set forth in
the Exchange Indenture and the Exchange Debentures. Liquidated damages, if any,
incurred prior to December 15, 2003, may be paid, at the Company's option, by
the issuance of additional shares of Preferred Stock having an aggregate
liquidation preference equal to the amount of liquidated damages or, if the
Preferred Stock has been exchanged for Exchange Debentures, by the issuance of
additional Exchange Debentures having an aggregate principal
8
<PAGE>
amount equal to the amount of such liquidated damages. All obligations of the
Company set forth in the preceding paragraph that are outstanding with respect
to any Transfer Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all such
obligations with respect to such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company shall comply with all applicable provisions of Section 6(c)
below, shall use its best efforts to effect such exchange and to permit the
resale of New Preferred Stock or New Exchange Debentures, as the case may be, by
Broker-Dealers that tendered in the Exchange Offer Preferred Stock or Exchange
Debentures, respectively, that such Broker-Dealer acquired for its own account
as a result of its market making activities or other trading activities (other
than Preferred Stock or, if issued in exchange therefor, Exchange Debentures
acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the Company
to Consummate an Exchange Offer for such Transfer Restricted Securities.
The Company hereby agrees to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, the Company
hereby agrees to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the New
Preferred Stock or the New Exchange Debentures, as the case may be, to be
issued in the Exchange Offer and (C) it is acquiring the New Preferred
Stock or the New Exchange Debentures, as the case may be, in its ordinary
course of business. Each Holder using the Exchange Offer to participate in
a
9
<PAGE>
distribution of the New Preferred Stock or the New Exchange Debentures, as
the case may be, hereby acknowledges and agrees that, if the resales are of
New Preferred Stock or New Exchange Debentures, as the case may be,
obtained by such Holder in exchange for Preferred Stock or Exchange
Debentures, respectively, acquired directly from the Company or an
Affiliate thereof, it (1) could not, under Commission policy as in effect
on the date of this Agreement, rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
----------------------------
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted
----------------------------------
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
-------------------
similar no-action letters (including, if applicable, any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
-------------
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
-------------------- ----------------------------
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
-------------------
letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the New Preferred Stock or the
New Exchange Debentures, as the case may be, to be received in the Exchange
Offer and that, to the best of the Company's information and belief, each
Holder participating in the Exchange Offer is acquiring the New Preferred
Stock or the New Exchange Debentures, as the case may be, in its ordinary
course of business and has no arrangement or understanding with any Person
to participate in the distribution of the New Preferred Stock or the New
Exchange Debentures, as the case may be, received in the Exchange Offer and
(C) any other undertaking or representation required by the Commission as
set forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
10
<PAGE>
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by such
Persons, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request
by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from
11
<PAGE>
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Company shall use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchasers and, if requested by any
selling Holder, to such Holder, named in any Registration Statement or
Prospectus in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration Statement
or Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with such
sale, if any, for a period of at least five Business Days, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which the
selling Holders of the Transfer Restricted Securities covered by such
Registration Statement in connection with such sale, if any, shall
reasonably object within five Business Days after the receipt thereof. A
selling Holder shall be deemed to have reasonably objected to such filing
if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(vi) upon the reasonable request of any selling Holder, promptly
prior to the filing of any document that is to be incorporated by reference
into a Registration Statement or Prospectus, provide copies of such
document to the selling Holders in connection with such sale, if any, make
the Company's representatives available for discussion of such document and
other customary due diligence matters, and include such information in such
document prior to the filing thereof;
(vii) in the case of any Shelf Registration, make available at
reasonable times for inspection by the selling Holders participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders, all financial and other
records, pertinent corporate documents of the Company and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such selling Holder, attorney or accountant in
connection with such Registration Statement or any post-effective amendment
thereto subsequent to the filing
12
<PAGE>
thereof and prior to its effectiveness, in each case as shall reasonably be
necessary to enable such persons to conduct a reasonable investigation
within the meaning of Section 11 of the Act; provided, however, that the
foregoing inspection and information gathering shall be coordinated on
behalf of the Initial Purchasers and such selling Holders by you and on
behalf of the other parties, by one counsel designated by and on behalf of
such other parties as described in Section 7 hereof, provided, further,
that any records, documents, properties or information that are designated
by the Company as confidential at the time of delivery of such records,
documents, properties or information shall be kept confidential by such
persons, unless (i) such records, documents, properties or information are
in the public domain or otherwise publicly available, (ii) disclosure of
such records, documents, properties or information is required by court or
administrative order or (iii) disclosure of such records, documents,
properties or information, in the written opinion of counsel to such
person, is otherwise required by law (including, without limitation,
pursuant to the requirements of the Act);
(viii) subject to Section 4(b) hereof, if reasonably requested by
selling Holders of a majority of the aggregate liquidation preference of
Stock or principal amount of Debentures, as the case may be, constituting
Transfer Restricted Securities being sold in connection with such offering,
if any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
provided, however. that the Company shall not be required to take any
action pursuant to this Section 6(c)(viii) that would, in the opinion of
counsel for the Company reasonably satisfactory to the Initial Purchasers,
violate applicable law;
(ix) furnish to each selling Holder in connection with such sale,
if any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use (in accordance with law and subject to the
provisions of this Agreement) of the Prospectus and any amendment or
supplement thereto by each of the selling Holders in connection with the
offering and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
13
<PAGE>
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any applicable Registration
Statement contemplated by this Agreement as may be reasonably requested by
any Holder of Transfer Restricted Securities in connection with any sale or
resale pursuant to any applicable Registration Statement and in such
connection, the Company shall:
(A) Upon the request of any selling Holder, furnish (or in the case
of paragraphs (2) and (3), use its best efforts to cause to be furnished)
to each selling Holder, upon the effectiveness of the Shelf Registration
Statement or upon Consummation of the Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the Chief Executive Officer or President and (y) the
Chief Financial Officer or Treasurer of the Company, as set forth in
Section 7(n) of the Purchase Agreement and such other similar matters
as are customary and as the selling Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer, or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company covering
matters similar to those set forth in of Section 7(d) of the Purchase
Agreement and such other matters as the selling Holders may reasonably
request, and in any event including a statement to the effect that
such counsel has participated in conferences with officers of the
Company and with the independent public accountants for the Company
concerning the preparation of the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, and
although such counsel has made certain inquiries and investigations in
connection with such preparation, it is not passing upon and does not
assume any responsibility for the accuracy or completeness of the
statements contained in such Registration Statements, except insofar
as such statements relate to such counsel, and on the basis of the
foregoing, such counsel's work in connection with this matter did not
disclose any information that gave such counsel reason to believe that
the applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective ,
or the Prospectus contained in such Registration Statement as of its
date, and, in the case of the Exchange Offer Registration Statement,
as of the date of Consummation of the Exchange Offer, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and
(3) a customary comfort letter, dated the date of Consummation
of the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration
14
<PAGE>
Statement, as the case may be, from the Company's independent
accountants, in the customary form and covering matters of the type
customarily covered in comfort letters to underwriters in connection
with underwritten offerings, and meeting the requirements set forth in
the comfort letters delivered pursuant to Sections 7(k) and 7(l) of
the Purchase Agreement;
(B) Set forth in full or incorporated by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) Deliver such other customary documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
clause (A) above and with any customary conditions contained in any
agreement entered into by the Company pursuant to this clause (xi).
If at any time the representations and warranties of the Company set forth
in the certificate contemplated in clause (A)(1) above cease to be true and
correct, the Company shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Preferred Stock or
Exchange Debentures covered by any Shelf Registration Statement
contemplated by this Agreement, New Preferred Stock or New Exchange
Debentures, respectively having an aggregate liquidation preference or an
aggregate principal amount, as the case may be, equal to the aggregate
liquidation preference of Preferred Stock or aggregate principal amount of
Exchange Debentures surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such New Preferred Stock or New
Exchange Debentures to be registered in the name of such Holder or in the
name of the purchaser(s) of such New Preferred Stock or New Exchange
Debentures, as the case may be; in return, the Preferred Stock or Exchange
Debentures, as the case may be, held by such Holder shall be surrendered to
the Company for cancellation;
15
<PAGE>
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities pursuant to such
Registration Statements;
(xv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Transfer Agent (in the case
of Stock) or the Exchange Trustee (in the case of Debentures) with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with The Depository Trust Company;
(xvii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-
month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
(xviii) (A) if the Stock or the Debentures have been rated prior to
the initial sale of the Preferred Stock, use its best efforts to confirm
that such ratings will apply to the Transfer Restricted Securities covered
by a Registration Statement, or (B) if the Stock and the Debentures were
not previously rated, use commercially reasonable efforts to cause the
Transfer Restricted Securities covered by the Registration Statement to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate liquidation preference of Stock or principal
amount of Debentures, as the case may be, covered thereby or the managing
underwriter(s), if any;
(xix) cause the Exchange Indenture to be qualified under the TIA
not later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with the
Exchange Trustee and the Holders to effect such changes to the Exchange
Indenture as may be required for such Exchange Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Exchange Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Exchange Indenture to be so
qualified in a timely manner; and
16
<PAGE>
(xx) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension
----------
Notice"), such Holder will forthwith discontinue disposition of Transfer
- ------
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
-------------------
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing of Prospectuses), messenger and
delivery services and telephone; (iv) all reasonable fees and disbursements of
counsel for the Company and one firm of counsel designated by the Holders of a
majority in aggregate liquidation preference of Stock or principal amount of
Debentures, as the case may be, constituting Transfer Restricted Securities to
act as counsel for the Holders in connection therewith; (v) all application and
filing fees in connection with listing the New Preferred Stock or the New
Exchange Debentures, as the case may be, on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
17
<PAGE>
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins, New York, New York, unless another firm shall be chosen by the
Holders of a majority in aggregate liquidation preference of Stock or principal
amount of Debentures, as the case may be, constituting Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
(c) Each Holder of Transfer Restricted Securities will pay all
underwriting discounts, if any, and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Transfer Restricted
Securities.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder and
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "controlling person")
and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Holder"), from and against any and all losses, claims, damages,
------------------
liabilities, judgments (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any holder or any prospective purchaser of New
Preferred Stock or New Exchange Debentures, as the case may be, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided, however, that (i) the Company shall not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in a Registration Statement or Prospectus or in any amendment or
supplement thereto or in any preliminary Prospectus relating to a Shelf
Registration in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein and (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary Prospectus relating to a Shelf Registration Statement, the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Holder or Broker-Dealer from whom the person asserting any such losses, claims,
damages or liabilities purchased the Transfer Restricted Securities concerned,
to the extent that a Prospectus relating to such Securities was required to be
delivered by such Holder or Broker-Dealer under the Act in
18
<PAGE>
connection with such purchase and any such loss, claim, damage or liability of
such Holder or Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final Prospectus if the Company
has previously furnished copies thereof to such Holder of Broker-Dealer;
provided further, however, that this indemnity agreement will be in addition to
any liability which the Company may otherwise have to such Indemnified Holder.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company, and its directors and
officers, and each controlling person, if any, to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only with reference to information relating to such Indemnified Holder furnished
in writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have the Company or
any of their controlling persons.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
-----------------
against whom such indemnity may be sought (the "indemnifying person") in writing
-------------------
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Indemnified Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
19
<PAGE>
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Holders of a majority in aggregate liquidation preference of Stock
or principal amount of Debentures, as the case may be, in the case of the
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party) and, prior
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall (i) without
the prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action or (ii) be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Indemnified Holders, on the other hand, from their sale of
Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Indemnified Holder, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and judgments
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or
20
<PAGE>
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(d) are several in proportion to the respective aggregate liquidation
preference of Stock or principal amount of Debentures constituting Transfer
Restricted Securities held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by the
--------
Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
21
<PAGE>
(b) No Inconsistent Agreements. The Company will not, on or after the date
--------------------------
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Stock and the Debentures. The Company will
--------------------------------------------------
not take any action, or permit any change to occur, with respect to the Stock
and the Debentures that would materially and adversely affect the ability of the
Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding aggregate liquidation
preference of Stock or principal amount of Debentures, as the case may be,
constituting Transfer Restricted Securities (excluding Transfer Restricted
Securities held by the Company of its Affiliates). Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the aggregate
liquidation preference of Stock or principal amount of Debentures, as the case
may be, constituting Transfer Restricted Securities subject to such Exchange
Offer.
(e) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(f) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Transfer Agent or, if the Stock has been exchanged for Debentures, of the
Registrar under the Exchange Indenture, with a copy to the Exchange Trustee
under the Exchange Indenture; and
(ii) if to the Company:
22
<PAGE>
Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, Texas 77057
Telecopier No.: (713) 570-3150
Attention: Chief Financial Officer
With a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Telecopier No.: (212) 474-3700
Attention: Stephen L. Burns, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent at
450 West 33rd St., 15th Floor, New York, New York 10001 or, if the Stock has
been exchanged for Debentures, to the Exchange Trustee at the address specified
in the Exchange Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Lehman Brothers Inc.
on behalf of the Initial Purchasers (in the form attached hereto as Exhibit A)
and shall be addressed to: Attention: Compliance Department, 3 World Financial
Center, New York, NY 10285.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement, the Certificate of Designations or the Exchange Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
23
<PAGE>
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Crown Castle International Corp.
/s/ Kathy Broussard
By:___________________________________________
Kathy Broussard
Name:_______________________________________
Vice President
Title:______________________________________
Lehman Brothers Inc.
/s/ Mark Carter
By:__________________________
Name: Mark Carter
Title: Analyst
Salomon Smith Barney Inc.
/s/ Anthony S. Graham
By:__________________________
Name: Anthony S. Graham
Title: Director
Goldman, Sachs & Co.
/s/ Goldman, Sachs & Co.
By:__________________________
Name:
Title:
25
<PAGE>
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Compliance Department
3 World Financial Center
New York, NY 10285
From: Crown Castle International Corp.
510 Bering Drive, Suite 500
Houston, Texas 77057
Re: 12 3/4% Senior Exchangeable Preferred Stock due 2010
Date:__________________
For your information only (NO ACTION REQUIRED):
Today, ____________, we filed [an A/B Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within
[_____] business days of the date hereof.
<PAGE>
EXHIBIT 23.1
The Board of Directors
Crown Castle International Corp.:
The audits referred to in our report dated February 20, 1998, included the
related financial statement schedule as of December 31, 1997 and 1996, and for
each of the years in the three-year period ended December 31, 1997, included
in the Registration Statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to the use of our reports incorporated by reference herein and to
the reference to our firm under the headings "Experts" in the Prospectus.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 2, 1999
<PAGE>
EXHIBIT 23.2
CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 28, 1996, with respect to the financial
statements of TEA Group Incorporated included in the Registration Statement
and related Prospectus of Crown Castle International Corp. for the
registration of $374,604,480 of 12.75% Senior Exchangeable Preferred Stock due
2010 and $371,044,268 of 12.75% Senior Subordinated Exchange Debentures due
2010.
/s/ Ernst & Young LLP
-------------------------------------
Ernst & Young LLP
Atlanta, Georgia
February 2, 1999
